Sunday, 15 September 2013

The Cleveland Financial Stress Index

A new coincident indicator of financial stress.

"The level of the Cleveland Financial Stress Index (CFSI) has decreased in the past few months, indicating a lower level of systemic financial stress. Although the most recent reading of the index from September 4 is in Grade 2 or a “normal stress period,” the index had been in a Grade 1 or “low stress period” for 49 days since June 1. The index currently stands at −0.43, which is up 0.63 points from a recent low on July 15, 2013. (The points refer to the standardized distance from the mean or the z-score). The index is down 1.32 points over the past year and is 3.52 points lower than its historical peak in December 2008."





Check out how this indicator moved into the Grade 4 category in late 2007, and remained in upper Grade 3 or Grade 4 throughout most of 2008.
 


3 comments:

  1. Long periods of high stability breed low resilience? That is the argument forwarded here: http://www.macroresilience.com/2009/12/06/minskys-financial-instability-hypothesis-and-hollings-conception-of-resilience-and-stability/

    This coincidental indicator being in zone 1 for this stretch is not necessarily a positive. Usually during the summer there is often a fair bit of volatility and noise due to many market participants being on vacation and thus outsized reactions happening on little volume; that didn't happen this year. With the large amounts of financial captial sloshing around in the global system looking for a return above the risk free rate and effective demand being the lowest seen in advanced economies in generations I personally don't see how this can last. The issue of global imbalances remain unresolved with no resolution in sight. FED tapering and the carnival sideshow of the so called 'debt ceiling' may light the next spark but the Eurozone is hard coding itself for lost decades and the BRICs are proving to not be the answer to the question of low effective demand in global markets.

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  2. The CFSI is designed to track distress in the U.S. financial system on a continuous basis. Continuous monitoring gives financial-system supervisors the ability to .financial advisor india

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  3. Great post! Thanks for sharing this! Very informative. I’m sure this is very helpful for other people too who are into Payment processing programs.

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