A Quantitative Assessment of Financial Conditions in Asia

We propose a new Financial Condition Index (FCI) for Asian economies based on two different methodologies: a VAR model and a Dynamic Factor Model. The paper shows that this index has predictive power in forecasting GDP growth and may be thus used as a leading indicator. Based on the FCI, financial conditions in Asia tightened substantially earlier in the global crisis, reflecting losses in the stock markets and tighter credit conditions. In early 2010, financial conditions in Asia recovered rapidly and reached precrisis levels, thanks to accommodative monetary policies and a rapid rebound in regional equity markets.
Publication date: July 2011
ISBN: 9781462314331
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Economics- Macroeconomics , Economics / General , International - Economics , exchange rate , stock market , effective exchange rate , nominal effective exchange rate , bond , stock price index , equity markets , stock price , government bond , bond yield , government bond yield , stock prices , exchange rates , deposit rate , stock market indices , treasury bo

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