1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The Estimation of Financial Conditions Indices for the Major OECD Countries

Financial conditions indices (FCIs) have been developed to summarise financial conditions and also supplement more traditional macroeconomic forecasting. They capture market expectations but also quantitative and survey information. This paper seeks to provide up to date financial conditions indices for six countries, France, Germany, Italy, Japan, the United Kingdom and the United States, as well as the euro area, updating earlier results by the OECD. The addition of the period of the financial crisis period has made radical changes to the original results of the FCI estimation. Country-specific estimates provide a number of wrong signs and insignificant coefficients. We find in general that the panel (and NiGEM) based FCIs are more satisfactory. Furthermore, a promising avenue for further research is the dynamic factor/principal components approach.

English

Keywords: macro-financial linkages, panel estimates, financial conditions index
JEL: E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles; E44: Macroeconomics and Monetary Economics / Money and Interest Rates / Financial Markets and the Macroeconomy; E47: Macroeconomics and Monetary Economics / Money and Interest Rates / Money and Interest Rates: Forecasting and Simulation: Models and Applications
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