Constructing a financial fragility index for emerging countries

Sensoy A., Ozturk K., Hacihasanoglu E.

FINANCE RESEARCH LETTERS, cilt.11, sa.4, ss.410-419, 2014 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 11 Sayı: 4
  • Basım Tarihi: 2014
  • Doi Numarası: 10.1016/j.frl.2014.07.007
  • Dergi Adı: FINANCE RESEARCH LETTERS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.410-419
  • Abdullah Gül Üniversitesi Adresli: Hayır

Özet

This article proposes a novel framework to construct a financial fragility index (FIX) of an emerging country from five main variables by combining the methods of principal component analysis and dynamic conditional correlations. The main contribution of the FIX is the time-varying weighting scheme of the variables and it is demonstrated for a leading emerging market, Turkey. A comparison with the classic principal component approach on forecasting economic activity-expectations and a policy making application are presented. (C) 2014 Elsevier Inc. All rights reserved.