The views expressed here are those of the individual authors and not necessarily those of the JSM sponsors, their officers, or their staff.
Online Program Home
Abstract Details
Activity Number:
|
247
|
Type:
|
Contributed
|
Date/Time:
|
Monday, July 30, 2012 : 2:00 PM to 3:50 PM
|
Sponsor:
|
Business and Economic Statistics Section
|
Abstract - #305314 |
Title:
|
Measuring the Effect of Financial Stress
|
Author(s):
|
Michael Owyang*+ and Ana Beatriz Galvao
|
Companies:
|
Federal Reserve Bank of St. Louis and Queen Mary College, University of London
|
Address:
|
1421 Dr. Martin Luther King Drive, St. Louis, MO, 63106, United States
|
Keywords:
|
dynamic factors ;
STAR model ;
covariate selection ;
MCMC
|
Abstract:
|
In this paper, we construct a measure of financial stress which is defined by its effects on the dynamics of macroeconomic variables. Based on previous work by Hubrich and Tetlow (2010), we create an index of financial stress which has the property that high stress times alter the underlying dynamic responses of macro variables to shocks. This implies a sort of regime switching initiated by a rise in the stress index. We augment the standard logistic smooth transition autoregression with a factor which enters contemporaneously into the VAR and with a lag into the transition function. Estimation of the model is conducted in a Bayesian environment using the Metropolis-Hasting steps to draw the transition function parameters. Because of the nonlinearity in the transition function, the factor must be estimated using a nonlinear filter. We use the unscented Kalman filter as a proposal density in a Metropolis step. We find that nonlinearities produced by increases in financial stress. Estimating the model, we find three periods of high stress. During each of these periods, the responsiveness of macro variables to shocks to financial variables is heightened.
|
The address information is for the authors that have a + after their name.
Authors who are presenting talks have a * after their name.
Back to the full JSM 2012 program
|
2012 JSM Online Program Home
For information, contact jsm@amstat.org or phone (888) 231-3473.
If you have questions about the Continuing Education program, please contact the Education Department.