Institute of Information Theory and Automation

Publication details

Financial Stress in the Czech Republic: Measurement and Effects on the Real Economy

Journal Article

Horváth Roman, Malega J.


serial: Prague Economic Papers

project(s): GA15-10331S, GA ČR

keywords: financial stress indicator, vector autoregression, Czech Republic

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abstract (eng):

We estimate a financial stress index for the Czech Republic and examine its development during\nthe 2002–2014 period. We find a marked increase in financial stress at the beginning of the global\nfinancial crisis with a  decrease to nearly pre-crisis levels by the  end of  our study period. Next,\nwe estimate vector autoregression models of the Czech economy and find that financial stress\nhas systematic effects on output, prices and interest rates, with the maximum response occurring\napproximately one and a  half years after the  shock. Specifically, an  increase in  financial stress\nis associated with higher unemployment, lower prices and lower interest rates, indicating its\ndetrimental effects on the real economy.

RIV: AH

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Last modification: 21.12.2012
Institute of Information Theory and Automation