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Posts tagged with: "KCFSI"

View this series on FRED

Move along. Nothing to see here. (Seriously.)

Searching for financial stress

You may be relaxing over the holidays, but Team FRED Blog feels a little contrarian, like that uncle you can never agree with. So let’s talk about stress.

FRED offers three series from different regional Federal Reserve Banks that are intended to alert us to financial stress. All three indices use available data from the financial sector to try to establish an aggregate that highlights the level of risk in that sector, with higher values showing more stress.

The good news? Today, things are looking pretty steady. You could even say that there’s nothing to see here. At least as far as financial stress goes.

But the data overall show a couple of things quite clearly: The Great Recession was definitely financial in nature, with great financial stress, whereas the preceding recession was not. And all three indices show the same course: As early as July 2007, conditions were getting worrisome. Still, it’s good to be careful when reading indicators like these, as increasing stress doesn’t always signal an impending recession.

How this graph was created: Search FRED for “stress,” check the two series, and click “Add to Graph.” From the “Edit Graph” panel, use the “Add Line” tab to search for “Chicago Financial Conditions” and add that line to the graph.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: KCFSI, NFCI, STLFSI

On financial stress

The past recession highlighted the financial sector’s role in the economy, specifically that its health can affect economic fluctuations. It is not as easy to see how well this sector is doing now, as there are many, many indicators. (The FRED database is testimony to that.) So it is useful to look for a summary indicator, and three Federal Reserve Banks provide one: The Cleveland, Kansas City, and St. Louis Feds each offer their own financial index to measure the stress or uncertainty within the financial sector. Each draws on different data, uses different methodologies, and emphases different factors. Of course, the indexes can incorporate only tangible information to measure something more or less intangible, so they are going to be imperfect. Still, as the graph shows, they correlate remarkably well.

How this graph was created: Search for “financial stress index” and select the three series. Click “add to graph.”

Suggested by Christian Zimmermann

View on FRED, series used in this post: CFSI, KCFSI, STLFSI


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