Review Of Financial Stress And Its Impact On The Real Economy

For the measurement of financial systemic risk, research scholars had tent fromthe single market indicators to gradually build a multi-market index. This article aimsto measure the financial systemic risk in emerging one widely recognized method-acomprehensive review of financial stress index.Firstly,this paper introduces the classic definition of financial stress and characteristics which is widely accepted by scholars. Financial pressures are likely to bear thefinancial markets run in a negative energy, it makes the internal structure of the financial markets becoming fragile or vulnerable to external shocks, leading to its normal function is destroyed, and even affecting the real economy.Financial stress occurs to be the extreme which is the ‘financial crisis’.The financial pressure generation, often accompanied by a base value of assets,has increased uncertainty and asymmetric information investor behavior. Meanwhile, the ‘investment security transfer’, the main feature of ‘liquidity investment diversion’ is the main feature of financial stress.To measure financial systemic risk, research scholars have gradually tended fromthe single market indicators to build a multi-market index. This article is to measurethe financial systemic risk in emerging method that has been widely recognized-acomprehensive review of financial stress index.Secondly, this paper analyzes the various articles selected targets, principles andmethods of selecting the data to build the index. Most scholars have used them toconstruct indicators index, which were mostly selected from the banks, bonds, equities, foreign exchange market. However, some scholars have adopted innovativeindicators, such as economic fundamentals, the external debt. After selectingindicators, methods used by scholars on how to integrate the indicators into acomposite index were not the same. For example, variances weighting method,principal component analysis, CDF conversion method, as well as credit CDF-weightmethod are the most commonly used method for the research nowadays.Then, the paper combines various scholars to identify and predict the financialpressure period. Whether financial stress index is really able to identify non-healthstate of the financial system, even in times of crisis fit? Scholars have made use of thecontrast with the pressure during the FSI, Markov shift auto-regression model,threshold model to assess the fit and predictive ability of financial stress index fromdifferent angles.Furthermore, this paper focuses on the relationship between the real economyand the financial pressures. To disrupt the real economy, financial pressure hasthough increasing the uncertainty of financial asset prices about future economicprospects, increasing the cost of corporate finance and home finance consumption, aswell as by raising banks’ credit standards to improve channels of influence. Scholarshave specifically to study the impact of the financial pressure on the real economy viabi-variety analysis, Granger causality test, impulse response analysis and other tools.Finally, this paper also analyzes the financial pressure under the conductionbetween different countries as well as different domestic markets. Financial pressurehas an obvious characteristic, which is its highly contagious. A financial pressure thathas generated within the financial subsystem will spread to the entire financial market,and even disrupt the normal operation of the entire economy. The generation ofeconomic pressures will be transmitted to other economies through political, trade,asset restructuring and common shocks and other channels, and may seriously trigger the outbreak of the global financial crisis. However, there are still no exhaustiveresearches about how to develop risk isolation system nowadays.