Mixed Compilation And Application Of China’s Real-time Flexible Dynamic Financial Stress Index

At present,China is in a critical period of comprehensively deepening reform to promote high-quality economic development.On the one hand,China still has risk factors such as sustained downward pressure on the economy and foam in real estate prices.On the other hand,the world today is facing the biggest change in a century.With the continuous opening of China’s financial industry,the increasingly complex international political and economic situation also makes China’s financial system face greater challenges.Therefore,it is of great significance to build a financial stress index that can comprehensively,accurately,timely and effectively reflect China’s systemic financial risk situation for real-time monitoring of the operation of the financial system and forward-looking formulation of fiscal and monetary policies.Firstly,in order to comprehensively and accurately characterize the risks in the financial market,this article selects six financial sub market sectors: the money market,banking sector,stock market,bond market,real estate sector,and exchange rate market.Each sub market sector selects five representative indicators to measure liquidity risk pressure,collapse risk pressure,credit risk pressure,systemic risk pressure,and general risk pressure,respectively,A total of 30 financial indicators composed the quarterly,monthly,and daily mixed frequency sample data from January 2004 to March 2022;Secondly,in order to fully utilize the information in the mixed sample data,a mixed innovation time-varying coefficient random variance dynamic factor model(MF-MI-TVP-SV-DFM)was constructed to extract one realtime flexible dynamic financial pressure common factor from each financial sub market sector as the financial pressure index of that sub market sector;Then,the first real-time flexible dynamic financial stress index(RTFD-FSI)in China was integrated using the expanded dual time-varying coefficient system pressure comprehensive index(DTVP-CISS)method;Finally,the effectiveness of China’s real-time flexible dynamic financial pressure index and the time-varying transmission effect of China’s financial pressure on the macroeconomic were empirically tested and analyzed.The empirical results show that: first,China’s real-time flexible dynamic financial stress index is reasonable and effective,and can be prepared to identify financial stress events and financial stress status;Second,the impact of the financial stress of the banking sector and the real estate sector on the macro economy is significantly greater than that of other financial sub-markets;Third,China’s real-time flexible dynamic financial stress index can better predict the macroeconomic,and its transmission effect on the macroeconomic shows the characteristics of dynamic differentiation and flexible dynamic trends.The main innovations of this paper are as follows: First,a new indicator framework for comprehensively measuring financial risk has been constructed;Secondly,the dynamic factor model of the stochastic-variance of the time-varyingparameter of the mixed-frequency hybrid innovation and the comprehensive index of the double time-varying system stress are newly constructed,taking into account the mixing,flexibility and timeliness,which can describe the complex and changeable characteristics of the financial system;Thirdly,the paper constructs China’s real-time flexible dynamic financial stress index and further discusses its application.