- Title
- A financial stress index to model and forecast financial stress in Australia
- Creator
- Mukulu, Sandra
- Date
- 2017
- Type
- Text; Thesis; PhD
- Identifier
- http://researchonline.federation.edu.au/vital/access/HandleResolver/1959.17/165529
- Identifier
- vital:13314
- Identifier
- https://library.federation.edu.au/record=b2752361
- Abstract
- The series of financial crises that cascaded through and rocked much of the world over the past decade created opportunities to draw meaning from the pattern of countries succumbing to crisis and those who appear to be wholly or partially immune. This thesis examines the case of Australia, a developed country that has seldom experienced an endogenous crisis in the last few decades, but has experienced crisis by contagion. This study designs a financial stress index to measure and forecast the health of the Australian economy and proposes a custom-made stress index to: Gauge the potential for a crisis; and Signal when a timely intervention may minimise fear and contagion losses in the Australian financial market. Financial and economic data is used to design indicators for stress in the banking sector and equity, currency and bond markets. Further, this study explores how movements in equity markets of key trading partners of Australia can be used to predict movements in the Australian equity market. The variance-equal weights (VEW) and principal components approach (PCA) are used to subsume 22 stress indicators into a composite stress index. The VEW and PCA stress indexes were examined to determine monitoring and their forecasting capabilities. It was found that the VEW stress index performed better than the PCA stress index, because it provided more consistent estimates for the level of Australian financial stress. Although, both models show some promise, each model fell short of giving adequate forecasts in financial stress especially at the peak time of the 2007-2009 GFC. Thus, more research is needed to understand the complex nature of financial crisis, how crises develop and the techniques that can be used to predict the onset of financial crises.; Doctor of Philosophy
- Publisher
- Federation University Australia
- Rights
- Copyright Sandra Mukulu
- Rights
- Open Access
- Rights
- This metadata is freely available under a CCO license
- Subject
- Financial stress index; Model; Forecast; Australia
- Full Text
- Thesis Supervisor
- Hettihewa, Samanthala
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