A Composite Indicator of Systemic Stress (CISS) for Colombia

Cabrera-Rodríguez, Wilmar Alexander; Hurtado-Guarín, Jorge Luis; Morales, Miguel; Rojas-Bohórquez, Juan Sebastián

A Composite Indicator of Systemic Stress (CISS) for Colombia

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Temas de Estabilidad Financiera ; No. 80

Date published

2014-06-06

Date

2014-06-06

Authors

Cabrera-Rodríguez, Wilmar Alexander
Hurtado-Guarín, Jorge Luis
Morales, Miguel
Rojas-Bohórquez, Juan Sebastián

Document language

eng

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Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva.

The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

Abstract

The most recent global financial crisis (2008-2009) highlighted the importance of systemic risk and promoted academic interest to develop a wide set of warning indicators, which are mechanisms to identify systemically important institutions and global systemic risk indexes. Using the methodology proposed by Holló et al. (2012), along with some considerations from Hakkio & Keeton (2009), this document comprises a Composite Indicator of Systemic Stress (CISS) for Colombia. The index takes into account several dimensions related to financial markets (credit institutions, housing market, external sector, money market and local bond market) and is constructed using portfolio theory, considering the contagion among dimensions. Results suggest the peak of the global financial crisis (September 2008) as the most important episode of systemic risk in Colombia between 2000-2014. Additionally, real activity seems to be adversely affected by an unexpected increase of the systemic risk index.