With Scott Brave.
Published in International Journal of Central Banking 8(2), June 2012: 191-239. https://www.ijcb.org/journal/ijcb12q2a6.htm
Previously distributed as Federal Reserve Bank of Chicago Working Paper No. 2010-07, January 2010.
Abstract: We approach the task of monitoring financial stability within a framework that balances the costs and benefits of identifying future crisis-like conditions based on past U.S. financial crises. Our results indicate that the National Financial Conditions Index (NFCI) produced by the Federal Reserve Bank of Chicago is a highly predictive and robust indicator of financial stress at leading horizons of up to one year, with measures of leverage playing a crucial role in signaling financial imbalances. At longer forecast horizons, we propose an alternative sub-index of the NFCI that captures the relationship between non-financial leverage, financial stress, and economic activity.
The published article is available as a pdf. (49 pages, 714 KB)
The NFCI index can be downloaded as a .cvs sheet from here.