Work detail

Financial Stress in the Czech and Slovak Republic: Measurement and Effects on the Real Economy

Author: PhDr. Ján Malega
Year: 2016 - summer
Leaders: prof. Roman Horváth Ph.D.
Consultants:
Work type: Doctoral
Language: English
Pages: 80
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/167512/
Abstract: In the scope of this thesis, we estimate a financial stress index particularly for the
Czech Republic with application for Slovakia, and examine its development during
the period 2002-2014. The advantage of the index is primarily its ability to measure
the current level of stress in the financial system incorporating information from
various sectors of the economy and expressing it in a single-value statistic. We find a
marked increase in financial stress at the beginning of the global financial crisis and
European sovereign debt crisis with a decrease to nearly pre-crisis levels by the end
of our study period. Next, we estimate vector autoregression models and find out that
financial stress has systematic effects on unemployment, prices and interest rates,
with the maximum response occurring approximately one to two years after the shock
in the Czech Republic, and with a half-year delay in Slovakia. Specifically, an
increase in financial stress is associated with higher unemployment, lower prices and
lower interest rates, indicating its detrimental effects on the real economy.

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