Financial Stress Index (FSI) and Economic Sensitivity Index (ESI): 2014 update

Project description:

To provide potential investors, researchers and politicians with a reliable source of information about the polish economy, CASE has created a unique and novel indicator, the CASE Financial Stress Index (FSI) and the Economic Sensitivity Index (ESI). After twenty years of transformation, the Polish economy is becoming an increasingly predictable environment for potential investors. However, many investors are still forced to conduct their businesses based on incomplete information. Hence the growing demand for the creation of an indicator which allows one to assess the Polish economy in a global context and from the point of view of a particular category (e.g.  unemployment). While the indicators offer a simplified view of reality, applied throughout long periods of time they reveal certain trends –information which is valuable for a wide array of stakeholders.

In 2014 the Indices will be updated and amended. Especially the prognostic part of the model which will be extended. In order to improve the process of predicting tensions in financial markets and the economic condition of the region, CASE experts will build an econometric Vector Autoregression Model (VAR ). Multi-equation VAR models are a very effective forecasting tool that enable one to capture the dynamic relationships between economic indicators and units. Variables’ values predicted by CASE’s VAR model will be used to forecast the value of the indices. Forecasts will be created for the year preceding the actual moment of conducting calculations (January-March 2014).

A quarterly analysis of the macroeconomic situation in the region will be provided based on the updates of indices and the econometric model’s forecasts (March / June / September / December 2014). The analysis will be published quarterly in an online report, available in two versions: a general and a detailed one.

General Objectives of the Project:

The main objective of the project is to update and amend indices giving an overview of Poland’s macroeconomic situation and its financial stability. The indices will take into account a number of factors enabling comprehensive analysis of the economic situation. They are designed to serve as a tool for both scientists and politicians.

Project Structure and Involvement of CASE:

The project is the brainchild of CASE experts and a continuation of the „CASE Financial Vulnerability Index” project which was carried out in 2013. The work on the project will last approximately 12 months. The updates will be released every three months.

Project Output:

The updated indices are the main output of the project. The updates will be issued quarterly in the form of a methodological report available online. Additionally, a dissemination seminar during which the index will be presented shall be organized.