Financial stress index and economic activity in South Africa: new evidence

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dc.contributor.authorTewari, Devi Datt
dc.contributor.authorIlesanmi, Kehinde Damilola
dc.coverage.conferenceissn
dc.date.accessioned2025-11-20T07:02:16Z
dc.date.available2025-11-20T07:02:16Z
dc.date.issued2020
dc.departmentNameEconomics
dc.description.abstractThe importance of a sound and stable financial system and by extension economic stability was brought to the fore by the global financial crisis (GFC). The economic and social costs of the GFC have renewed the commitment of stakeholders in the financial sector including central banks to develop instruments and methodologies that will be useful in monitoring financial stress within the financial system and the real economy. This study contributes to the growing literature by developing a financial stress indicator for the South African financial market. The financial stress indicator (FSI) is a single aggregate indicator that is constructed to reflect the systemic nature of financial instability and also to measure the vulnerability of the financial system to both internal and external shocks. Using the principal component analysis (PCA), the results show that financial stress can be identified by the financial stress indicator. Furthermore, using a recursive Vector Autoregression (VAR) model to estimate the impact of financial stress on output and investment, the result shows that financial stress has a negative impact on economic growth and investment, though not immediately. FSI is very useful for gauging the effectiveness of government measures to mitigate the impact of financial stress. Concerted effort to stimulate investment and domestic production by relevant stakeholders is necessary to mitigate the impact of financial stress. This will go a long way to alleviating the impact of the financial stress on industrial production, employment and the economy at large
dc.facultyFaculty of Commerce, Administration and Law
dc.format.preprintNo
dc.identifier.citationIlesanmi, K.D. and Tewari, D.D., 2020. Financial stress index and economic activity in South Africa: new evidence. Economies, 8 (4), 110
dc.identifier.issn2227-7099
dc.identifier.otherhttps://doi.org/10.3390/economies8040110
dc.identifier.urihttp://hdl.handle.net/10530/58307
dc.inproceedingsissn
dc.issuenumber8 / 4
dc.keynoteissn
dc.pages110
dc.peerreviewedYes
dc.publisherMDPI
dc.subjectGlobal financial crisis
dc.subjectInvestment
dc.subjectPrincipal component analysis
dc.subjectSouth Africa
dc.subjectSystemic risk
dc.titleFinancial stress index and economic activity in South Africa: new evidence
dc.title.journalEconomies
dc.typeJournal Article
dspace.entity.typePublication
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