The simpler the better: measuring financial conditions for monetary policy and financial stability
(WorldNews Germany)

Simone Arrigoni, Alina Bobasu, Fabrizio Venditti Working Paper Series The simpler the better: measuring financial conditions for monetary policy and financial stability No 2451 / August 2020 Disclaimer: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. Abstract In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering...