Calculation of financial condition index by principal component analysis method in Iran

Subject Areas : Financial Economics

Zahra Haeri Nasab ¹ , Kiomars Sohaili ² , Shahram Fattahi ³

1 - Department of Economics, Razi University, Kermanshah, Iran
2 - Department of Economics, Faculty of Social Sciences, Razi University, Kermanshah, Iran
3 - Department of Economics, Razi University, Kermanshah, Iran.

Received: 2023-12-12 Accepted : 2024-02-03 Published : 2024-03-20

Keywords: principal component analysis, Iran, G14, Keywords: Financial Condition Index, credite channel. Jel classification: G10,

Abstract :

Abstract In the last few years, the financial condition index has been an important indicator to determine the situation of each country. The Financial Conditions Index can be defined as the current state of the variables that affect the future state of the economy. The Financial Conditions Index is a summary index of financial variables that is effective in predicting the economic situation of a country. Financial conditions in any country are one of the most important issues in the economy. The purpose of this article is to determine and calculate the financial condition index for Iran using the basic component analysis method and time series data from 1990-2020. The results of calculating the financial condition index show that the credit channel has more weight than other channels and this shows the importance of the volume of credit in estimating the country's financial condition index during this period in the research. After that, the asset channel, ie the stock price index and the housing index, have the most weight. Among these, the exchange rate and interest rate channels have the lowest weight. Therefore, the central bank can adopt a forward-looking approach in monetary policy, so that by changing its retrospective approach in monetary policy decisions, it can show the most correct reaction.

References:

منابع

• اسکندری، بهمن، و وظیفه دوست، حسین (1400). تاثیر روش های تامین مالی بر مشارکت جمعی در کسب و کارهای دانش بنیان.  فصلنامه اقتصاد مالی، (15 )57، 3-26.


• صفری, رؤیا (1393). اثرات سیاست پولی بر تولید و تراز تجاری. پایاننامه کارشناسی ارشد، دانشگاه الزهرا. 2)


• ابونوری، اسمعیل، و تهرانی، رضا (1400). سرایت پذیری ریسک از بخش مالی به بخش واقعی با استفاده از شاخص برخورد شرطی. فصلنامه اقتصاد مالی، (15)56، 1-24.


• لطفی مزرعه شاهی، محمد (1385). بررسی اثرات تورم بر بازده سهام شرکت های پذیرفته دربورس اوراق بهادار.فصلنامه مدیریت، (5)12، 63-.74


• تقی زاده، حجت(1396). محاسبه شاخصهای شرایط پولی و مالی با استفاده از تحلیل مولفه اساسی. فصلنامه مطالعات اقتصادی کاربردی ایران، (29)57، 5-25.


• جعفری صمیمی، احمد (1385). تاثیر متعیرهای نهادی بر رشد اقتصادی ایران. فصلنامه دانش و توسعه، (5)16، 5-28.


• عطرکار، صدیقه و محبوبی، مطهره (1398). محاسبه شاخص شرایط مالی در ایران. فصلنامه تحقیقات مدلسازی اقتصادی، (3)12، 2-18.


• دادگر، یدالله و نظری، روح الله (1392). ارزیابی شاخص های توسعه مالی در ایران. ششمین کنفرانس توسعه نظام تامین مالی در ایران.


• ویکی پدیا، دانشنامه ازاد.


• واشقانی، محمد (1389). مکانیسم انتقال سیاست پولی و اثرگذاری سیاست پولی بر اقتصاد ایران. ماهنامه اقتصادی، (159)166، 5-25.

• Angelopoulou, E.,& Hiona, B. (2013). Building a financial conditions index for the euro area and selected euro area countrieswhat does it tell us about the crisis. ECB Working paper, 125(7), 2218-2227.


• Boivin, J., Kiely, M., & Mishkin, F. (2010). How Has the Monetary Transmission Mechanism Evolved Over Time?. Finance and Economics Discussion Series, 110(5), 1120-1131.


• Bean, C., & Taylor, A. (2010). Monetary Policy after the fall. The Monetary Policy, 140(2), 2215-2232. 13)


• Baxa, J., & Horvas, R. (2013). Time varing Monetary Policy rule and Finance Stress.Journal of finance Stability, 120(3), 3320-3335.


• Boivin, J. (2010). Has U.S. Monetary Policy Changed? Evidence from Drifting Coefficients and Real-Time Data. Journal of Money, Credit and Banking, Blackwell Publishing, 38(5), 1149-1173.


• Bagheri,A.,& Chitsazan, H. (2020). Croedfunding Motivation Afocus on donors Perspective.Tecnological forcasting & social change, 145(4), 218-232.


• Clarida,Gail.(1998). Monetary policy rule in in practice. journal of monetary policy, 127(3),1033-1067.


• Clarida,R. (2000). The Science of Monetary Policy. Journal os Economic Literature, 125(2), 1027-1037.


• Clarida,V., & Woodford, M.(2010).  Credit Spread and Monetary Policy.journal of monetary policy, 127(5), 1044-1057.


• Gomez, E. (2011). Financial Conditions Index: Early and Leading Indicator for Colombia. Journal of business, 66(2), 174-220.


• Taylor,JB. (2014). Monetary Policy and Asset Market. Standfore University.


• Taylor, John, B. (1993). Macroeconomic Policy in a World Economy From Econometric Design to Practical Operation. Newyork journal, 123(1), 1122-1135.


• Bean,C. (2010). Monetary Policy after the fall. Journal of monetary policy, 120(2), 267-328. 23)


• 24)Borio,Lowe. (2004). Securing Sustainable Price Stability.journal of Canada reiew, 125(2), 2267-2277.


• Freedman,C.(1995). “TheRole ofMonetary Conditions And TheMonetary Conditions IndexInThe Conduct Of MonetaryPolicy”. BankOf Canada Review,125(2), 2278-2292.


• Komijani, A., & Mashhadi Ahmad, F. (2012). Monetary policy and its


• impact on economic growth with an emphasis on the rate of bank interest in Iran.The American economic review, 122(1), 520-535.


• Mishikin, FS. (2008). Monetary Policy Effecting during financial Crises. The American Economic Review,122(4), 573-577.


• Mishkin, F. (1995). Symposium on the Monetary Transmission The Journal of Economic Perspectives, 9(4), 3333-3340.


• Mishkin, F. (1995). “Symposium on the Monetary Transmission The Journal of Economic Perspectives, 9(4),3333-3340.


• Mishkin, F. (2001). The transmission mechanism and the role of asset prices in monetary policy. National bureau of economic, 127(2), 1332-1347.


• Morris, C., & Sellon Jr, G. (1995). Bank lending and monetary policy: Evidence on a credit channel. Economic Review-Federal Reserve Bank of Kansas City, 80(2), 59-75.


• Mayes, D. (2001). Financial Conditions Indexes.journal Bank of Finland Discussion Paper,  150(2), 1122-1135.


• Polat, A., & satti, L. (2015). Revisiting 33) Linkages between Financial Development, Trade Openness Economic Growth in South Africa. Fresh Evidence from Combined
  Cointegration Test, Quality & Quantity, 49(2), 1785-1793.


• Sharma, S. (1996). Applied Multivariate Techniques. Journal Wiley & Sons, Inc, 49(3), 2250-2270.


• Swiston, A. (2008). Financial Conditions Index: Putting Credit Where Credit is Due. IMF Working Paper, 50(2), 1152-1173.


• Hatzius, J. (2010). Financial Conditions Indexes A Fresh Look after the Financial Crisis. NBER Working PaperSeries, 25(1), 1615-1630.


• Hubrich, K., & Tetlow, R. (2015). Financial Stress and Economic Dynsamic The Transmission of crisises. journal Monetary and Economic, 29(4), 1144-1158.


• Krylova, E. (2002). The Credit Channel of Monetary PolicyCase of Austria. Economics journals, 125(1), 1125-1133.


• Goodhart, C., & Hofmann, B. (2001). Asset Prices, Financial Conditions, and the Transmission of Monetary Policy. Paper prepared for the conference on Asset Prices, Exchange Rates and Monetary Policy, 110(2), 1127-1140.


• Hatzius, J., & Watson, M.(2010). Financial Conditions Indexes A Fresh Look after the Financial Crisis. journal of monetary economic, 120(2), 1125-1145.


• Ho, G., & Lu, Y. (2013). A Financial Conditions Index for Poland. IMF paper,122(3),  1440-1454.