This note develops a synthetic indicator of macro-financial stress for the Italian economy computed using stress measures for the five most important Italian financial markets, i.e. the money market, the bond market, the equity market, the foreign exchange market and the market for stocks of financial intermediaries. The indicator is used to evaluate the impact on the Italian economy of high/low-stress regimes.
The indicator tracks the principle episodes of stress that occurred at global level from 2008 to 2012, as well as the periods of greatest turbulence in the Italian financial markets. Our estimates show that a negative shock in financial conditions determined a significant loss in gross domestic product in the subsequent 12 months in a high-stress regime, while the impact of a negative shock in a low-stress regime proved limited.
