The study presents several methodologies to compute synthetic indicators of macro-financial stress for the major emerging market economies, using data relative to the dynamics and volatility of equity markets, interest rates, and exchange rates. This information is complemented with data from internet searches (via Google Trends) concerning some terms that are potentially indicative of periods of financial stress (e.g. volatility, bankruptcy, or spreads).
The indicators of financial conditions developed in the study, especially those based on the simple average of a small number of financial variables combined with measures of web search intensity, are shown to be effective in capturing business cycle fluctuations and the occurrence of stress episodes relating to capital flows.
Published in 2022 in: Economics Letters, v. 216, Article 110528
