Dr. Manfred Kremer, Deputy Head of the Financial Research Division at the European Central Bank (ECB), gave a seminar on “Measuring Systemic Financial Stress and Its Impact on the Macro-Economy” at the School on Sep 20, 2018.

Dr. Kremer supervises 15 top-level researchers whose work covers a wide range of topics in central bank-related financial research at the ECB. Before joining the Financial Research Division in 2009, Manfred was Deputy Head in the Capital Markets and Financial Structure Division of the ECB’s Directorate General Economics. Prior to joining the ECB in 2000, Manfred served as an economist at the Deutsche Bundesbank (the Central Bank of Germany) for more than 20 years.

In the seminar, Dr. Kremer explained, in details, his approach to measure systemic financial stress – Composite Indicator of Systemic Stress (CISS), expressed as the association index for the joint hypothesis of multiple index components being both strongly correlated and jointly high at one point in time.

The ECB publishes the CISS for the Euro Area on a regular basis to monitor the financial markets. Also as a joint work with the Center for Finance and Development of Tsinghua University National Institute of Financial Research, Dr. Kremer also calculated Chinese CISS, basing on the data of Chinese Financial Markets. The index suggests there are five major rises in systemic risks, respectively in 2008, 2011, 2013, 2015 and 2016. Evidence shows that the CISS can be used as the synchronization index of financial stress. It can be potentially used as the guide of macro prudential policy. The CISS can also act as a strong indicator of prediction, thus a warning indicator of real economy recessions.