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The Financial Activity Index

April 18, 2012
Atsushi Ishikawa*1
Koichiro Kamada*2
Kazutoshi Kan*3
Ryota Kojima*4
Yoshiyuki Kurachi*5
Kentaro Nasu*6
Yuki Teranishi*7

Abstract

The financial activity index (FAIX) introduced in this paper is a selection of financial indicators that borrow from prior literature on early bubble warnings and are particularly adept at explaining the bubble occurred in Japan starting in the 1980s. Our index comprises 10 financial indicators and is envisioned for use from two main perspectives. First, it is used for a multi-faceted analysis of overheating and overcooling of financial activity through individual indicators in each segment. Second, it is used to monitor from a macroeconomic perspective the dynamics of bubble creation and destruction through an aggregation of the indicators. The index, with these characteristics, should be an effective tool for detecting the accumulation of financial imbalances.

The authors would like to thank Kazuo Ueda (The University of Tokyo) and the staff of the Bank of Japan for their helpful comments. Any errors or omissions are the responsibility of the authors. The views expressed here are those of the authors and should not be ascribed to the Bank of Japan or its Financial System and Bank Examination Department.

  • *1   Financial System and Bank Examination Department
    E-mail : atsushi.ishikawa@boj.or.jp
  • *2   Financial System and Bank Examination Department
    E-mail : kouichirou.kamada@boj.or.jp
  • *3   Financial System and Bank Examination Department
    E-mail : kazutoshi.kan@boj.or.jp
  • *4   Secretariat of the Policy Board (formerly Financial System and Bank Examination Department)
    E-mail : ryouta.kojima@boj.or.jp
  • *5   Financial System and Bank Examination Department
    E-mail : yoshiyuki.kurachi@boj.or.jp
  • *6   Financial System and Bank Examination Department
    E-mail : kentarou.nasu@boj.or.jp
  • *7   Financial System and Bank Examination Department
    E-mail : yuuki.teranishi@boj.or.jp

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