Home  Journals  Finance and Credit  25(697) - 2016 July

Leading indicators of the Russian financial market crisis and their relation with business cycles

Vol. 22, Iss. 25, JULY 2016

Article PDF Version

Received: 24 March 2016

Received in revised form: 14 April 2016

Accepted: 16 May 2016

Available online: 18 July 2016

Subject Heading: Financial system

JEL Classification: C22, C43, E32

Pages: 2-18

Importance The article addresses crisis episodes on the Russian financial market for the period from 2001 to 2015.
Objectives The study aims to reveal leading indicators that predict crises on the Russian financial market.
Methods I apply the signal approach for crises prediction, and test about 50 quarterly series as leading indicators. I also use the cross-spectral analysis to estimate the time lag between time series.
Results The identified leading indicators show that systemic financial crises of 2008–2009 and 2014–2015 and non-systemic crisis of 2011 are predicted well enough by some indicators, while non-systemic crises of 2001 and 2004 are predicted much worse. The best leading indicators can be classified by the type of information utilized and by the period length between the signal and the crisis, i.e. short-term (1–3 quarters in advance) and long-term (5–8 quarters in advance).
Conclusions The best leading indicators are based on the statistics of world commodity prices, monetary aggregates, transferable deposits, interest rates, and real export. According to cross-spectral analysis of indicators and macroeconomic time series, the 'real' lead value of the indicators is 1–3 quarters or less. Long-term leading indicators have good predictive power because of de facto stability of the business cycle frequency in the Russian economy.

Keywords: early warning approach, market, pressure, cross-spectral analysis, business cycle

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