Quality of Financial Policies and Financial System Stress

In this paper, we develop multi-country indices of financial system stress and quality of financial policies and use them in regression analysis of the determinants of financial stress. We find that countries with higher quality of financial policies are better able to contain the effects of macroeconomic pressures on the overall level of stress in the financial system. They are also in a better position to ensure sustainable development of the financial system.Financial systems;financial system, financial policies, banking, foreign exchange, banking sector, stock market, bond, foreign exchange market, financial sector, financial stability, international financial statistics, banking supervision, banking crises, currency crises, financial markets, bond index, equity markets, bank soundness, deposit insurance, bank credit, stock markets, international reserves, government bond, nominal exchange rate, financial contagion, emerging stock markets, deposit money, government bond index, bank for international settlements, deposit money banks, stock market index, financial intermediaries, financial institutions, bond markets, bonds, bank lending, stock market indices, bank lenders, assets of deposit money, assets of deposit money banks, bank lender, money market, interbank market, international bank lending, stock market capitalization, moral hazard, bank of canada, benchmark government bond, bank crises, government finance, exchange rate devaluation, fixed income bond, hedge funds, prudential regulation, international financial markets, income bond, money market rate, banking sectors, banking statistics, financial structure, domestic government bond, financial market, financial intermediation, deposit insurance scheme, financial globalization, financial services, financial backup facilities, financial fragility, financial sector development, bank regulation, macroeconomic stability, bank runs, equity market, bank run, borderline financial crises, bank policy, eurobonds, international finance, stock market crashes, domestic hedge, brady bonds, bank assets, money market instruments, government bond yields, bond yields, banking system, excess liquidity, capital adequacy, international standards