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Early-Warning Systems and Managing Systemic Risks using Real-Time Financial and Business Conditions Indicators (CIFR - E034)

Area of Interest: Systemic Risk  Lead Institution: Macquarie University

Project Summary

Substantial resources in banks, businesses, governments and universities are devoted to deriving accurate and timely estimates of the state of the economy and systemic risks. These estimates are of central importance for business, financial, regulatory and macroeconomic policy decision-makers, who have to act in real time. However the data currently utilised is largely disparate, arrives at different time intervals, and is not always rigorously analysed for joint informational content with respect to the management of financial and systemic risks. This project applies the rigour of dynamic factor models (DFMs) for Australia in an international financial and macroeconomic context to model potential systemic risks for the financial sector and the economy. A key outcome is a new set of early warning indictors for systemic risk available over the internet, developed through close communication between Australian academics and practitioners including the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA).

CIFR Inaugural Symposium on Systemic Risk

On 8 August 2013, finance sector leaders gathered to discuss the progress of six CIFR-funded research projects focused on systemic risk, including the Macquarie University Early-Warning Systems and Managing Systemic Risks project. The first of a series, the Symposium was designed to give researchers the opportunity to discuss their projects with an audience of academic peers, finance industry executives and financial sector regulators.

The event received strong support with over 100 people participating, providing a powerful demonstration of CIFR's increasingly important position in financial markets, policy formulation and research.

Guests were welcomed by Kylie Hargreaves, Acting Deputy Director General, NSW Trade & Investment. CIFR Chairman Peter Mason then introduced the Symposium by reinforcing the importance of the CIFR projects currently being undertaken. This was followed by CIFR CEO David Gallagher foreshadowing CIFR's new approach to commissioning research projects.

View highlights from the Centre for International Finance and Risk (CIFR) Symposium

Research Team

Professor Stefan Trueck | Co-Director Centre for Financial Risk, Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University

Professor Jeffrey Sheen | , Department of Economics, Faculty of Business and Economics, Macquarie University

Dr Chi Truong | Postdoctoral Research Fellow, Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University