Measuring stress in the financial system and analyzing factors affecting it

Today, with the development of the communication infrastructure and the interconnection of different financial markets, the importance of financial system stability has become more and more important. This is important to monitor and control the various financial markets and to avoid instability and crisis in the financial system as well as to prevent the devastating impact of the financial crisis on the real sector of the economy. To this end, in recent years, by combining financial market indices, researchers have devised a comprehensive index to illustrate the overall status of the financial system with respect to the degree of risk, instability, and resilience available to the financial system. Significantly, the lack of such an indicator is in line with the conditions of the Iranian financial system, indicating the situation of stress in order to describe the conditions of the financial system to achieve financial stability. In this study, by determining the dimensions of the Iranian financial system and selecting the risk and volatility indicators in different financial markets and combining them, we designed an index designated as the stress index of the Iranian financial system. After combining the obtained variables with equal weighting method, we have analyzed the designed index and we have concluded that the periods between the end of 1391 to the end of 1394 also the end of 1396 to the middle of 1397 are the stressful periods in the Iranian financial system. In addition, by examining the factors affecting this index, we have found that the greatest impact on stress in the Iranian financial system was related to the shocks caused by the producer price index.