However, the financial-stress index (FSI) has dropped from the recent high of late last year and early this year and might not necessarily translate to weakness in the economy, Goldman analysis showed. “Growth will not necessarily be affected significantly if a sharp increase in financial stress is followed by a quick reversal,” Li said. Some of the metrics underlying the index have short histories, so Goldman Sachs built both an extended-history measure with the ingredients that have longer histories, and a “full” version. Goldman’s Financial Conditions Index has shown some tightening in financial conditions recently, thanks in part to a slowing in money-supply growth. With regard to the banking sector, Goldman Sachs used measures of lenders’ stocks and bonds in the FSI.

Source: Taipei Times May 17, 2017 16:10 UTC