Finansal Stres ve Iktisadi Faaliyet

This study examines the interaction between financial stress and economic activity across emerging markets (EMs). Episodes of financial stress can be broadly defined as periods when the financial system is under acute strain and its ability to intermediate is impaired. This study introduces a monthly composite index used to measure financial stress episodes across EMs. The study then examines the implications of domestic and external financial stress shocks on Turkish economic activity and contrasts the dynamics with that of other EMs. Quantitatively, financial stress matters. Specifically, even a temporary financial stress shock can drag industrial production substantially below trend.