FREE Policy Brief: Financial Stress and Economic Contraction in Belarus

This brief summarizes the results of an analysis of financial stress episodes in the Belarusian economy. Based on a principal component analysis, the author constructs a financial stress index for Belarus (BFSI) that incorporates distinctive indicators for the banking sector, exchange market and external debt risks covering the period January 2004 to September 2016. Next, he identifies episodes of financial turmoil in Belarus using the BFSI and assess the consequences for the real economy. Finally, the author investigates the long-run relationship between financial stress and economic activity in Belarus.

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