Abstract: The purpose of this study is to develop a financial stability index which comprises of several indicators, by drawing a conceptual framework and components of financial stability and current literature to ascertain and evaluate the Turkeys financial position. This index is aimed at reflecting the periodical movements in Turkish economy, tallying with the known cyclical fluctuations and ascertaining the real financial positions of Turkeys in a right way. 20 indicators in monthly frequency which covers April 2007 June 2015 period were used in this index. This period was selected since it includes expansion, crisis and recovery periods for global and Turkish economy. In this study, a new index results were calculated and evaluated by using two different methods; factor analysis and equal weighting. The results show that they coincide with the economical developments in Turkey and ascertain financial developments in a right way.
Key words: Financial stability, macroeconomy, financial stability index, factor analysis, composite indicator. JEL Code: E00 Article Language: EnglishTurkish
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