Estimating a financial uncertainty index for Saudi Arabia
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 29 June 2022
Issue publication date: 23 January 2024
Abstract
Purpose
This study seeks to build a financial uncertainty index for Saudi Arabia. This index serves as a leading indicator of Saudi economic activity and helps to describe economic fluctuations and forecast economic trends.
Design/methodology/approach
This study adopts an extension of the Jurado et al. (2015) procedure by combining financial uncertainty factors with their net spillover effects on GDP and inflation to construct an aggregate financial uncertainty index. The authors consider 13 monthly financial variables for Saudi Arabia from January 2010 to June 2021.
Findings
The empirical results show that the constructed financial uncertainty estimates are good leading indicators of economic activity. The robustness analysis suggests that the authors’ proposed financial uncertainty estimators outperform the alternative estimates used by other existing approaches to estimate the financial conditions index.
Originality/value
To the best of the authors’ knowledge, this is the first attempt at constructing a financial uncertainty index for Saudi Arabia. This study extends the empirical literature, from which the authors propose a novel conceptual framework for building a financial uncertainty index by combining the approach of Jurado et al. (2015) and the time-varying connectedness network approach proposed by Antonakakis et al. (2020)
Keywords
Acknowledgements
Fnding: This paper has been funded by the Research Group Program (RGP), award number – RG-21-10-01, Deanship of Scientific Research, Imam Mohammad Ibn Saud Islamic University (IMSIU), Saudi Arabia.
Conflict of interest: The authors declare that there exists no conflict of interest in this work.
Citation
Ben Haddad, H., Altamimi, S., Mezghani, I. and Medhioub, I. (2024), "Estimating a financial uncertainty index for Saudi Arabia", International Journal of Emerging Markets, Vol. 19 No. 2, pp. 519-539. https://doi.org/10.1108/IJOEM-02-2022-0248
Publisher
:Emerald Publishing Limited
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