Bulletin Spring‧Summer 2004

systemic and r ecu r r ent pattern, which is discernible. Therefore, one could judge whether a crisis is coming f r om the mov eme nt of particular economic and financial indicators. The concept of resilience on the other hand is based on the hypothesis that different states of a system involve different equilibrium. It is believed that if an economic system is resilient, it should be able to withstand new challenges and sudden qualitative shifts. Conversely, if the economy is not resilient, the chances that it will change from the current state to other states would be higher. In the context of economic and financial systems, resilience can be interpreted as a measure of a system's ability to remain stable, without undergoing catastrophic changes in basic functioning, in the event of financial shocks. It should be noted that measuring resilience does not involve anticipating financial shocks. EWS tend to focus on high-frequency market data. Indicators commonly used in EWS include (i) Financial Market Data (interest rates, exchange rates, equity prices); (ii) Monetary Aggregates (money supply, loan and deposits); Capital Flows Data (foreign direct investment flows, portfolio and other investment flows, imports and exports, current account ba l ance ); Basic Macro- economic Data (real output growth, government budget and official foreign exchange reserves). As resilience frameworks aim at assessing the state of soundness of the economic and financial systems at a particular point in time, they tend to focus on stock variables, such as the ratio of international reserves to short-term external debt, fiscal reserves or outstanding public debt, and net international investment positions. They put less emphasis on data that reflect market stress, such as exchange rates and interest rates, because these data tend to be highly volatile and contain too much ‘noise' for a meaningful analysis. How to Measure Resilience The basic conceptual framework on resilience indicators comprises the assessment of the resilience of five sectors: external, public, banking, corporate and household. The framework also includes an assessment of the degree of restriction on 'In the context of economic and financial systems, resilience can be interpreted as a measure of a system'S ability to remain stable, without undergoing catastrophic changes in basic functioning, in the event of financial shocks.' Research News 4 3