Assessment of financial stress in Latin American countries during periods of global economic shocks

Abstract

A feature of modern international markets is their susceptibility to global and local shocks that contribute to the spread of financial stress. This article presents approaches to assessing financial stress and demonstrates their application in Latin American countries. Insufficient attention of the authors to this problem in the context of the study of regional factors of instability and financial crises is noted. Particular attention is paid to the methods of constructing a generalizing indicator of financial stress. On the basis of extensive statistical material in relation to the large economies of Latin America, the author's index of financial stress has been developed and tested. Calculations for 2007—2023 made it possible to identify three periods of increasing stress in Latin American countries and record its peak values: during the global financial crisis, the COVID-19 pandemic, as well as during the 2022 food crisis. There is also a high level of correlation between stress in the United States and Latin American countries, which is explained by their close financial and trade ties. In addition, the synchronicity of the reaction of different Latin American countries to a particular shock has been empirically proven.