Journal Article

Revamping the Kansas City Financial Stress Index Using the Treasury Repo Rate


Abstract: The Kansas City Financial Stress Index (KCFSI) uses the London Interbank Offered Rate (LIBOR) to measure money market borrowing conditions. But regulatory changes in the United Kingdom will eliminate LIBOR by 2021. We construct a revised financial stress index with a variable that measures the cost of borrowing collateralized by Treasury securities (the Treasury repo rate) instead of LIBOR. {{p}} This revised measure of the KCFSI is highly correlated with the current KCFSI, suggesting the Treasury repo rate can replace LIBOR.

Keywords: Treasury repo rate; Kansas City Financial Stress Index;

JEL Classification: E40; E43;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Macro Bulletin

Publication Date: 2018-10-24

Issue: October 24, 2018

Pages: 1-2