Aggregate financial stability indices represent another class of quantitative methods which aim at measuring the stability of a financial system at any given point in time. Absence of specific benchmarks however, limits the use of such indices for predicting stress conditions/ crisis more effectively. 51. As I mentioned earlier, financial stability is multi-dimensional and it can be impacted through different channels.
Signs of instability or vulnerability could thus manifest in different variables or indicators. There are thus challenges in first identifying a set of indicators which need to be monitored for financial stability and then identifying the level at which each indicator reflects stress conditions.