Risk Monitoring Systems in Real-time Based on Dynamic Factor Models

This work aims at prediction, prevention and mitigation of systemic risks providing an Early Warning System (EWS) based on forecasts of systemic real and financial risks. These risks are estimated using density forecasts of a set of unrestricted factor-augmented VARs, with factors extracted from a large number of macroeconomic series employed as predictors. Its forecasting power is assessed using quarterly time series of the G-7 economies in order to compare the major European economies with Japan, Canada and the United States.