3/12/2012: Current crisis systemic risk comparative

THE LIBERALIZATION AND MANAGEMENT OF CAPITAL FLOWS - an IMF paper released today has an interesting chart putting into perspective the extent of the euro area crisis in comparative terms to other crises (click on the image to enlarge):

The above clearly shows that to Q3 2011, the euro area crisis has been

1. Systemically separate from the preceding global financial crisis of Q1 2008 - Q1 2010, 
2. Much smaller in magnitude than the preceding crisis,
3. As measured by the crisis indicator - comparable in magnitude to the early stage of the Asian-Russian crises and ERM crisis, as well as to the early stages of the Scandinavian crisis
4. However, the spillover from the euro area crisis to the global economy remained more limited than contagion in previous crises, as illustrated by the systemic crisis indicator.

Another interesting feature of the chart is that it shows that the Age of Moderation (1990-2007) was actually a period with four systemic crises: the Scandinavian crisis of the 1990s, the ERM crisis, the Asian and Russian crises, and the dot.com bubble

Lastly, the above shows that both, the IMF systemic crisis indicator and Equal-weighted crisis indicator are not sufficient in providing lead-up signals for systemic stress build up.