Bio

Fuchun Li is a Senior Economist in the Model Development and Research Division of the Financial Stability Department at the Bank of Canada. His research interests are in econometric methods in finance, economics, and risk management. His current work mainly focuses on developing financial tools or financial stability assessment framework for the risk analysis of banking industry or Financial System. He received his PhD in economics from the University of Western Ontario.


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Staff Working Papers

Early Warning of Financial Stress Events: A Credit-Regime-Switching Approach

Staff Working Paper 2016-21 Fuchun Li, Hongyu Xiao
We propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks.

Measuring Systemic Risk Across Financial Market Infrastructures

Staff Working Paper 2016-10 Fuchun Li, Héctor Pérez Saiz
We measure systemic risk in the network of financial market infrastructures (FMIs) as the probability that two or more FMIs have a large credit risk exposure to the same FMI participant.

Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest Rates

Staff Working Paper 2015-17 Fuchun Li
The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.

Predicting Financial Stress Events: A Signal Extraction Approach

Staff Working Paper 2014-37 Ian Christensen, Fuchun Li
The objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event.

A Semiparametric Early Warning Model of Financial Stress Events

Staff Working Paper 2013-13 Ian Christensen, Fuchun Li
The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States.

Measuring Systemic Importance of Financial Institutions: An Extreme Value Theory Approach

Staff Working Paper 2011-19 Toni Gravelle, Fuchun Li
In this paper, we define a financial institution’s contribution to financial systemic risk as the increase in financial systemic risk conditional on the crash of the financial institution. The higher the contribution is, the more systemically important is the institution for the system.

Identifying Asymmetric Comovements of International Stock Market Returns

Staff Working Paper 2010-21 Fuchun Li
Based on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns.

Financial Stress, Monetary Policy, and Economic Activity

Staff Working Paper 2010-12 Fuchun Li, Pierre St-Amant
This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold.

Testing for Financial Contagion with Applications to the Canadian Banking System

Staff Working Paper 2009-14 Fuchun Li
The author proposes a new test for financial contagion based on a non-parametric measure of the cross-market correlation. The test does not depend on the assumption that the data are drawn from a given probability distribution; therefore, it allows for maximal flexibility in fitting into the data.

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Journal Publications

Publications with external referees

  • Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest rates, Journal of Financial Econometrics (Forthcoming, 2019).
  • Measuring System Risk across Financial Market Infrastructures,
    (with Hector Perez Saiz), Journal of Financial Stability, Volume 34, 2018, p.1-11.
  • Predicting Financial Stress Events: A Signal Extraction Approach,
    (with Ian Christensen), Journal of Financial Stability, Vol. 14, October 2014, p. 54-65.
  • Testing for Financial Contagion Based on a Nonparametric measure of cross-market linkage,
    (with H. Zhu), Review of Financial Economics, 2014, Vol. 23, p. 141-147.
  • Identifying Asymmetric Comovements of International Stock Market Returns,
    Journal of Financial Econometrics, 2014, Vol. 12, No. 3, p. 507-554.
  • Measuring Systemic Importance of Financial Institutions : An Extreme Value Theory Approach
    (with Toni Gravelle), Journal of Banking and Finance, 2013, 37 (7), p. 2196-2209.
  • A Consistent Test for Multivariate Conditional Distributions,
    (with Greg Tkacz), Econometric Reviews, 30 (3), p. 251-273, 2011.
  • Testing the Parametric Specification of a Diffusion Function in a Diffusion Process
    Econometric Theory, 2007, 23, 221-250.
  • A Semiparametric Two-Factor Term Structure Model
    (with John Knight, Minwei Yuan), Journal of Financial Econometrics, 2006, 4 (2): 204-237.
  • Combining Forecasts with Nonparametric Kernel Regressions
    (with Greg Tkacz), Studies in Nonlinear Dynamics & Econometrics, 2004, 8 (4), article 2.
  • An Empirical Implementation of a Non-parametric Estimation Approach for a Two-Factor Term Structure Model
    (with Mingwei Yuan), Canadian Journal of Administrative Sciences, 2000, 17 (2), 182-198.
  • A Consistent Bootstrap Test for Conditional Density Functions with Time-Series Data,
    (with Greg Tkacz), Journal of Econometrics, 2006, Vol. 133, 863-886.