Klaipėdos universitetas

Financial disturbances can be costly. In particular, systemic events in financial markets, such as banking crises, often affect the whole society in a deeply traumatising way. Consequently, it is important to anticipate risks of such adverse development so as to try to prevent that kind of disaster and ensure financial stability. Author of this paper analyses fragility of financial system of Latvia to the fluctuations in global economy and changes in direction of international capital flows by creating complex financial system stability index. Results have proven that dynamics of every developed sub-index show unique economic processes defining Latvian financial system’s stability. Secondly, sub-indices analysis allows to determine that Latvian financial vulnerability began to worsen in 2005, however, Latvian financial stability downward movement started in 2002, that in its turn shows the necessity for Latvian economic policy makers to get more actively involved in preventing growing risks of economy. Latvian financial system stability index established in this working paper and its accompanying methodology can be further used in follow-up research and Latvian financial stability index improvement.

Maintaining the stability of financial leverage is a task in macro-economic management and also a challenge to be faced. Financial amplification characteristics dominate financial leverage system with low risk of capabilities, and the efficiency of this ability has two-sides results and proposes a lot of risks, however, most researchers have not found the best ways to solve this problem. Therefore, taking positive measures to strengthen the management of the financial system leverage feature becomes very important. In this paper, authors use comparative study and data analysis to illustrate the main problems of financial system leverage, the effect of leverage amplification characteristics, bi-amplified comparative analysis of profit and loss, and bi-amplification characteristics of the risk analysis. Meanwhile, based on five classified management methods, authors put forward countermeasures to the management of leverage properties in financial system.