This paper proposes a holistic and dialectical approach to accurately measure and detect systemic risk. As a countermeasure of the pro-cyclicality of the risk charge, which has been severely criticized due to the pro-cyclical impact by forcing banks to restrict their lending in downturns, a so-called counter-cyclical structure of regulatory policy has been widely proposed. As a result, extant regulatory approaches highlight the need for leading (or forward-looking) variables as a harbinger of a systemic crisis based on the market prices rather than lagging (or backwardlooking) ones. Our empirical study based on a multivariate Markov regime-switching autoregressive model con rms that both leading and lagging variables are helpful in a complementary manner. We develop a holistic framework for a systematic diagnosis of systemic risk indicated by a mixture of leading and lagging indicators. The result clearly demonstrates the di erent aspects of pre- and post-crisis periods for the Asian crisis, the Long-Term Capital Management crisis, the technology bubble, and the recent global nancial crisis.
JEL classi cation: C13, G01, G21, G28
Keywords: Systemic risk, Systemic indicators, Markov regime switching model
