Eichengreen et al. (2012) use principal components to
examine how the subprime crisis spread to the global economy. In their work they highlight the rise in
the importance of common factors in driving credit default swaps across countries. Luca and Sparafora
(2012) use principal components to develop a global risk measure similar to ours that they find to be a
significant determinant of capital flows to developing economies. Finally, Aramonte, et al. (2013) use
these techniques to rank various financial condition indexes.