Macroeconomic variables and default risk: an application of the FAVAR model

Liang Guo and Catherine Bruneau

Revue d'économie politique, 2014, vol. 124, issue 5, 817-857

Abstract: This paper studies the influence of macroeconomic factors on credit risk. We apply the dynamic factor model (FAVAR type) proposed by Stock and Watson [2005]. We have two empirical applications, respectively in the United States and in the Euro area. In the two applications, the results suggest that the most important factor for explaining default rates is related to real activity. Furthermore, we are interested in the effect of monetary policy on default rates. The results suggest that default rates increase slightly after a rise in the interest rate and that speculative grade firms are more sensitive. However, the contribution of interest rate shocks to default rates is limited.

Keywords: macroeconomic factors; dynamic factor model; credit risk (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cairn.info/load_pdf.php?ID_ARTICLE=REDP_245_0817 (application/pdf)
http://www.cairn.info/revue-d-economie-politique-2014-5-page-817.htm (text/html)
free

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cai:repdal:redp_245_0817

Access Statistics for this article

More articles in Revue d'économie politique from Dalloz
Bibliographic data for series maintained by Jean-Baptiste de Vathaire ().