Macroeconomic efault Modeling and Stress Testing

Dietske Simons and Ferdinand Rolwes
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Dietske Simons: De Nederlandsche Bank
Ferdinand Rolwes: De Nederlandsche Bank

International Journal of Central Banking, 2009, vol. 5, issue 3, 177-204

Abstract: This paper applies a macroeconomic-based model for estimating probabilities of default. The first part of the paper focuses on the relation between macroeconomic variables and the default behavior of Dutch firms. A convincing relationship with GDP growth and oil price and, to a lesser extent, the interest and exchange rate exists. The second part of the paper assesses the default behavior based on a stress scenario of two consecutive quarters of zero GDP growth as required by the Basel II framework. It can be concluded that a stress-test scenario covering two quarters of zero GDP growth does not influence the default rate significantly and thus does not seem to be very severe.

JEL-codes: C12 C13 C15 E32 E44 E47 G21 G28 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2009:q:3:a:6

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