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Global credit risk: world country and industry factors

Bernd Schwaab, Siem Jan Koopman and Andre Lucas

No 1922, Working Paper Series from European Central Bank

Abstract: We investigate the dynamic properties of systematic default risk conditions for firms in different countries, industries and rating groups. We use a high-dimensional nonlinear non-Gaussian state space model to estimate common components in corporate defaults in a 41 country sample between 1980Q1-2014Q4, covering both the global financial crisis and euro area sovereign debt crisis. We find that macro and default-specific world factors are a primary source of default clustering across countries. Defaults cluster more than what shared exposures to macro factors imply, indicating that other factors also play a signicant role. For all firms, deviations of systematic default risk from macro fundamentals are correlated with net tightening bank lending standards, suggesting that bank credit supply and systematic default risk are inversely related. JEL Classification: G21, C33

Keywords: credit portfolio models; frailty-correlated defaults; international default risk cycles; state-space methods; systematic default risk (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-ger and nep-rmg
Note: 955417
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: Global Credit Risk: World, Country and Industry Factors (2017) Downloads
Working Paper: Global Credit Risk: World, Country and Industry Factors (2015) Downloads
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