EconPapers    
Economics at your fingertips  
 

Twin Default Crises

Caterina Mendicino, Kalin Nikolov (), Juan Rubio-Ramirez and Javier Suarez

No 2020-01, Working Papers from FEDEA

Abstract: Twin Default Crises are rare and severe episodes of borrower and bank defaults. We build a quantitativemodel that links borrower and bank solvency. This is crucial to reproduce key features of thedata both in normal times and in Twin Default Crises. Specialization exposes banks to non-diversifiableborrowers’ default risk. Fluctuations in the non-diversifiable component of credit risk and bank leverageare important determinants of Twin Default Crises. Capturing the frequency and severity of Twin DefaultCrises is key for the correct calibration of bank capital requirements. Our framework implies highercapital requirements than alternative frameworks that do not model the link between borrower and bankdefault.

Date: 2020-01
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://documentos.fedea.net/pubs/dt/2020/dt2020-01.pdf (application/pdf)

Related works:
Working Paper: Twin Default Crises (2020) Downloads
Working Paper: Twin default crises (2020) Downloads
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:fda:fdaddt:2020-01

Access Statistics for this paper

More papers in Working Papers from FEDEA
Bibliographic data for series maintained by Carmen Arias ().

 
Page updated 2020-10-23
Handle: RePEc:fda:fdaddt:2020-01