Free access to new paper on Global Credit Risk

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  • Author: Statistics Views, Bernd Schwaab, Siem Jan Koopman and André Lucas
  • Date: 21 November 2016

Each week, we select a recently published article and provide free access. This week's is from Journal of Applied Econometrics and is available from Early View.

To read the article in full, please click the link below:

Global Credit Risk: World, Country and Industry Factors

Bernd Schwaab, Siem Jan Koopman and André Lucas

Journal of Applied Econometrics

DOI: 10.1002/jae.2521

thumbnail image: Free access to new paper on Global Credit Risk

The authors investigate the dynamic properties of systematic default risk conditions for firms in different countries, industries and rating groups. They use a high-dimensional nonlinear non-Gaussian state-space model to estimate common components in corporate defaults in a 41 country samples between 1980:Q1 and s2014:Q4, covering both the global financial crisis and euro area sovereign debt crisis. They 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 significant 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.

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