Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211986 
Year of Publication: 
2004
Series/Report no.: 
Bank of Finland Discussion Papers No. 18/2004
Publisher: 
Bank of Finland, Helsinki
Abstract: 
In the discussion paper, we employ data on industry-specific corporate sector bankruptcies over the time period from 1986 to 2003 and estimate a macroeconomic credit risk model for the Finnish corporate sector.The sample period includes a severe recession with significantly higher-than-average default rates in the early 1990s.The results suggest a significant relationship between corporate sector default rates and key macroeconomic factors including GDP, interest rates and corporate indebtedness.The estimated model is employed to analyse corporate credit risks conditional on current macroeconomic conditions.Furthermore, the paper presents some examples of applying the model to macro stress testing, ie analysing the effects of various adverse macroeconomic events on the banks credit risks stemming from the corporate sector.The results of the stress tests suggest that Finnish corporate sector credit risks are fairly limited in the current macroeconomic environment.
Subjects: 
banking
credit risk
stress tests
JEL: 
C15
G21
G28
G33
Persistent Identifier of the first edition: 
ISBN: 
952-462-154-1
Document Type: 
Working Paper

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