Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154355
Authors: 
Schwaab, Bernd
Koopman, Siem Jan
Lucas, André
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1922
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.
Subjects: 
credit portfolio models
frailty-correlated defaults
international default risk cycles
state-space methods
systematic default risk
JEL: 
G21
C33
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2170-1
Document Type: 
Working Paper

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