Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81857
Authors: 
Åsberg, Per
Shahnazarian, Hovick
Year of Publication: 
2008
Series/Report no.: 
Sveriges Riksbank Working Paper Series 219
Abstract: 
We use a vector error correction model to study the long-term relationship between aggregate expected default frequency and the macroeconomic development, i.e. CPI, industry production and short-term interest rate. The model is used to forecast the median expected default frequency of the corporate sector by conditioning on external forecasts of macroeconomic developments. Evaluations of the model show that it yields low forecast errors in terms of RMSE. The estimation results indicate that the interest rate has the strongest impact on expected default frequency among the included macroeconomic variables. The forecasts indicate that EDF will rise gradually over the forecast period.
Subjects: 
Expected Default Frequency
Macroeconomic Impact
Business cycle
vector error correction model
Financial stability
Financial and real economy interaction
JEL: 
C32
C52
C53
G21
G33
Document Type: 
Working Paper

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