Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Bank of Finland Research Discussion Papers, Bank of Finland

No 18/2004:
Macro stress testing with a macroeconomic credit risk model for Finland

Kimmo Virolainen ()

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.

Keywords: banking; credit risk; stress tests; (follow links to similar papers)

JEL-Codes: C15; G21; G28; G33; (follow links to similar papers)

48 pages, July 18, 2004

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

0418.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:bofrdp:2004_018 This page was generated on 2014-12-14 19:21:31