Scandinavian Working Papers in Economics
Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)
No 226: Firm Default and Aggregate Fluctuations
Tor Jacobson (), Rikard Kindell (), Jesper Lindé () and Kasper Roszbach ()
Additional contact information
Tor Jacobson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Rikard Kindell: Svenska Handelsbanken, Postal: 106 70 Stockholm
Jesper Lindé: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Kasper Roszbach: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Abstract: This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a logit approach on a panel data set for all incorporated Swedish businesses over 1990- 2002, we find strong evidence for a substantial and stable impact of aggregate fluctuations. Macroeffects differ across industries in an economically intuitive way. Out-of-sample evaluations show our approach is superior to both models that exclude macro information and best fitting naive forecasting models. While firm-specific factors are useful in ranking firms’ relative riskiness, macroeconomic factors capture fluctuations in the absolute risk level.
Keywords: Default; default-risk model; business cycles; aggregate fluctuations; microdata; logit; firm-specific variables; macroeconomic variables
JEL-codes: C35; C41; C52; E44; G21; G33
48 pages, September 1, 2008
Full text files
wp226.pdf
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