Post by Sapphire Capital on Aug 5, 2008 21:44:51 GMT 4
Credit Risk and Business Cycle Over Different Regimes
Juri Marcucci
Bank of Italy; Federal Reserve Banks - Federal Reserve Bank of Boston
Mario Quagliariello
Bank of Italy; University of York (UK) - Department of Economics and Related Studies
July 11, 2008
Bank of Italy Temi di Discussione (Working Paper) No. 670
Abstract:
In the recent banking literature on the relationship between credit risk and the business cycle, the presence of asymmetric effects both across credit risk regimes and through the business cycle has been generally neglected. Employing threshold regression models both at the aggregate and the bank level and exploiting a unique dataset on Italian bank borrowers' default rates, this paper analyzes whether this relationship is characterized by regime switches and thus by asymmetries, determining the thresholds endogenously. Our results show that not only are the effects of the business cycle on credit risk more pronounced during downturns but also when credit risk conditions are poor.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1160155_code606534.pdf?abstractid=1160155&mirid=3
Juri Marcucci
Bank of Italy; Federal Reserve Banks - Federal Reserve Bank of Boston
Mario Quagliariello
Bank of Italy; University of York (UK) - Department of Economics and Related Studies
July 11, 2008
Bank of Italy Temi di Discussione (Working Paper) No. 670
Abstract:
In the recent banking literature on the relationship between credit risk and the business cycle, the presence of asymmetric effects both across credit risk regimes and through the business cycle has been generally neglected. Employing threshold regression models both at the aggregate and the bank level and exploiting a unique dataset on Italian bank borrowers' default rates, this paper analyzes whether this relationship is characterized by regime switches and thus by asymmetries, determining the thresholds endogenously. Our results show that not only are the effects of the business cycle on credit risk more pronounced during downturns but also when credit risk conditions are poor.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1160155_code606534.pdf?abstractid=1160155&mirid=3