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Joint effect of financial fragility and macroeconomic shocks on bank loan losses: Evidence from Europe

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  • Pesola, Jarmo
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    Abstract

    A reduced-form model including nonlinearities is estimated from pooled data from nine European countries during 1982-2004 to show the effects of macroeconomic shocks and financial fragility on bank loan losses. The main ingredients of the model are unanticipated-output and interest-rate shocks estimated from published macroeconomic and naïve forecasts. The model fits the data well, capturing the extremely high levels of loan losses witnessed in different financial crises.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 11 (November)
    Pages: 3134-3144

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:11:p:3134-3144

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Financial fragility Macroeconomic shock Joint effect Loan loss;

    References

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    Cited by:
    1. Jokivuolle, Esa & Pesola, Jarmo & Viren, Matti, 2013. "What drives loan losses in Europe?," Research Discussion Papers 6/2014, Bank of Finland.

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