Dietske Simons (De Nederlandsche Bank) Ferdinand Rolwes (De Nederlandsche Bank)
Abstract
This paper applies a macroeconomic-based model for estimating probabilities of default. The first part of the paper focuses on the relation between macroeconomic variables and the default behavior of Dutch firms. A convincing relationship with GDP growth and oil price and, to a lesser extent, the interest and exchange rate exists. The second part of the paper assesses the default behavior based on a stress scenario of two consecutive quarters of zero GDP growth as required by the Basel II framework. It can be concluded that a stress-test scenario covering two quarters of zero GDP growth does not influence the default rate significantly and thus does not seem to be very severe.
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Volume (Year): 5 (2009) Issue (Month): 3 (September) Pages: 177-204 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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