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International Transmission of Bank and Corporate Distress

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Author Info

  • Papa M'B. P. N'Diaye
  • Dale F. Gray
  • Natalia T. Tamirisa
  • Hiroko Oura
  • Qianying Chen

Abstract

The paper evaluates how increases in banks’ and nonfinancial corporates’ default risk are transmitted in the global economy, using in a vector autoregression model for 30 advanced and emerging economies for the period from January 1996 to December 2008. The results point to two-way causality between bank and corporate distress and to significant global macroeconomic and financial spillovers from either type of distress when it originates in a systemic economy. Corporate distress in advanced economies has a larger impact on economic growth in emerging economies than bank distress in advanced economies has. In contrast, activity in advanced economies is more vulnerable to bank distress than to corporate distress.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/124.

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Length: 43
Date of creation: 01 May 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/124

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Related research

Keywords: Spillovers; Banking sector; Corporate sector; Credit risk; Developed countries; Economic models; Emerging markets; Financial risk; probability; bank distress; probabilities; bank default; logarithm; banking; probability of default; bank default probability; kurtosis; skewness; statistics; correlations; equations; equation; vector autoregression; bank capital; present value; descriptive statistics; banks ? balance sheets; banks ? loan; probability distribution; banking sectors; missing data; significance level; banks loan; statistical tests; bank lending relationship; standard deviations; var model; financial statistics; bank balance sheets; normal distribution; calibration; correlation; time series; bank borrowing; bank liquidity; econometrics; bank lending; banks ? assets; standard deviation; bank credit; number of parameters; forecasting; bank portfolio;

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Citations

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Cited by:
  1. Gross, Marco & Kok, Christoffer, 2013. "Measuring contagion potential among sovereigns and banks using a mixed-cross-section GVAR," Working Paper Series 1570, European Central Bank.
  2. Daniel Zerfu Gurara & Mthuli Ncube, 2013. "Working Paper 183 - Global Economic Spillovers to Africa- A GVAR Approach," Working Paper Series 981, African Development Bank.
  3. Dale F. Gray, 2013. "Modeling Banking, Sovereign, and Macro Risk in a CCA Global VAR," IMF Working Papers 13/218, International Monetary Fund.
  4. Gross, Marco, 2013. "Estimating GVAR weight matrices," Working Paper Series 1523, European Central Bank.
  5. Eickmeier, Sandra & Ng, Tim, 2011. "How do credit supply shocks propagate internationally? A GVAR approach," Discussion Paper Series 1: Economic Studies 2011,27, Deutsche Bundesbank, Research Centre.
  6. Milcheva, Stanimira, 2013. "Cross-country effects of regulatory capital arbitrage," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5329-5345.
  7. Peter Broer & Jürgen Antony, 2013. "Financial Shocks and Economic Activity in the Netherlands," CPB Discussion Paper 260, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Maria Gonzalez, 2012. "Nonfinancial Firms in Latin America," IMF Working Papers 12/279, International Monetary Fund.
  9. Binder, Michael & Gross, Marco, 2013. "Regime-switching global vector autoregressive models," Working Paper Series 1569, European Central Bank.

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