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Stress testing and corporate finance

Author

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  • de Bandt, O.
  • Bruneau, C.
  • El Amri, W.

Abstract

The article contributes to the literature on financial fragility, studying how macro-economic shocks affect supply and demand in the corporate debt market. We take into account the effect of the competitive environment, as well as the risk level, measured by companies' default rate. The model is estimated using data from the Harmonised BACH database of corporate accounts for large euro area countries on the 1993-2005 period, in order to carry out an illustrative stress testing exercise. We measure the impact of large macroeconomic shocks (a severe recession and a sharp increase in oil prices) on the equilibrium in the debt market.
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Suggested Citation

  • de Bandt, O. & Bruneau, C. & El Amri, W., 2008. "Stress testing and corporate finance," Journal of Financial Stability, Elsevier, vol. 4(3), pages 258-274, September.
  • Handle: RePEc:eee:finsta:v:4:y:2008:i:3:p:258-274
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    Cited by:

    1. Gu, Xin & Cui, Tingfei & Hu, Yingquan, 2016. "新常态下商业银行和企业两部门杠杆联动的微观机制和宏观效应
      [Micromechanism and Macro effect of Leverage Dynamics between Commercial Banks and Enterprises under New Norm]
      ," MPRA Paper 49491, University Library of Munich, Germany.
    2. repec:eee:ecmode:v:69:y:2018:i:c:p:181-192 is not listed on IDEAS
    3. Costeiu, Adrian & Neagu, Florian, 2013. "Bridging the banking sector with the real economy: a financial stability perspective," Working Paper Series 1592, European Central Bank.
    4. Schechtman, Ricardo & Gaglianone, Wagner Piazza, 2012. "Macro stress testing of credit risk focused on the tails," Journal of Financial Stability, Elsevier, vol. 8(3), pages 174-192.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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