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

  • Pesola, Jarmo
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    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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    File URL: http://www.sciencedirect.com/science/article/pii/S037842661100152X
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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