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The Relationship Between Macroeconomic Variables And Romanian Corporate Default Rates Between 2002-2008


  • Kovacs Ildiko

    () (Universitatea Babeº-Bolyai, Facultatea de ªtiinþe Economice ºi Gestiunea Afacerilor)

  • Karsai Zoltan-Krisztian

    (Universitatea Babeº-Bolyai, Facultatea de ªtiinþe Economice ºi Gestiunea Afacerilor)

  • Suveg Orsolya

    (Universitatea Babeº-Bolyai, Facultatea de ªtiinþe Economice ºi Gestiunea Afacerilor)

  • Joita Nicoleta

    (Universitatea Babeº-Bolyai, Facultatea de ªtiinþe Economice ºi Gestiunea Afacerilor)


During its 20 year history of market economy, Romania experienced the most severe downturn in 2009, which resulted in many cost, mainly because of the output loss. These conditions forced several firms to declare bankruptcy and to stop their activity. The aim of this research is to assess the relationship between the corporate default rates and the macroeconomic processes in the case of Romania for the period comprised between 2002Q1-2008Q4. For this, based on the relevant literature, we ranked the potential explanatory variables of the default rates into seven groups: cyclical indicators, household indicators, corporate indicators, external sector indicators, price stability indicators and interest rates, loans to private sector and finally the capital market indicators. Some studies base their results only on accounting data, others only on market data. Our study focuses on both, since this seems to be an adequate approach in capturing most of the processes. Similar to the banks' loan portfolio structure, we conducted analysis for five sectors: industry, construction, agriculture, services and the overall economy. For each sector the average default probability at time t is modeled as a logistic function of many general and sector-specific macroeconomic variables. The use of logistic regression was motivated by its ability to account for fractional data between 0 and 1. We found that at least one variable from each group has a significant explanatory power regarding the evolution of the default rates in all five sectors analyzed. In some cases the sign of the variables was the opposite of what the economic theory would have suggested, but it has to be taken into account that Romania posted the picture of an overheated economy during the analyzed period. Another important conclusion was that many variables were significant through their lagged value, which indicates an even better supervision of the evolution of the specific variables. From all the variables, the volatility of the BET-C index proves to be the most important in predicting the evolution of the default rates, as it didn't proved to be significant only for the construction sector. The evolution of FDI and the volatility of the BET-C index proved to be very important in determining the evolution of the corporate default rates, as well. The first was a very important factor in the financing of companies, especially during the analyzed period, and the risk meter is something that never should be disregarded when it comes of analyzing default rates.

Suggested Citation

  • Kovacs Ildiko & Karsai Zoltan-Krisztian & Suveg Orsolya & Joita Nicoleta, 2011. "The Relationship Between Macroeconomic Variables And Romanian Corporate Default Rates Between 2002-2008," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 206-213, July.
  • Handle: RePEc:ora:journl:v:1:y:2011:i:1:p:206-213

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    References listed on IDEAS

    1. Bonfim, Diana, 2009. "Credit risk drivers: Evaluating the contribution of firm level information and of macroeconomic dynamics," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 281-299, February.
    2. Castrén, Olli & Dées, Stéphane & Zaher, Fadi, 2008. "Global macro-financial shocks and expected default frequencies in the euro area," Working Paper Series 875, European Central Bank.
    3. Michael Boss & Martin Fenz & Johannes Pann & Claus Puhr & Martin Schneider & Eva Ubl, 2009. "Modeling Credit Risk through the Austrian Business Cycle: An Update of the OeNB Model," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 17, pages 85-101.
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    More about this item


    corporate default rate; macroeconomic processes; economic imbalances; logistic regression; lagged effects;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation


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