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International Transmission of Bank and Corporate Distress

Author

Listed:
  • Papa M 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.

Suggested Citation

  • Papa M N'Diaye & Dale F. Gray & Natalia T. Tamirisa & Hiroko Oura & Qianying Chen, 2010. "International Transmission of Bank and Corporate Distress," IMF Working Papers 10/124, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/124
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    Citations

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    Cited by:

    1. Inoue,Tomoo & Kaya,Demet & Ohshige,Hitoshi, 2015. "The impact of China?s slowdown on the Asia Pacific region : an application of the GVAR model," Policy Research Working Paper Series 7442, The World Bank.
    2. Kok, Christoffer & Gross, Marco & Żochowski, Dawid, 2016. "The impact of bank capital on economic activity - evidence from a mixed-cross-section GVAR model," Working Paper Series 1888, European Central Bank.
    3. Donal Smith, 2016. "The International Impact of Financial Shocks: A Global VAR and Connectedness Measures Approach," Discussion Papers 16/07, Department of Economics, University of York.
    4. Eickmeier, Sandra & Ng, Tim, 2011. "How Do Credit Supply Shocks Propagate Internationally? A GVAR approach," CEPR Discussion Papers 8720, C.E.P.R. Discussion Papers.
    5. Peter Broer & Jürgen Antony, 2013. "Financial Shocks and Economic Activity in the Netherlands," CPB Discussion Paper 260, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Matthew Greenwood-Nimmo & Viet Hoang Nguyen & Yongcheol Shin, 2012. "International Linkages of the Korean Economy: The Global Vector Error-Correcting Macroeconometric Modelling Approach," Melbourne Institute Working Paper Series wp2012n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    7. Chen, Qianying & Filardo, Andrew & He, Dong & Zhu, Feng, 2016. "Financial crisis, US unconventional monetary policy and international spillovers," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 62-81.
    8. Dovern, Jonas & van Roye, Björn, 2014. "International transmission and business-cycle effects of financial stress," Journal of Financial Stability, Elsevier, vol. 13(C), pages 1-17.
    9. Maria Gonzalez, 2012. "Nonfinancial Firms in Latin America; A Source of Vulnerability?," IMF Working Papers 12/279, International Monetary Fund.
    10. Matthew Greenwood-Nimmo & Viet Hoang Nguyen, 2015. "Measuring the Connectedness of the Global Economy," Melbourne Institute Working Paper Series wp2015n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    11. Dale F. Gray, 2013. "Modeling Banking, Sovereign, and Macro Risk in a CCA Global VAR," IMF Working Papers 13/218, International Monetary Fund.
    12. Gross, Marco & Población García, Francisco Javier, 2016. "Assessing the efficacy of borrower-based macroprudential policy using an integrated micro-macro model for European households," Working Paper Series 1881, European Central Bank.
    13. Filippo di Mauro & Alexander Al-Haschimi & Stephane Dees & Martina Jancokova, 2014. "Linking Distress of Financial Institutions to Macrofinancial Shocks," EcoMod2014 6807, EcoMod.
    14. Daniel Zerfu Gurara & Mthuli Ncube, 2013. "Working Paper 183 - Global Economic Spillovers to Africa- A GVAR Approach," Working Paper Series 981, African Development Bank.
    15. Jürgen Antony & D. Broer, 2015. "Euro area financial shocks and economic activity in The Netherlands," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 571-595, August.
    16. Apostolakis, George & Papadopoulos, Athanasios P., 2015. "Financial stress spillovers across the banking, securities and foreign exchange markets," Journal of Financial Stability, Elsevier, vol. 19(C), pages 1-21.
    17. Milcheva, Stanimira, 2013. "Cross-country effects of regulatory capital arbitrage," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5329-5345.
    18. Anna Sznajderska, 2017. "The role of China in the world economy: evidence from global VAR model," NBP Working Papers 270, Narodowy Bank Polski, Economic Research Department.
    19. Eickmeier, Sandra & Ng, Tim, 2015. "How do US credit supply shocks propagate internationally? A GVAR approach," European Economic Review, Elsevier, vol. 74(C), pages 128-145.
    20. Hail Park & Yongcheol Shin, 2014. "Mapping Korea's International Linkages using Generalised Connectedness Measures," Working Papers 2014-16, Economic Research Institute, Bank of Korea.
    21. Kok, Christoffer & Gross, Marco, 2013. "Measuring contagion potential among sovereigns and banks using a mixed-cross-section GVAR," Working Paper Series 1570, European Central Bank.
    22. Gross, Marco & Binder, Michael, 2013. "Regime-switching global vector autoregressive models," Working Paper Series 1569, European Central Bank.
    23. Gross, Marco, 2013. "Estimating GVAR weight matrices," Working Paper Series 1523, European Central Bank.

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