Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector

Author/Editor:

Marcos R Souto ; Rodolphe Blavy

Publication Date:

May 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The credit risk measures we develop in this paper are used to investigate macrofinancial linkages in the Mexican banking system. Domestic and external macro-financial variables are found to be closely associated with banking soundness. At the aggregate level, high external volatility and domestic interest rates are associated with higher expected default probability. Though results vary substantially across individual banks, domestic activity and U.S. growth, and higher asset prices, are generally associated with lower credit risks, while increased volatility worsens credit risks. The expected default probability is also found to be a leading indicator of traditional financial stability indicators.

Series:

Working Paper No. 09/109

Subject:

English

Publication Date:

May 1, 2009

ISBN/ISSN:

9781451872569/1018-5941

Stock No:

WPIEA2009109

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

32

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