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International Transmission of Bank and Corporate Distress

Author/Editor: Chen, Qianying | Gray, Dale F. | N'Diaye, Papa M'B. P. | Oura, Hiroko | Tamirisa, Natalia T.
Authorized for Distribution: May 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,521KB)
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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 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.
 
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Series: Working Paper No. 10/124
Subject(s): Banking sector | Corporate sector | Credit risk | Developed countries | Economic models | Emerging markets | Financial risk | Spillovers
Author's keyword(s): Bank | corporate | distress | GVAR | financial | international | spillovers
 
English  
    Published:   May 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010124   Pages:   43
    Price:   US$18.00
       
     
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