International Transmission of Bank and Corporate Distress
May 1, 2010
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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.
Subject: Banking, Debt default, Financial statements, Industrial production, Real effective exchange rates
Keywords: economy, exchange rate, WP
Pages:
43
Volume:
2010
DOI:
Issue:
124
Series:
Working Paper No. 2010/124
Stock No:
WPIEA2010124
ISBN:
9781455200832
ISSN:
1018-5941
