Financial Stress and Commercial Bank Loan Delinquency
University of Maryland Eastern Shore - School of Business and Technology
Takming University of Science and Technology - Department of Banking and Finance
July 2, 2013
Banks and Bank Systems, 8(3), 72-75. November, 2013.
This study is set up to investigate how financial stress dynamically affects commercial bank loan delinquency (CBLD) rate. Using quarterly data from 1994Q1 to 2012Q4, the results show that CBLD rate immediately rises following financial stress shock; however, it significantly drops after 3 quarters following the shock. Financial stress Granger-causes the reaction in CBLD rate; the response feedback from CBLD rate to financial stress is absent. Financial stress forecasts only 0.08% of the CBLD rate at the two-quarter horizon, but it forecasts CBLD rate up to 8.67% at the four-quarter horizon, 10.74% at the six-quarter horizons and 20% at the eight-quarter horizon.
Number of Pages in PDF File: 11
Keywords: loan delinquency, commercial banks, financial stress
JEL Classification: G20, G21
Date posted: July 3, 2013 ; Last revised: January 25, 2014
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