International Transmission of Bank and Corporate Distress

44 Pages Posted: 2 Jun 2010

See all articles by Qianying Chen

Qianying Chen

International Monetary Fund (IMF) - Monetary and Capital Markets Department

Dale F. Gray

International Monetary Fund (IMF); MF Risk

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department

Hiroko Oura

International Monetary Fund (IMF)

Natalia T. Tamirisa

International Monetary Fund (IMF)

Date Written: May 2010

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.

Keywords: Banking sector, Corporate sector, Credit risk, Developed countries, Economic models, Emerging markets, Financial risk, Spillovers

Suggested Citation

Chen, Qianying and Gray, Dale F. and N'Diaye, Papa and Oura, Hiroko and Tamirisa, Natalia T., International Transmission of Bank and Corporate Distress (May 2010). IMF Working Papers, Vol. , pp. 1-43, 2010. Available at SSRN: https://ssrn.com/abstract=1617023

Qianying Chen

International Monetary Fund (IMF) - Monetary and Capital Markets Department ( email )

United States
1-202-623-6633 (Phone)

Dale F. Gray

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

MF Risk

5921 Searl Terrace
Bethesda, MD 20816

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Hiroko Oura

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Natalia T. Tamirisa

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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