Banks and Bank Systems, 8(3), 72-75. November, 2013.
11 Pages Posted: 3 Jul 2013 Last revised: 25 Jan 2014
Date Written: July 2, 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.
Keywords: loan delinquency, commercial banks, financial stress
JEL Classification: G20, G21
Suggested Citation: Suggested Citation
Sum, Vichet and Lin, Jung-Chu, Financial Stress and Commercial Bank Loan Delinquency (July 2, 2013). Banks and Bank Systems, 8(3), 72-75. November, 2013.. Available at SSRN: https://ssrn.com/abstract=2288561 or http://dx.doi.org/10.2139/ssrn.2288561