Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector

The credit risk measures we develop in this paper are used to investigate macrofinancial linkages in the Mexican banking system. Domestic and external macro-financial variables are found to be closely associated with banking soundness. At the aggregate level, high external volatility and domestic in...

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Bibliographic Details
Main Author: Souto, Marcos
Other Authors: Blavy, Rodolphe
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2009
Series:IMF Working Papers
Subjects:
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Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:The credit risk measures we develop in this paper are used to investigate macrofinancial linkages in the Mexican banking system. Domestic and external macro-financial variables are found to be closely associated with banking soundness. At the aggregate level, high external volatility and domestic interest rates are associated with higher expected default probability. Though results vary substantially across individual banks, domestic activity and U.S. growth, and higher asset prices, are generally associated with lower credit risks, while increased volatility worsens credit risks. The expected default probability is also found to be a leading indicator of traditional financial stability indicators
Physical Description:32 pages
ISBN:9781451872569