Search results for "STRESS"
showing 10 items of 6278 documents
Financial Fragility and Distress Propagation in a Network of Regions
2012
Building on previous works on business fluctuations, we model the propagation of financial distress in a network of regions, each populated by heterogeneous interacting firms and banks. In order to diversify risk, firm sell goods outside their own region and borrow from banks located there. However, this results in ties across regions which propagate financial distress across regional borders. We investigate how the average level of economic integration affects the probability of both individual and systemic failures. We find that the benefit of greater diversification is eventually offset by the effect of financial acceleration and contagion. In particular, beyond a certain level of integr…
Stress test impact and bank risk profile: Evidence from macro stress testing in Europe
2019
Abstract This study investigates the risk profile of banks that get a significant capital level reduction in the EU-wide stress test exercises. Using the CAMELS multifaceted risk approach, we look into the connection between the bank risk factors and the macro stress testing impact on capital. The results show that financial institutions that are inefficient or complex, with low profitability levels and small loan portfolio, receive highly negative results in the stress tests. As this risk profile is not consistent over time, the results support the stress tests disciplinary role, suggesting risk management strategy adjustment through consideration of prior stress test outcomes.
Macro-uncertainty and financial stress spillovers in the Eurozone
2020
Abstract This paper studies macro-uncertainty and financial distress spillovers within the Eurozone. We propose a novel methodology to derive the indices of spillovers, by using a Global Vector autoregressive model fitted to data sampled at mixed-frequencies. We find that macro-uncertainty and financial stress are relatively disconnected in the Eurozone. We also show that connectedness between core and periphery Eurozone countries mainly operates through financial stress and it decreases since the outbreak of the Eurozone sovereign debt crisis (with an increasing role played by peripheral countries). As a result, investors and policymakers should monitor separately macro-uncertainty and fin…
Bank fragility and contagion: Evidence from the bank CDS market
2016
Understanding how contagion works among financial institutions is a top priority for regulators and policy makers who aim to foster financial stability and to prevent financial crises. Using bank credit default swap (CDS) data, we provide a framework for the evaluation of contagion among banks in different countries and regions during a period of prolonged financial distress. We measure contagion in terms of return spillovers, following a Generalized VAR (GVAR) approach. In addition, we propose an innovative framework to distinguish between two types of contagion: systematic (linked to global factors), and idiosyncratic (linked to bank specific factors). We find evidence of both types of co…
The euro area sovereign debt crisis: Can contagion spread from the periphery to the core?
2014
Abstract We examine the determinants of joint default risk of euro area countries during 2007–2011. To accomplish this, we recover joint default probabilities from individual CDS contracts. In contrast to earlier theoretical studies, we find that financial linkages are an active contagion transmission channel only in the case of the troubled periphery euro area economies. During the current sovereign debt crisis, real economy linkages play a more important role in transmitting shocks from the euro area periphery towards its core. Countries that have stronger trade interconnections with troubled economies tend to have a higher expected joint default risk.
Economic value, competition and financial distress in the european banking system
2012
Abstract In this paper we examine the impact of a large number of factors at the bank level (liquidity and credit risks, asset size, income diversification and market power), at the industry level (banking concentration) and macro-level (real GDP growth) on bank financial distress using an unbalanced panel of 308 European commercial banks between 1996 and 2009. The observations falling below a given threshold of the empirical distribution of the Shareholder Value Ratio proxy bank financial distress. We employ a panel probit regression and, given the presence of overlapping data giving rise to residual autocorrelation, we use the Bertschek and Lechner (1998) robust estimator of the covarianc…
A quest between fiscal and market discipline
2023
Fiscal rules are typically seen as government constraints. Yet, the extent to which they are substituted or complemented by market discipline (especially, during financial stress) remains unexplored. Using data for 71 countries over the period 1985–2015, we estimate an “augmented” fiscal reaction function to assess the impact of both fiscal and market discipline. We find that different market signals influence fiscal policy, but fiscal discipline depends on market incentives. In the EU and the OECD, market signals complement fiscal rules. These are less effective in the EMU and non-OECD countries that are “debt intolerant”. Yet, there are unintended consequences: (i) neither output and debt…
Financial stress and sovereign debt composition
2015
"Published online: 19 Oct 2015"
Does job design make workers happy?
2019
Using linked employer‐employee data for Finland we examine associations between job design, employee well‐being and job‐related stress. Three key findings stand out. First, in accordance with the theory of Karasek and Karasek and Theorell, job control and supervisory support are positively correlated with employee well‐being and negatively correlated with job‐related stress. Second, as predicted by theory, job demands are positively correlated with job‐related stress. Third, there is no association between job demands and employee well‐being and, contrary to expectations, neither job control nor supervisory support alleviate the negative relationship between job demands and job‐related stre…
How does fiscal policy react to wealth composition and asset prices?
2012
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