IMF Working Papers Volume 2009 Issue 109: Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector (2009)

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Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector

Author:

Mr. Marcos R Souto

Mr. Marcos R Souto
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and

Mr. Rodolphe Blavy

Mr. Rodolphe Blavynull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2009: Issue 109

Publication Date:: 01 May 2009

DOI:: https://doi.org/10.5089/9781451872569.001

ISBN:: 9781451872569

ISSN:: 1018-5941

Pages:: 32

Keywords:: WP; bank; book value; asset; banking sector; credit risk; macrofinancial links; Mexico; banking sector soundness; credit risk indicator; asset volatility; book value risk indicator; bank vulnerability; medium-size bank; banking system; book value asset volatility; risk measure; downside-risk volatility; balance sheet datum; Commercial banks; Bank soundness; Nonperforming loans; Financial statements; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2009: Issue 109

Language:: English

Publication Date:: 01 May 2009

DOI:: https://doi.org/10.5089/9781451872569.001

ISBN:: 9781451872569

ISSN:: 1018-5941

Pages:: 32

Keywords:: WP; bank; book value; asset; banking sector; credit risk; macrofinancial links; Mexico; banking sector soundness; credit risk indicator; asset volatility; book value risk indicator; bank vulnerability; medium-size bank; banking system; book value asset volatility; risk measure; downside-risk volatility; balance sheet datum; Commercial banks; Bank soundness; Nonperforming loans; Financial statements; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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