Default, credit growth, and asset prices
By: prepared by Miguel A. Segoviano Basurto, Charles Goodhart, and Boris Hofmann.
Contributors: Goodhart, C. A. E.; Hofmann, Boris.; International Monetary Fund. Monetary and Financial Systems Dept.
Series: IMF working paper -- WP/06/223
Publisher: International Monetary Fund, Monetary and Financial Systems Dept.
Published: 2006
Place of publication: [Washington, D.C.]
Language: eng
Number of pages: 43
Subjects: Asset allocation -- Econometric models.; Credit -- Econometric models.
Description: This paper uses a Merton-type estimate of the probability of default (PoD) for the main banks in a sample of Organization for Economic Cooperation and Development and middle-income countries as a proxy for the fragility of their banking systems. Based on theory and stylized facts, the paper explores a range of financial and real variables that explain such PoDs across time. We find property price fluctuations and bank credit to be important explanatory factors. There is two-way interaction between these variables and a clearer relationship when the variables are entered as a deviation from trend. The lag structure between such developments and PoDs is long and varies widely across countries. The paper assesses the implications of these findings for economic policy.
Notes: Caption title.

"September 2006."

Includes bibliographical references (p. 38-43).

Also available on the World Wide Web.