We present a stochastic simulation forecasting model for stress testing aimed at assessing banks' capital adequacy, financial fragility and probability of default. The paper provides a theoretical presentation of the methodology and the essential features of the forecasting model on which it is...

The main result of the quick reactions of the Federal Reserve (the Fed) and the European Central Bank (ECB) to the Covid-19 crisis are that more than 20% of their public debt is now held by these central banks and that the balance sheet of the ECB is now near 50% of GDP (33% for the Fed). Two...

Why do some banks fail in financial crises while others survive? This article answers this question by analysing the effect of the Dutch financial crisis of the 1920s on 142 banks, of which 33 failed. We find that choices of balance sheet composition and product market strategy made in the...

Despite France's importance in the interwar world economy, the scale and consequences of the French banking crises of 1930–1931 were never assessed quantitatively due to lack of data in the absence of banking regulation. Using a new dataset of individual balance sheets from more than 400...

The paper puts the outcome during the most recent financial crisis in a historical perspective by taking a closer look at the frequency of extreme events in the economic history of Denmark, in some cases based on time series back to the late 1600s. We focus on the frequency distribution of a...

The paper puts the outcome during the most recent financial crisis in a historical perspective by taking a closer look at the frequency of extreme events in the economic history of Denmark, in some cases based on time series back to the late 1600s. We focus on the frequency distribution of a...

We build a commercial credit network, identify the most central economic sectors in terms of commercial debt, and provide a more complete idea of total indebtedness and financial interlinks between firms and banks in Uruguay. "Commerce," "manufacturing," and "transportation, storage, and...

This paper analyzes whether the financial distress of a firm affects the investment decisions of non-distressed competitors. On average, firms in distress impose indirect costs to non-distressed competitors by increasing costs of credit in the industry and hence restricting credit access and...

Does borrowing diversity (i.e., borrowing via a larger number of debt types) affect how firms respond to an exogenous credit supply shock? To answer this question I use the recent 2007-2009 credit crisis as a negative exogenous credit supply shock to U.S. non-financial companies. Applying a...

We develop a dynamic theory of capital structure, liquidity and risk management, and payout policies for a financially constrained firm under incomplete markets. In addition to costly external equity financing, the key friction we emphasize is limited financial spanning. We show that the...