Climate change has become a pressing issue that requires comprehensive and scientific understanding of its impact on the economy. Policymakers seek answers to the questions of how climate change affects economic growth, inflation, and the financial system. To design targeted policies, it is...

I conduct a risk analysis of Brazil’s sovereign credit. My focus is on possible changes since 2016. Using a country-level balance sheet framework, I analyze how Brazil’s liabilities pressure its assets, increasing borrowing needs and default probability. Rises in external debt, especially...

This study considers whether Islamic banks and conventional banks have different levels of credit risk. One problem with existing research in this area is the dominance of accounting information to assess credit risk, and this could be especially misleading in the case of Islamic banking. Using...

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with market uncertainty. During calm periods, the underlying risk forecast models...

This paper discusses the concept of leverage, its components and how to measure and monitor it. It proposes an innovative approach to assessing leverage based on flows using the concept of a marginal leverage ratio, which reveals the leverage related to new activities, as a valuable supplement...

We examine the mechanism through which a financial crisis affects the default risk of real economy firms. We find that firms with strong dependence on bank financing suffer from higher increases in default risk than firms with no such dependence. Conversely, firms that rely solely on financing...

We study the impact of the recent global financial crisis on the determinants of corporate bond spreads, in particular, focusing on the impact of liquidity and credit risk on yield spreads using data regarding financial and non-financial bond issuers listed on the Korea Exchange (KRX). Our main...

The Basel capital is a “margin” requirement imposed by regulators to cushion banks against extreme falls in prices of assets held, and is often a function of value-at-risk (VaR). The way banks adjust their balance sheets to maintain the requirement is equivalent to leverage targeting that...

We study the impact of sovereign risk on the credit risk of the non-financial corporate sector in the Eurozone using credit default swap data. We show that an increase in sovereign risk is associated with a statistically and economically significant increase in corporate credit risk and, hence,...

We estimate a panel error correction model for loan loss provisions, using unique supervisory data on flow of funds into and out of the allowance for loan losses of 25 Dutch banks in the post-2008 crisis period. We find that these banks aim for an allowance of 49% of impaired loans. In the short...