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Contraction or steady state? An analysis of credit risk management in Italy in the period 2008-2012

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  • Stefano Olgiati
  • Alessandro Danovi

Abstract

Credit risk management in Italy is characterized, in the period June 2008 to June 2012, by frequent (frequency=0.5 cycles per year) and intense (peak amplitude: mean=39.2 billion Euros, s.e.=2.83 billion Euros) quarterly contractions and expansions around the mean (915.4 billion Euros, s.e.=3.59 billion Euros) of the nominal total credit used by non-financial corporations. Such frequent and intense fluctuations are frequently ascribed to exogenous Basel II procyclical effects on credit flow into the economy and, consequently, Basel III output based point in time Credit to GDP countercyclical buffering advocated. We have tested the opposite null hypotheses that such variation is significantly correlated to actual default rates, and that such correlation is explained by fluctuations of credit supply around a steady state. We have found that, in the period June 2008 to June 2012 (n=17), linear regression of credit growth rates on default rates reveals a negative correlation of r=minus 0.6903 with R squared=0.4765, and that credit supply fluctuates steadily around the default rate with an Internal Steady State Parameter SSP=0.00245 with chi squared=37.47 (v=16, P

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  • Stefano Olgiati & Alessandro Danovi, 2013. "Contraction or steady state? An analysis of credit risk management in Italy in the period 2008-2012," Papers 1307.2465, arXiv.org.
    • Handle: RePEc:arx:papers:1307.2465
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    References listed on IDEAS

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