Pesola, Jarmo, "Joint Effect of Financial Fragility and Macroeconomic Shocks on Bank Loan Losses: Evidence from Europe", Journal of Banking & Finance, Vol. 35, No. 11, (November 2011), pp. 3134-3144,
Abstract: A reduced-form model including nonlinearities is estimated from pooled data from nine European countries during 1982-2004 to show the effects of macroeconomic shocks and financial fragility on bank loan losses. The main ingredients of the model are unanticipated-output and interest-rate shocks estimated from published macroeconomic and na´ve forecasts. The model fits the data well, capturing the extremely high levels of loan losses witnessed in different financial crises.
Keywords: Financial fragility, Macroeconomic shock, Joint effect, Loan loss