The Effect of Credit Risk on Output Evidence from France Germany Italy and Spain Data

OpenAlex İngilizce

This paper analyzes the effect of credit risk on output for four significant countries within the Euro area; namely France, Germany, Italy and Spain. For this aim, bivariate VAR model is applied for a closer look at the effect of the credit risk on output and the classical VAR model is applied to put the credit risk in a country specific structure for the 1999:01-2015:08. The main conclusion is that the credit risk has immediate, strong and long-lasting negative impact on output for the aforementioned countries. Furthermore, the effect of the credit risk on output has the strongest for Italy, longest for Spain and smallest for France. Germany has relatively short but strong credit risk effect on its own output.