Discussion paper

DP7083 Firm Default and Aggregate Fluctuations

This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a multiperiod logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we find strong evidence for a substantial and stable impact of aggregate fluctuations. Macroeffects differ across industries in an economically intuitive way. Out-of-sample evaluations show our approach is superior to both models that exclude macro information and best fitting naive forecasting models. While firm-specific factors are useful in ranking firms' relative riskiness, macroeconomic factors capture fluctuations in the absolute risk level.


Lindé, J, T Jacobson, K Roszbach and R Kindell (2008), ‘DP7083 Firm Default and Aggregate Fluctuations‘, CEPR Discussion Paper No. 7083. CEPR Press, Paris & London. https://cepr.org/publications/dp7083