The Link between Default Risk and Macroeconomy in Tunisia: Cointegration Approach

Abstract

This paper examines the long-term and short-term causal relationships between default risk and macroeconomic factors in Tunisia, by studying the time series stochastic behavior and cointegration in a set of Non-Performing Loans rate and macroeconomic variables. We consider the linkage in the global economy and in five sectors. This approach requires the construction of macroeconomic credit model providing the framework to perform assessing causal relationship between variable pairs to improve the capture of the relation between macroeconomic variables and probabilities of default for the main Tunisian sectors and which macroeconomic variables are important for each sector and the global economy.