Economic conditions, non-financial corporate credit risk and financial stability.

Summary The purpose of this thesis is to make a methodological contribution to the empirical literature on financial stability. It consists of three chapters. The first chapter studies the convergence of financial systems in the euro area by estimating a household credit demand equation in different countries. Using the ARDL model proposed in particular by Pesaran et al (1999), we highlight the convergence of the long-run determinants of credit demand within the largest countries, while the short-run dynamics remain heterogeneous. The second chapter contributes to the literature on financial fragility by studying how macroeconomic shocks affect supply and demand in the corporate debt market. We consider the effect of the competitive environment, as well as the level of risk, as measured by the default rate of firms. We measure the effects of large macroeconomic shocks on the debt market equilibrium. The third chapter studies the interactions between macroeconomic shocks and firms' financial fragility. It analyzes the interactions in both directions, i.e. whether corporate failures are affected by macroeconomic variables and whether, in the opposite direction, failures can determine the business cycle. Bankruptcy forecasting equations are estimated using the approach of Shumway (2001). The modeling of the joint dynamics of insolvencies and macroeconomic variables allows for the measurement of "second round effects". The model is used to perform stress tests.