TY - BOOK ID - 84541739 TI - How Much Leverage is too Much, or Does Corporate Risk Determine the Severity of a Recession? PY - 2003 SN - 1462351123 1452759391 1281603244 1451890303 9786613783936 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Accounting KW - Banks and Banking KW - Investments: Bonds KW - Investments: Stocks KW - Business Fluctuations KW - Cycles KW - Prices, Business Fluctuations, and Cycles: Forecasting and Simulation KW - Interest Rates: Determination, Term Structure, and Effects KW - Financial Markets and the Macroeconomy KW - Contingent Pricing KW - Futures Pricing KW - option pricing KW - General Financial Markets: General (includes Measurement and Data) KW - Public Administration KW - Public Sector Accounting and Audits KW - Pension Funds KW - Non-bank Financial Institutions KW - Financial Instruments KW - Institutional Investors KW - Investment & securities KW - Finance KW - Financial reporting, financial statements KW - Corporate bonds KW - Bond yields KW - Yield curve KW - Financial statements KW - Stocks KW - Financial institutions KW - Financial services KW - Public financial management (PFM) KW - Bonds KW - Interest rates KW - Finance, Public KW - United States KW - Option pricing UR - https://www.unicat.be/uniCat?func=search&query=sysid:84541739 AB - Economic theory suggests that vulnerable financial conditions of the corporate sector can trigger or worsen an economy-wide recession. This paper proposes a measure of corporate vulnerability, the Corporate Vulnerability Index (CVI) and analyses whether it can explain the probability and severity of recessions. The CVI is constructed as the default probability for the entire corporate sector, using the model of corporate debt by Anderson, Sundaresan, and Tychon (1996). The CVI is shown to be a significant predictor of the probability of a recession 4 to 6 quarters ahead, even controlling for other leading indicators. An increase in the CVI is also associated with an increase in the probability of a more severe and lengthy recession 3 to 6 quarters ahead. ER -