A model for the credit risk in Albania using banks’ panel data

The recent financial crisis showed that the credit risk is an important source of risk of the financial system. In this paper the authors have devised a macro stress test for Albania assessing the impact of the direct and indirect credit risk channels using aggregated banks data. This stress test could be used as a satellite to the existing macroeconomic model in the Bank of Albania (BoA), to examine the macroeconomic implications of the scenarios derived by the latter or alternatively, the estimated parameters can be employed in sensitivity analysis.