Modelling the impact of macroeconomic variables on aggregate corporate insolvency: case of Croatia

Figures & data

Table 1. Unit root test results.

Variable	ADF value Constant included	ADF value Constant and trend included	Phillips-Perron t, Constant included	Phillips-Perron t, Constant and trend included
(a) Levels
LINS_RATE	-1.533545 (0.5081)	-0.480784 (0.9811)	-1.581019 (0.4842)	-0.480784 (0.9811)
LIND	-1.770832 (0.3894)	-0.145807 (0.9924)	-2.662008 (0.0883)	-3.035449 (0.1338)
LCRED	-1.333513 (0.6061)	-1.754772 (0.7102)	-0.860651 (0.7919)	-1.403828 (0.8470)
IRL	-1.944578 (0.3094)	-1.560358 (0.7917)	-2.477483 (0.1273)	-2.015703 (0.5778)
UNEMP	-1.719489 (0.4144)	-1.228960 (0.8913)	-1.537733 (0.5060)	-1.396638 (0.8492)
(b) First differences
First diff.	ADF value Constant included	ADF value Constant and trend included	Phillips-Perron t. Constant included	Phillips-Perron t. Constant and trend included
∆LINS_RATE	-5.533792 (0.0000)	-5.815135 (0.0001)	-5.533792 (0.0000)	-5.758925 (0.0001)
∆LIND	-6.531380 (0.0000)	-7.465403 (0.0000)	-6.547002 (0.0000)	-7.497703 (0.0000)
∆LCRED	-5.140215 (0.0001)	-5.092101 (0.0008)	-5.145045 (0.0001)	-5.092572 (0.0008)
∆IRL	-2.120940 (0.0409)	-3.023099 (0.0047)	-9.271769 (0.0000)	-10.23944 (0.0000)
∆UNEMP	-2.648292 (0.0917)	-2.792581 (0.2082)^a	-5.870426 (0.0000)	-6.422889 (0.0000)

^a The ADF test with constant and trend showed that the unemployment rate in first-difference is not stationary. A decisive role was attributed to the results of the PP test, which showed that the differenced unemployment rate variable is stationary and integrated of order one.

Notes: ∆ is the difference operator. MacKinnon (1996) critical values are used for the rejection of the hypothesis of a unit root (p-values in brackets). Unit root tests include constant and trend. The optimal lag lenght is chosen by the Schwarz Information Criterion.

Source: Author’s calculations.

Table 2. Estimation of cointegration vectors.

Unrestricted Cointegration Rank Test (Trace)
Hypothesised		Trace	0.05
No, of CE(s)	Eigenvalue	Statistic	Critical Value	Prob.**
None *	0.599160	87.58555	76.97277	0.0062
At most 1	0.480292	51.93200	54.07904	0.0767
At most 2	0.324881	26.40696	35.19275	0.3197
At most 3	0.200276	11.08518	20.26184	0.5339
At most 4	0.058938	2.369121	9.164546	0.7037
Trace test indicates 1 cointegrating eqn(s) at the 0.05 level
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)
Hypothesised		Max-Eigen	0.05
No, of CE(s)	Eigenvalue	Statistic	Critical Value	Prob.**
None *	0.599160	35.65355	34.80587	0.0395
At most 1	0.480292	25.52504	28.58808	0.1172
At most 2	0.324881	15.32178	22.29962	0.3491
At most 3	0.200276	8.716057	15.89210	0.4649
At most 4	0.058938	2.369121	9.164546	0.7037
Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level

Source: Author’s calculations.

* denotes rejection of the hypothesis at the 0.05 level.

**MacKinnon-Haug-Michelis (1999) p-values.

Table 3. Error correction model estimates (short- and long-run).

LINS_RATE(-1)	Coefficients	Standard error	t-statistics
Long run dynamics (cointegration equation)^a
UNEMP(-1)	0.769009	(0.18631)	[4.12747]
Constant	0.016741
Short term dynamics
EC term^b	-0.240687	(-0.07007)	[-3.43518]
D(LINS_RATE(-1))	-0.508503	(-0.16511)	[-3.07979]
D(LINS_RATE(-2))	-0.516446	(-0.17441)	[-2.96113]
D(LCRED(-3))	-1.739679	(-0.71128)	[-2.44583]
D(LIND(-1))	-1.394531	(-0.47045)	[-2.96426]
D(LIND(-2))	-1.091186	(-0.51468)	[-2.12011]
D(IRL(-1))	0.093238	(-0.04531)	[ 2.05793]
D(IRL(-2))	0.135604	(-0.05536)	[ 2.44934]
D(IRL(-3))	0.087976	(-0.04351)	[ 2.02202]

^a Cointegration equation can also be expressed as follows:

^b Adjustment parameter (EC term) was defined based on the cointegration equation as follows: and was included in the VEC model. As such it represents the relationship between short-term and long-term dynamics of the variables in the system.

Notes: Standard error in parentheses and t-statistics in brackets.

Source: Author’s calculations.

Table 4. Variance decomposition of the corporate insolvency rate.

Period	S.E.	LINS_RATE	LCRED	UNEMP	LIND	IRL
1	0.080319	97.88519	1.564545	0.000000	0.000000	0.550264
2	0.100087	72.58448	1.431433	17.19862	5.048049	3.737417
3	0.102567	71.55403	1.825660	16.41825	5.570078	4.631982
4	0.111781	67.43680	2.350569	20.65715	4.767252	4.788232
5	0.123726	63.91376	6.327376	18.16415	4.274903	7.319807
6	0.125988	64.60274	6.176979	17.94351	4.216169	7.060603
7	0.136072	62.16463	5.599449	20.19718	4.428084	7.610654
8	0.143244	62.84797	5.790520	19.48101	4.050277	7.830218

Source: Author's calculations.