Credit Risk and Regional Economic Disparities

Abstract

This paper aims to bridge the areas of credit risk and regional economic disparities, and investigates the relationship between credit risk and economic indicators in the Czech Republic at the regional (NUTS 3) level. This relationship is consecutively examined using graphical and correlation analysis, regression techniques, and different types of clustering methods. Regions are then clustered into three groups according to their economic similarities and disparities. Subsequently, it is shown on the real data that region-specific information has the potential to be utilizable in credit scoring and possibly other applications.

Keywords

• Credit risk
• regional disparities
• cluster analysis
• Bayesian information criterion
• model selection
• logistic regression