The Effect of Economic Downturns on Credit Risk

Abstract

Economic downturns can have a significant impact on credit risk, as borrowers may be more likely to default on their loans during periods of high unemployment and low economic growth. This paper will examine the relationship between economic cycles and credit risk, and how lenders can adjust their risk management strategies in response to changing economic conditions. It will also explore the role of government policies in mitigating credit risk during economic downturns.