Copyright © 2011 SciRes. ME Credit Risk and Macroeconomic Interactions: Empirical Evidence from the Brazilian Banking System*

In Brazil, the credit is characterized by excessive cost and limited supply and the main reason is the high de-fault risk embedded in the spread. This paper concludes that the level of economic activity and the basic in-terest rate are factors with great influence on the default risk. Additionally, the paper also analyzes the reac-tion of the financial sector to structural risks, suggesting a new approach to credit risk. The assumption that credit risk is the result of an interactive process between banks and the economic environment is confirmed for the period from 2000 to 2006 in Brazil. The results also point to differences in the behavior of private and public banks