We analyse the behaviour of euro area corporate sector probabilities of default under a wide range of domestic and global macro-financial shocks. Using the Global Vector Autoregressive (GVAR) model and constructing a linking satellite equation for firm-level Expected Default Frequencies (EDFs) we show that, at the aggregate level, the median EDFs react most to shocks to GDP, exchange rate, oil prices and equity prices. Intuitive variations to these results occur when sector-level median EDFs are considered. The satellite-GVAR model emerges as a useful tool for linking global macro-financial scenarios with micro-level information on expected defaults.

We introduce a central bank digital currency (CBDC) in the network of financial accounts. Simulating a shift of deposits by both households and non-financial corporations from the banking sector to the central bank, we model the different responses of the affected institutional sectors. We find that the introduction of CBDC generates funding shortages in banks, which may propagate to other sectors. In addition, significant adjustments in the balance sheets of all sectors trigger large moves in securities prices and induce changes in the financial network structure. Finally, we extend the analysis to the introduction of a crypto financial asset (stablecoin) issued by either a domestic or a foreign entity.