Estimation of Conditional Time-Homogeneous Credit Quality Transition Matrices for Commercial Banks in Colombia

This paper presents an estimation of credit quality transition matrices for commercial banks inColombia, using a duration hazard function model, and following the methodology proposed byGómez-González et al (2009). Using a test developed by Weißbach et al (2005), we test for thetime-homogeneity of transition matrices estimated this way, after conditioning on firm-specificand macroeconomic variables. We found that 70% of the time we could not reject the nullhypothesis of time homogeneity. We also found that obtaining matrices for different subsampleswas not necessary, given the similarities of the survival function