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Business and Economics > Investments: Stocks

You are looking at 1 - 10 of 60 items for :

  • Type: Journal Issue x
  • Financial Markets and the Macroeconomy x
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Cover IMF Working Papers
From Extreme Events to Extreme Seasons: Financial Stability Risks of Climate Change in Mexico
Michaela Dolk
,
Mr. Dimitrios Laliotis
, and
Sujan Lamichhane
This paper explores the financial stability implications of acute physical climate change risks using a novel approach that focuses on a severe season associated with a sequence of tropical cyclone and flood events. Our approach was recently applied to study physical risks in the Mexican financial sector, but the framework is applicable to other countries as well. We show that even if the scale of individual climate events may not be material at an aggregate national scale, considering a sequence of events could lead to potentially significant macro-financial impacts in the short term. This could occur even if none of the individual events affect the particular region(s) with highest concentrations of banking sector exposures. Our results indicate potential for even greater effects in the future given the increasing severity and frequency of extreme events from climate change. Thus, this paper highlights the importance of considering sequences of extreme physical risk events driven by climate change, rather than just individual extreme events, to better understand financial stability implications and design effective policies.
Keywords:
Climate change; physical risk; disasters; extreme seasons; financial stability; stress testing; climate change risk; risk event; IMF working paper No. 23/176; damage estimate; climate change condition; Natural disasters; Stocks; Financial sector; Global
Cover IMF Working Papers
The Internationalization of China’s Equity Markets
Juan J. Cortina
,
Mr. Maria Soledad Martinez Peria
,
Mr. Sergio L. Schmukler
, and
Jasmine Xiao
China’s equity markets internationalization process started in the early 2000s but accelerated after 2012, when Chinese firms’ shares listed in Shanghai and Shenzhen gradually became available to international investors. This paper studies the effects of the post-2012 internationalization events by comparing the evolution of equity financing and investment activities for: (i) domestic listed firms relative to firms that already had access to international investors and (ii) domestic listed firms that were directly connected to international markets relative to those that were not. The paper finds large increases in financial and investment activities for domestic listed and for connected firms, with significant aggregate effects. The evidence also suggests the rise in firms’ equity issuances was primarily and initially financed by domestic investors. International investors’ portfolio holdings in Chinese equity markets and ownership in firms increased markedly only once Chinese firms’ locally issued shares became part of the MSCI Emerging Markets Index.
Keywords:
equity financing; equity market liberalization; firm investment; foreign investors; international investors; issuance activity; Stock Connect; portfolio holding; internationalization process; unconnected firm; China's equity markets; Stock markets; Stocks; Foreign corporations; Emerging and frontier financial markets; Market capitalization; Global
Cover IMF Working Papers
Macroeconomic Effects of Dividend Taxation with Investment Credit Limits
Matteo Ghilardi
and
Roy Zilberman
We analyze the effects of dividend taxation in a general equilibrium business cycle model with an occasionally-binding investment credit limit. Permanent dividend tax reforms distort capital investment decisions in the binding long-run equilibrium, but are neutral otherwise. Temporary unexpected tax cuts stimulate shortterm real activity in the credit-constrained economy, yet produce contractionary macroeconomic outcomes in the slack regime. The occasionally-binding constraint reconciles the `traditional' and `new' views of dividend taxation, and highlights the importance of measuring the firm's initial borrowing position before enacting tax reforms. Finally, permanently lower dividend taxes dampen financial business cycles, and help to explain macroeconomic asymmetries.
Keywords:
Dividend Taxation; Occasionally-Binding Borrowing Constraints; Investment; Business Cycles.; borrowing position; tax relief; dividend distribution; dividend tax rate; dividend tax adjustment; tax environment; benchmark system; dividend tax shock; dividend tax cut; tax adjustment; dividend tax system; Dividend tax; Credit; Corporate income tax; Collateral; Stocks
Cover IMF Working Papers
Understanding the Macro-Financial Effects of Household Debt: A Global Perspective
Mr. Adrian Alter
,
Alan Xiaochen Feng
, and
Nico Valckx
We confirm the negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) for a wider set of countries over the period 1950–2016. Three mutually reinforcing mechanisms help explain this relationship. First, debt overhang impairs household consumption when negative shocks hit. Second, increases in household debt heighten the probability of future banking crises, which significantly disrupts financial intermediation. Third, crash risk may be systematically neglected due to investors’ overoptimistic expectations associated with household debt booms. In addition, several institutional factors such as flexible exchange rates, higher financial development and inclusion are found to mitigate this impact. Finally, the tradeoff between financial inclusion and stability nuances downside risks to growth.
Keywords:
WP; debt ratio; Household debt; financial crises; neglected crash risk; leverage; macro-financial stability; standard deviation; bank stock; negative correlation; subprime crisis; financial leverage; Exchange rate arrangements; Stocks; Consumption; Commercial banks; Consumer credit; Global
Cover IMF Working Papers
Financial Development and Source of Growth: New Evidence
Samy Ben Naceur
,
Mr. Robert Blotevogel
,
Mr. Mark Fischer
, and
Haiyan Shi
This paper examines how financial development affects the sources of growth—productivity and investment—using a sample of 145 countries for the period 1960-2011. We employ a range of econometric approaches, focusing on the CCA and MENA countries. The analysis looks beyond financial depth to capture the access, efficiency, stability, and openness dimensions of financial development. Yet even in this broad interpretation, financial development does not appear to be a magic bullet for economic growth. We cannot confirm earlier findings of an unambiguously positive relationship between financial development, investment, and productivity. The relationship is more complex. The influence of the different dimensions of financial development on the sources of growth varies across income levels and regions.
Keywords:
WP; capital stock growth; interest rate; Financial Development; Growth; Total Factor Productivity; Capital Accumulation; low income; productivity growth; capital adequacy ratio; inflation dummy; Financial sector development; Stock markets; Income; Stocks; Global
Cover IMF Working Papers
Financial Frictions, Underinvestment, and Investment Composition: Evidence from Indian Corporates
Miss Sonali Das
and
Mr. Volodymyr Tulin
This paper studies private investment in India against the backdrop of a significant investment decline over the past decade. We analyze the potential causes of weaker investment at the firm level, using both firm-level financial statements and a novel dataset on firms’ investment project decisions, and find that financial frictions have played a role in the slowdown. Firms with higher financial leverage invest less, as do firms with lower earnings relative to their interest expenses. Consistent with the notion of credit constraints leading to pro-cyclical investment, we also find that firms with higher leverage are (i) less likely to undertake new investment projects, (ii) less likely to complete investment projects once begun, and (iii) undertake shorter-term investment projects.
Keywords:
WP; firm; investment; investment rate; financial leverage; Corporate Leverage; India; investment project; Project length; firm investment; investment expenditure; investment decision; investment slowdown; Stocks; Exports; Capital adequacy requirements; Financial frictions; Private investment; Global
Cover IMF Working Papers
Bank Balance Sheets and the Value of Lending
Mr. Jiaqian Chen
and
Giuseppe Vera
We study 1,400 UK syndicated loans, together with the financial history of the lead bank and the borrowing firm. We interpret abnormal equity returns around loan announcements as the value of the lending relationship to the firm. We find that: (i) Consistent with previous evidence, the value of lending is higher when the firm is riskier or more opaque, suggesting that it primarily reflects the lead bank’s screening and monitoring activities. (ii) As a bank becomes larger, more profitable or more capitalized, the value of its loans first increases and then decreases. The largest, most capitalised or most profitable banks do not give the most valuable loans. (iii) Firms which receive low-value loans are more likely to experience low profitability and financial distress during the lending relationship. By relating the state of bank balance sheets to borrower performance, we offer a new angle to evaluate the impact of financial conditions on the real economy.
Keywords:
WP; announcement effect; return on assets; syndicated loan; asset growth; borrower performance; loan origination; Bank balance sheets; loan announcement effect; bank monitoring; loan announcement; lending relationship; lead bank balance sheet; monitoring intensity; capitalized bank; Loans; Financial statements; Bank credit; Stocks; Syndicated loans
Cover IMF Working Papers
Brazilian Market Portfolio
Cristina Tessari
and
Alexis Meyer-Cirkel
In recent years, Brazil has achieved substantial progress in capital market development by building a diversified investor base and expanding the menu of available financial instruments. In this context, we evaluated the invested Brazilian market portfolio for a period spanning 2005–15. This is a portfolio of all assets proportionally weighted by their market capitalization, and it is divided in eight broad categories: government bonds, equities, bank funding bonds, corporate bonds, real-estate, agribusiness, private-equity, and credit bonds. While the paper focuses on stylized facts related to market size, composition weighting and changes over time, the estimated market portfolio contains important information for policy makers and market participants alike.
Keywords:
WP; asset class; market capitalization; private equity; financial market; multi-asset market portfolio; Global market portfolio; portfolio selection; capital markets; Receivables certificate; fixed-income security; government bonds Index; fixed income; Sovereign bonds; Securities; Bonds; Stocks; Stock markets; Global
Cover Spillover Notes
Spillovers from China: Financial Channels
Miss Nkunde Mwase
,
Mr. Papa M N'Diaye
,
Ms. Hiroko Oura
,
Mr. Franto Ricka
,
Katsiaryna Svirydzenka
, and
Ms. Yuanyan S Zhang
Although China’s much-needed transition to a new growth path is proceeding broadly as expected, the transition is still fraught with uncertainty, including regarding the Chinese authorities’ ability to achieve a smooth rebalancing of growth and the extent of the attendant slowdown in activity. Thus, in the short run, the transition process is likely to entail significant spillovers through trade and commodities, and possibly financial channels. This note sheds some light on the size and nature of financial spillovers from China by looking at the impact of developments in China on global financial markets, with a particular emphasis on differentiation across asset classes and markets. The note shows that economic and financial developments in China have a significant impact on global financial markets, but these effects reflect primarily the central role the country plays in goods trade and commodity markets, rather than China’s financial integration in global markets and the direct financial linkages it has with other countries.
Keywords:
SN; China; market; yield; asset; commodity; price; role China; cross-border holding; developments in China; spillovers from China; China's integration; China to LIDCs; equity price; Financial sector development; Bond yields; Stocks; Stock markets; Foreign direct investment; Global
Cover IMF Working Papers
An Empirical Investigation of Oil-Macro-Financial Linkages in Saudi Arabia
Mr. Ken Miyajima
Oil-macro-financial linkages in Saudi Arabia are analyzed by applying panel econometric frameworks (multivariate and vector autoregression) to maceoeconomic and bank-level balance sheet data for 9 banks spanning 1999–2014. Lower growth of oil prices and non-oil private sector output leads to slower credit and deposit growth and higher nonperforming loan ratios, with feedback loops within bank balance sheets which in turn dampens economic activity. U.S. interest rates are not found to be a key determinant.
Keywords:
WP; price; bank; private sector; NPL ratio; Macro-financial linkages; nonperforming loans; panel vector autoregression; oil price; price growth; Brent crude; bank npls; solvency risk; equity price; Oil prices; Credit; Financial statements; Stocks; Middle East; North Africa; East Africa; Eastern Europe; Global