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Business and Economics > Investments: Stocks

You are looking at 1 - 10 of 36 items for :

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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
Handle with Care: Regulatory Easing in Times of COVID-19
Mr. Fabian Valencia
,
Mr. Richard Varghese
,
Weijia Yao
, and
Juan Yepez
The policy response to the COVID-19 shock included regulatory easing across many jurisdictions to facilitate the flow of credit to the economy and mitigate a further ampli-fication of the shock through tighter financial conditions. Using an intraday event study,this paper examines how stock prices—a key driver in financial conditions—reacted to regulatory easing announcements in a sample of 18 advanced economies and 8 emerging markets. The paper finds that overall, regulatory easing announcements contributed to looser financial conditions, but effects varied across sectors and tools. Financial regulatory easing led to lower valuations for financial sector stocks, and higher valuations for non-financial sector stocks, particularly for industries that are more dependent on bank financing. Furthermore, valuations declined and financial conditions tightened following announcements related to easier bank capital regulation while equity valuation rose and financial conditions loosened after those about liquidity regulation. Effects from non-regulatory financial measures appear to be generally more muted.
Keywords:
Stock prices; policy announcements; financial conditions; capital; liquidity; COVID-19.; WP; liquidity regulation easing; regulation announcement; announcement dummy; equity price; market reaction
Cover IMF Working Papers
Investor Information and Bank Instability During the Euro Crisis
Silvia Iorgova
Outside of financial crises, investors have little incentive to produce private information on banks’ short-term liabilities held as information-insensitive safe assets. The same does not hold true during crises. We measure daily information production using data from credit default swap spreads during the global financial crisis and the subsequent European debt crisis. We study abnormal information production around major events and interventions during these crises and find that, on average, capital injections reduced abnormal information production while early European stress tests increased it. We also link information production to outcomes: high levels of information production predict bank balance sheet contraction and higher government expenditures to support financial institutions. In an addendum, we show information production on nonfinancials dramatically increased relative to financials at the height of the COVID-19 crisis, reflecting the nonfinancial nature of the initial shock.
Keywords:
information production; safe asset; WP; reference securities; information-production ratio; banking system; debt crisis; rate of change; reference security model; unsecured debt
Cover IMF Working Papers
Expected Credit Loss Modeling from a Top-Down Stress Testing Perspective
Mr. Marco Gross
,
Mindaugas Leika
, and
Pavel Lukyantsau
The objective of this paper is to present an integrated tool suite for IFRS 9- and CECL-compatible estimation in top-down solvency stress tests. The tool suite serves as an illustration for institutions wishing to include accounting-based approaches for credit risk modeling in top-down stress tests. The tool suite is made available online along with this paper.
Keywords:
WP; transition matrix; financial asset; balance sheet; accounting regime; interest rate; provision stock; bank portfolio model; modeling choice; bank-portfolio level; Lt-ECL ratio; provision flow; International Financial Reporting Standards; Stress testing; Stocks; Loans; Loan loss provisions; Global; Credit risk; IFRS 9; CECL; lifetime probability of default; LGD modeling; Distressed assets
Cover IMF Working Papers
The Long Shadow of the Global Financial Crisis: Public Interventions in the Financial Sector
Ms. Deniz O Igan
,
Hala Moussawi
,
Alexander F. Tieman
,
Ms. Aleksandra Zdzienicka
,
Mr. Giovanni Dell'Ariccia
, and
Mr. Paolo Mauro
We track direct public interventions and public holdings in 1,114 financial institutions over the period 2007–17 in 37 countries based on publicly available information. We use aggregate official data to validate this new dataset and estimate the fiscal impact of interventions, including the value of asset holdings remaining in state hands at end-2017. Direct public support to financial institutions amounted to $1.6 trillion ($3.5 trillion including guarantees), with larger amounts allocated to lower capitalized and less profitable banks. As of end-2017, only a few countries had fully divested the initial support they provided during the crisis. Public holdings were divested faster in better capitalized, more profitable, and more liquid banks, and in countries where the economy recovered faster. In countries where the government stake remained high relative to the initial intervention, private investment and credit growth were slower, financial access, depth, efficiency, and competition were worse, and financial stability improved less.
Keywords:
WP; bank characteristic; bank variable; country condition; return on assets; intervened bank; Financial crisis; Government interventions; Bank resolution; asset holding; asset quality; system assets; government intervention; asset purchase; cash flow; Stocks; Financial sector; Loans; Liquidity; State-owned banks; Global
Cover IMF Working Papers
The Measurement of External Accounts
Gustavo Adler
,
Mr. Daniel Garcia-Macia
, and
Signe Krogstrup
Growing international integration in trade and finance can challenge the measurement of external accounts. This paper presents a unified conceptual framework for identifying sources of mismeasurement of foreign investment income in current account balances. The framework allows to derive a precise definition of measurement distortions and an empirical strategy for estimating their importance. As an application, we empirically estimate two specific distortions related to inflation and retained earnings on portfolio equity for a broad set of countries. We find these may explain a non-trivial share of current account imbalances and that they are particularly relevant in countries with large external investment positions. We also discuss how merchanting and profit-shifting activities could lead to measurement distortions. We suggest areas for future research and underline the need to strengthen data collection efforts.
Keywords:
WP; Current Account; Measurement; External Imbalances; Global Imbalances.; portfolio equity; inflation distortion; liabilities position; retained earnings distortion; inflation income; equity instrument; distortion distortion; inflation income in country c; inflation expectation; current account flow; current account statistics; current account measure; Income; Wages; Stocks; Inflation; Global
Cover IMF Working Papers
Indonesia's Public Wealth: A Balance Sheet Approach to Fiscal Policy Analysis
Ms. Majdeline El Rayess
,
Avril Halstead
,
Jason Harris
,
Mr. John Ralyea
, and
Alexander F. Tieman
Public sector balance sheets (PSBS) provide a framework for comprehensive and deep analysis of fiscal risks and policies. To illustrate these benefits, this paper shows how PSBS analysis can be applied to assess risks to Indonesia’s public sector stemming from its public corporations. The paper also shows that the government’s plans to finance a ramp-up in public investment with additional tax revenue increases both economic growth and public wealth.
Keywords:
WP; asset; GDP; real GDP; investment; balance sheet; Public Sector Balance Sheet; Intertemporal Fiscal Balances; Public Investment; Indonesia.; asset revaluation; return on equity; public sector; baseline GDP; nonfinancial public corporation asset; cash flow; asset instrument; current ratio; Business enterprises; Financial statements; Public sector; Public investment spending; Stocks
Cover Coordinated Portfolio Investment Survey Guide (Third Edition)
Coordinated Portfolio Investment Survey Guide (Third Edition)
Venkat Josyula

Abstract

This third edition of the Coordinated Portfolio Investment Survey Guide has been prepared to assist economies that participate or are preparing to participate in the Coordinated Portfolio Investment Survey (CPIS). It builds on and updates the second edition of the CPIS Guide (2002) to reflect the adoption of the Balance of Payments and International Investment Position Manual, sixth edition (BPM6) as the standard framework for compiling cross-border position statistics.

Keywords:
M&G; portfolio investment data collection system; investment; CPIS data template; survey questionnaire; investment survey; CPIS metadata questionnaire; Securities; Portfolio investment; Stocks; Foreign direct investment; Bonds; Global; Caribbean; CPIS data; securities holding; portfolio investment liability; liability position; CPIS Task Force; portfolio investment securities; Business enterprises
Cover IMF Working Papers
Household Wealth and Resilience to Financial Shocks in Italy
Mr. Daniel Garcia-Macia
High household wealth is often cited as a key strength of the Italian economy. Both in absolute terms and relative to income, the Italian household sector is wealthier than most euro area peers. A sizable fraction of this wealth is held by the rich and upper middle classes. This paper documents the changes in the Italian household sector’s financial wealth over the past two decades, by constructing the matrix of bilateral financial sectoral exposures. Households became increasingly exposed to the financial sector, which in turn was exposed to the highly indebted real and government sectors. The paper then simulates different financial shocks to gauge the ability of the household sector to absorb losses. Simple illustrative calculations are presented for a fall in the value of government bonds as well as for bank bail-ins versus bailouts.
Keywords:
WP; bailout; bail-in; government bond; bond; financial linkages; flow of funds; balance sheet analysis; financial asset holding; sectoral financial asset exposure; flow-of-funds datum; bail-in case; non-financial corporates; MFI assets; equity impact; Stocks; Sovereign bonds; Income distribution; Creditor bail-in; Financial sector; Global
Cover IMF Working Papers
Interconnectedness of Global Systemically-Important Banks and Insurers
Sheheryar Malik
and
Ms. TengTeng Xu
Interconnectedness among global systemically important banks (GSIBs) and global systemically important insurers (GSIIs) has important financial stability implications. This paper examines connectedness among United States, European and Asian GSIBs and GSIIs, using publicly-available daily equity returns and intra-day volatility data from October 2007 to August 2016. Results reveal strong regional clusters of return and volatility connectedness amongst GSIBs and GSIIs. Compared to Asia, selected GSIBs and GSIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness—i.e., among all GSIBs and GSIIs—tends to rise during financial stress, which is corroborated by a balance sheet oriented systemic risk measure. Lastly, the paper demonstrates significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, and the important role of bank profitability and asset quality in driving bank-specific return connectedness.
Keywords:
WP; economic policy; balance sheet; Global systemically important banks and insurers; connectedness; volatility; equity prices; vector autoregression; return connectedness; GSIBs from the United States; system of GSIBs; bank characteristic; equity return; bank subsidiary; BNP Paribas; book value; profitable GSIBs; dynamic return connectedness; connectedness in the system; return connectedness of United States; Global systemically important banks; Global systemically important insurers; Stocks; Insurance companies; Global; Europe; Asia and Pacific