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Business and Economics > Investments: Stocks

You are looking at 1 - 9 of 9 items for :

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Cover Selected Issues Papers
Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework
Can Sever
and
Athene Laws
This paper aims to provide a broad perspective on the WAEMU fiscal framework. Based on backward looking exercises and forward looking scenarios, it shows that (i) repeated fiscal slippages and historically large stock flow adjustments contributed to the surge in the WAEMU public debt, and (ii) stock flow adjustments can have significant effects on the WAEMU debt dynamics going forward. This paper also discusses that it is essential and urgent to reintroduce the fiscal rules and the Convergence Pact and to enhance the rules. Revamping the fiscal rules should focus on introducing a correction mechanism (which could contain surges in debt in the future) and an escape clause (which would enhance fiscal discipline and predictability), as well as capturing the extensive extra-budgetary and below-the-line operations and strengthening the enforcement mechanism. Any consideration to changing the fiscal deficit target should also encompass addressing extra-budgetary and below-the-line transactions (for example by changing the definition of the deficit). It is not appropriate to increase the debt ceiling.
Keywords:
Fiscal policy; fiscal rules; fiscal governance; PFM; fiscal coordination; monetary unions; WAEMU; stock flow adjustments; flow adjustment; debt dynamics scenario; deficit target; scenario assumption; deficit measure; deficit combination; so called SFA; Government debt management; Debt sustainability analysis; Debt limits; Global
Cover Staff Discussion Notes
Insolvency Prospects Among Small-and-Medium-Sized Enterprises in Advanced Economies: Assessment and Policy Options
Mr. Federico J Diez
,
Mr. Romain A Duval
,
Jiayue Fan
,
Jose M Garrido
,
Sebnem Kalemli-Ozcan
,
Chiara Maggi
,
Mr. Maria Soledad Martinez Peria
, and
Mr. Nicola Pierri
The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies.
Keywords:
Insolvency; Bankruptcy; “Quasi” Equity Injections; Small- and medium-size enterprises; COVID-19; insolvent firm; cash position; equity injection; illiquid firm; firm exit; cash flow; Solvency; Small and medium enterprises; Stocks; Financial statements; Southern Europe; Asia and Pacific
Cover IMF Working Papers
Corporate Liquidity and Solvency in Europe during COVID-19: The Role of Policies
Mr. Christian H Ebeke
,
Nemanja Jovanovic
,
Ms. Laura Valderrama
, and
Jing Zhou
The spread of COVID-19, containment measures, and general uncertainty led to a sharp reduction in activity in the first half of 2020. Europe was hit particularly hard—the economic contraction in 2020 is estimated to have been among the largest in the world—with potentially severe repercussions on its nonfinancial corporations. A wave of corporate bankruptcies would generate mass unemployment, and a loss of productive capacity and firm-specific human capital. With many SMEs in Europe relying primarily on the banking sector for external finance, stress in the corporate sector could easily translate into pressures in the banking system (Aiyar et al., forthcoming).
Keywords:
corporate vulnerability; solvency risk; liquidity risk; policy effectiveness; WP; cash flow; illiquid firm; firm level; management action; insolvent firm; liquidity deficit
Cover Staff Discussion Notes
A Capital Market Union for Europe
Mr. Ashok Vir Bhatia
,
Ms. Srobona Mitra
,
Mr. Shekhar Aiyar
,
Luiza Antoun de Almeida
,
Cristina Cuervo
,
Mr. Andre O Santos
, and
Tryggvi Gudmundsson
This note weighs the merits of a capital market union (CMU) for Europe, identifies major obstacles in its path, and recommends a set of carefully targeted policy actions. European capital markets are relatively small, resulting in strong bank-dependence, and are split sharply along national lines. Results include an uneven playing field in terms of corporate funding costs, the rationing out of collateral-constrained firms, and limited shock absorption. The benefits of integration center on expanding financial choice, ultimately to support capital formation and resilience. Capital market development and integration would support a healthy diversity in European finance. Proceeding methodically, the note identifies three key barriers to greater capital market integration in Europe: transparency, regulatory quality, and insolvency practices. Based on these findings, the note urges three policy priorities, focused on the three barriers. There is no roadblock—such steps should prove feasible without a new grand bargain.
Keywords:
SDN; EU counterparty; EU capital market practitioner; euro area; EU capital market rule; EU treaty; EU venture capital funds; Capital market union; financial integration; bilateral portfolio flows; monetary union; investment firm; funding cost; growth performance; private equity; equity valuation; capital market market fragmentation; nonfinancial firm; company information; Capital markets; Securities; Stocks; Mutual funds; Solvency; Europe; Global
Cover IMF Staff Country Reports
Switzerland: Financial Sector Assessment Program; Technical Note-Insurance Stress Testing
International Monetary Fund. Monetary and Capital Markets Department
Financial Sector Assessment Program; Technical Note-Insurance Stress Testing
Keywords:
ISCR; CR; investment; sovereign bond; capital; holding; bond investment; sovereign bond exposure; coverage ratio; investment holding; investment yield; low-yield environment; Insurance companies; Stress testing; Sovereign bonds; Insurance; Stocks; Global
Cover Policy Papers
Third Progress Report on Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contracts
International Monetary Fund
The IMF Executive Board endorsed in October 2014 the inclusion of key features of enhanced pari passu provisions and collective action clauses (CACs) in new international sovereign bonds.1 Specifically, the Executive Board endorsed the use of (i) a modified pari passu provision that explicitly excludes the obligation to effect ratable payments, and (ii) an enhanced CAC with a menu of voting procedures, including a “single-limb” aggregated voting procedure that enables bonds to be restructured on the basis of a single vote across all affected instruments, a two-limb aggregated voting procedure, and a series-by-series voting procedure.2 Directors supported an active role for the IMF in promoting the inclusion of these clauses in international sovereign bonds.3 The IMFC and the G20 further called on the IMF to promote the use of such clauses and report on their inclusion. Since that time, the IMF has published periodic progress reports on inclusion of the enhanced clauses.4 These reports found that since the Executive Board’s endorsement, substantial progress had been made in incorporating the enhanced clauses, with approximately 85 percent of new international sovereign bond issuances since October 2014 (in nominal principal amount) including such clauses. The reports also found that there was no observable market impact on inclusion of the enhanced clauses. However, the reports noted that the outstanding stock without the enhanced clauses remained significant, with issuers showing little appetite for liability management exercises to accelerate the turnover. This paper provides a further update on the inclusion of the enhanced clauses and on the outstanding stock of international sovereign bonds as of September 30, 2017. Section II reports on the inclusion of these enhanced provisions, finding that the vast majority of issuers are including these clauses, with only a few countries standing out against the market trend. Section II also provides an update on the outstanding stock, indicating that while the percentage of the outstanding stock with the enhanced clauses is increasing, a significant percentage of the stock still does not and little action has been taken by issuers to increase the rate of turnover. Section III briefly reports on the use of different bond structures, and Section IV describes the staff’s ongoing outreach efforts and next steps.
Keywords:
PP; issuer; yield; sovereign bond issuance; collective action clause; emerging market issuer; New York law; enhanced CAC; law-governed bond; bond governance; Passu provision; International bonds; Sovereign bonds; Bonds; Stocks; Debt management
Cover IMF Staff Country Reports
Liberia: Enhanced Initiative for Heavily Indebted Poor Countries-Completion Point Document and Multilateral Debt Relief Initiative
International Monetary Fund
The Liberia Poverty Reduction Strategy (LPRS) was completed in March 2008. Since reaching the decision point in March 2008, Liberia has maintained macroeconomic stability. The global financial crisis adversely impacted Liberia shortly after the LPRS was released. Investments were postponed, and export revenues were sharply reduced in the rubber sector as external demand weakened. The authorities’ strict adherence to a cash-based balanced budget, in place since February 2006, has contributed substantially to regaining fiscal discipline, putting debt on a downward path while also increasing pro-poor expenditures.
Keywords:
ISCR; CR; debt forgiveness; Liberian authorities; present value; HIPC assistance; exchange rate; PFM reform agenda; Debt relief; Debt service; Debt management; Government debt management; Stocks; Global; Sub-Saharan Africa
Cover IMF Working Papers
A Dynamic Model of Buy-Backs
International Monetary Fund
A dynamic framework is utilized to evaluate buy-backs of a country’s external debt. The model solves for the price of debt on the basis of expectations concerning the debtor’s ability to pay, and upon a variety of assumptions concerning changes in property rights consistent with various debt reduction programs. The importance of these assumptions is illustrated in simulations that relate debt reduction to a conventional balance of payments projection.
Keywords:
WP; interest payment; bond
Cover IMF Working Papers
Debt-Equity Composition of International Investment
International Monetary Fund
Capital flows to the nonindustrial countries share three striking characteristics. First, the bulk, of these flows was in the form of debt, not equity; second, the loans were mostly to, or guaranteed by, debtor governments; and third, these debts were largely bank loans, not bonds. This paper examines the economic factors that may have been responsible.
Keywords:
WP; government debt; debt-equity ratio; debt holder; debt holding; debt problem; equity composition; Stocks; Capital flows; Private debt; Sovereign bonds; Europe