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Business and Economics > Production and Operations Management

You are looking at 1 - 10 of 13 items for :

  • Type: Journal Issue x
  • Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill x
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Cover IMF Working Papers
Financial Heterogeneity, Investment, and Firm Interactions
Yang Liu
Recent literature has shown that corporate indebtedness affects firm-level investment behavior but not necessarily aggregate business cycles. I argue that interactions among heterogeneous firms play an important role in equilibrium. After a downturn, financially unconstrained firms in financially constrained industries significantly increase capital ex-penditure to substitute depressed investment by their financially constrained competitors. The increase in investment, primarily driven by small and medium firms, leads to substantial gains in future sales. Using a new empirical approach, I further show that equilibrium effects are unambiguously countercyclical because the increase in investment by unconstrained firms does not crowd out investment by financially constrained competitors. The “competitive interaction channel” underscored in this paper may play an important role in mitigating the impact of negative shocks in macroeconomic models with financial heterogeneity.
Keywords:
Financial constraints; investment; equilibrium effects; imperfect competition; firm interaction; investment behavior; equilibrium effect; interaction channel; product similarity; Government debt management; Productivity; Capital spending; Commodity markets; Competition; North America
Cover IMF Working Papers
Economic Growth After Debt Surges
João Tovar Jalles
and
Mr. Paulo A Medas
Debt levels, both private and public, were already at record highs before the Covid-19 pandemic, and surged further in 2020. The high indebteness raises concerns whether it will undermine future growth prospects. This paper contributes to the ongoing debate by examining what happens to economic growth after debt surges. We apply a local projection method to a new dataset of debt surges in 190 countries between 1970 and 2020. Our results show that the relationship between debt surges and economic growth are complex. Debt surges tend to be followed by weaker economic growth and persistently lower output. However, this negative relationship does not always hold. Surges in public debt tend to have the most negative impact on future growth prospects. This is particularly the case if the economy is already operating with a large positive output gap. Debt surges also tend to be followed by weaker economic growth if the initial debt levels are high, especially for private debt surges. Our results also show how debt surges impact future growth. Public debt surges are associated with especially weaker private and public investment, although both private and public consumption are also negatively affected. Surges in corporate debt are followed by lower private and public investment.
Keywords:
Public debt; private debt; economic growth; potential GDP; investment; panel data; local projection; nonlinearities; debt surge; debt level; b Real GDP; changes in debt; robustness exercise; Output gap; Potential output; Public investment spending; Global; surge episode; a number of debt; debt surge episode; Private consumption
Cover IMF Working Papers
Small and Vulnerable: Small Firm Productivity in the Great Productivity Slowdown
Sophia Chen
and
Dongyeol Lee
We provide broad-based evidence of a firm size premium of total factor productivity (TFP) growth in Europe after the Global Financial Crisis. The TFP growth of smaller firms was more adversely affected and diverged from their larger counterparts after the crisis. The impact was progressively larger for medium, small, and micro firms relative to large firms. It was also disproportionally larger for firms with limited credit market access. Moreover, smaller firms were less likely to have access to safer banks: those that were better capitalized banks and with a presence in the credit default swap market. Horseraces suggest that firm size may be a more important and robust vulnerability indicator than balance sheet characteristics. Our results imply that the tightening of credit market conditions during the crisis, coupled with limited credit market access especially among micro, small, and medium firms, may have contributed to the large and persistent drop in aggregate TFP.
Keywords:
Credit constraint; Financial crisis; Firm size; Intangibles; Producvitity; SMEs; WP; TFP growth; creditor bank; size premium; credit market access; micro firm; vulnerability indicator
Cover IMF Working Papers
Pouring Oil on Fire: Interest Deductibility and Corporate Debt
Pietro Dallari
,
Mr. Nicolas End
,
Fedor Miryugin
,
Alexander F. Tieman
, and
Mr. Seyed Reza Yousefi
This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and larger firms, with its effect accounting for about a quarter of leverage. The strength of this effect differs with firm size, the availability of collateral, income and income volatility, cash flow, and capital intensity. We conclude that leveling the playing field between debt and equity finance through tax policy reform would decrease NFC leverage, reducing economic risks posited by leverage.
Keywords:
WP; firm; debt; SME; Leverage; Debt Bias; Tax Policy; Corporate Income Tax; SMEs; Micro data; leverage decision; coefficient estimate; incurred debt; debt firm; debt contract; leverage ratio; estimates of debt bias; long-term debt; strength of debt bias; effect of debt bias; bias coefficient estimate; Capital productivity; Financial statements; Currencies; Europe; Global; interest deductibility; corporate debt; quantile regression; copyright Page; Oil
Cover IMF Working Papers
Predicting Fiscal Crises
Ms. Svetlana Cerovic
,
Mrs. Kerstin Gerling
,
Andrew Hodge
, and
Mr. Paulo A Medas
This paper identifies leading indicators of fiscal crises based on a large sample of countries at different stages of development over 1970-2015. Our results are robust to different methodologies and sample periods. Previous literature on early warning sistems (EWS) for fiscal crises is scarce and based on small samples of advanced and emerging markets, raising doubts about the robustness of the results. Using a larger sample, our analysis shows that both nonfiscal (external and internal imbalances) and fiscal variables help predict crises among advanced and emerging economies. Our models performed well in out-of-sample forecasting and in predicting the most recent crises, a weakness of EWS in general. We also build EWS for low income countries, which had been overlooked in the literature.
Keywords:
WP; fiscal crisis; crisis run-up; crisis probability; approaching crisis; crises start; debt crisis; missed crisis
Cover IMF Working Papers
The Granular Origins of Macroeconomic Fluctuations in Europe
Mr. Christian H Ebeke
and
Kodjovi M. Eklou
This paper investigates the microeconomic origins of aggregate economic fluctuations in Europe. It examines the relevance of idiosyncratic shocks at the top 100 large firms (the granular shocks) in explaining aggregate macroeconomic fluctuations. The paper also assesses the strength of spillovers from large firms onto SMEs. Using firm-level data covering over 14 million firms and eight european countries (Austria, Belgium, Finland, France, Germany, Italy, Portugal and Spain), we find that: (i) 40 percent of the variance in GDP in the sample can be explained by idiosyncratic shocks at large firms; (ii) positive granular shocks at large firms spill over to domestic SMEs’ output, especially if SMEs’ balance sheets are healthy and if SMEs belong to the services and manufacturing sectors.
Keywords:
WP; productivity growth; Idiosyncratic shocks; Aggregate fluctuations; SMEs; Balance Sheets; large firm; firm size distribution; productivity shock; firms sales; Productivity; Small and medium enterprises; Labor productivity; Spillovers; Services sector; Global; Europe
Cover Policy Papers
Provisional Agenda for the Thirty-First Meeting of the IMFC
International Monetary Fund
The following is the provisional agenda for the Thirty-First Meeting of the International Monetary and Financial Committee, which is to be convened at the IMF's Headquarters in Washington, D.C. on April 17, 2015.
Keywords:
PP; IMF deliverables; financing sustainable development; HQ2 Conference Hall
Cover IEO Evaluation Report
IEO Evaluation Report
IMF Forecasts
International Monetary Fund. Independent Evaluation Office

Abstract

The Independent Evaluation Office (IEO) was established by the IMF’s Executive Board in 2001. It provides objective and independent evaluation of issues related to the IMF. The IEO operates independently of IMF management and at arm’s length from the IMF Executive Board. For more information on the IEO’s activities, visit the IEO website: www.ieo-imf.org.

Keywords:
IEOR; IEO; forecast; IEO calculation; economist; country; IMF's spring; desk economist; forecasting process; IMF economist; GDP forecasting; Potential output; Current account balance; Current account imbalances; Fiscal stance; Global; Africa; forecast method; IMF program forecast; Economic recession
Cover IMF Working Papers
International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions
Rui Albuquerque
,
Mr. Luis Brandao Marques
,
Miguel A. Ferreira
, and
Pedro Matos
We develop and test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country. Using firm-level data on cross-border mergers and acquisitions (M&A) and corporate governance in 22 countries, we find that cross-border M&As are associated with subsequent improvements in the governance, valuation, and productivity of the target firms’ local rivals. This positive spillover effect is stronger when the acquirer is from a country with stronger shareholder protection and if the target’s industry is more competitive. We conclude that the international market for corporate control promotes the adoption of better corporate governance practices around the world.
Keywords:
WP; spillover effect; target firm; cross-border m&a; acquirer firm; panel regression; Foreign direct investment; Corporate governance; Cross border mergers; acquisitions; Spillovers; governance attribute; investor protection; industry classification; Competition; Productivity; Market capitalization; Global
Cover IMF Staff Country Reports
Iceland: Selected Issues
International Monetary Fund
Given its small size and openness, the Icelandic economy has been subject to large shocks. Systematic coordination of monetary and fiscal policy, however, could help improve the inflation-output variability trade-off. The fiscal rule is designed to simultaneously ensure a consistently countercyclical fiscal stance and achieve a stable public debt target. The parameter values of the model are estimated from the quarterly data using a Bayesian technique. To assess how the introduction of the fiscal policy changes the inflation-output variability trade-off in Iceland, the paper compares the efficiency policy frontiers.
Keywords:
ISCR; CR; reaction function; inflation-output variability trade-off; countercyclical fiscal policy; output-inflation variability tradeoff; Icelandic bank; Credit risk; Stocks; Loans; Inflation; Global