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Europe > Iceland

You are looking at 1 - 10 of 24 items for :

  • Type: Journal Issue x
  • Monetary Policy, Central Banking, and the Supply of Money and Credit: General x
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Cover IMF Working Papers
Firm Leverage and Boom-Bust Cycles
Can Sever
This paper explores the dynamic relationship between firm debt and real outcomes using data from 24 European economies over the period of 2000-2018. Based on macro data, it shows that a rise in credit to firms is associated with an increase in employment growth in the short-term, but employment growth declines in the medium-term. This pattern remains similar, even when the changes in credit to households are accounted for. Next, using data from a large sample of firms, it shows that firm leverage buildups predict similar boom-bust growth cycles in firm employment: Firms with a larger increase in leverage experience a boost in employment growth in the short-term, but employment growth decreases in the medium-term. Relatedly, the volatility of employment growth increases in the aftermath of firm leverage buildups. Finally, this paper provides suggestive evidence on the role of a financial channel in the relationship between firm leverage buildups and employment growth. The results show that a rise in firm leverage is associated with a persistently higher debt service ratio, pointing the drag on finances. Consistently, boom-bust growth cycles in the aftermath of firm leverage buildups are not limited to employment growth, but are also pronounced for investment. Moreover, the medium-term decline in firm employment growth as predicted by leverage buildups becomes even larger if aggregate financial conditions tighten. The findings are in favor of “lean against the wind” approach in policy making.
Keywords:
Firm leverage; firm debt; household debt; leverage cycles; employment; investment; boom-bust cycles; ORBIS; leverage buildup; employment growth; leverage cycle; growth cycle; cycles in the aftermath; Business cycles; Credit; Consumer credit; Credit booms; Europe; Global
Cover IMF Staff Country Reports
Chile: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
The Chilean economy has been hit by the pandemic while recovering from the social unrest in late 2019, requiring substantial adjustment of economic policies and the appropriate use of existing policy buffers. Following a sharp decline in mid-2020, economic activity started recovering in 2020H2 in the wake of ample policy stimulus. Inflation remains near the policy target, with inflation expectations anchored, and the current account balance has improved amid a sharp drop in imports and relatively resilient exports. Fiscal and monetary policies remain guided by the structural fiscal balance rule and the inflation-targeting framework, respectively. Beyond the pandemic-related risks, there is uncertainty stemming from a series of elections and the outcome of a New Constitution process—scheduled to finish in mid-2022—which are expected to shape the public discourse and influence the policy agenda.
Keywords:
liability positions vis-à-vis nonresident; money market rate; inflation expectation; policy target; I. Policy response; COVID-19; Pension spending; Fiscal stance; Credit; Global
Cover Policy Papers
IMF COVID-19 Response—A New Short-Term Liquidity Line to Enhance The Adequacy Of The Global Financial Safety Net
International Monetary Fund
The COVID-19 pandemic has created severe disruption in the global financial system, with many emerging market and developing countries (EMDCs) facing liquidity shortages. In the context of intensified demand for liquidity and heightened global uncertainty, staff has revisited the 2017 proposal for a new facility to provide liquidity support to the Fund’s membership. This paper proposes the establishment of a new Short-term Liquidity Line (SLL) as a special facility in the General Resources Account (GRA), based on the key features of the 2017 blueprint.
Keywords:
PP; SLL arrangement; SLL usage; liquidity pressure; liquidity position; liquidity shortage; Liquidity; Balance of payments need; Communications in revenue administration; Credit; Financial Sector Assessment Program; Global
Cover IMF Working Papers
Cross-Border Credit Intermediation and Domestic Liquidity Provision in a Small Open Economy
Mr. Thorvardur Tjoervi Olafsson
This paper develops a small open economy model where global and domestic liquidity is intermediated to the corporate sector through two financial processes. Investment banks intermediate cross-border credit through interlinked debt contracts to entrepreneurs and commercial banks intermediate domestic savings to liquidity constrained final good producers. Both processes are needed to facilitate development of key production inputs. The model captures procyclical investment bank leverage dynamics, global liquidity spillovers, domestic money market pressures, and macrofinancial linkages through which shocks propagate across the two processes, affecting spreads and balance sheets, as well as the real economy through investment and working capital channels.
Keywords:
WP; interest rate; money market; central bank; financial frictions; cross-border banking flows; macrofinancial linkages; financial intermediation; working capital; credit contracts; investment banking; credit market; liquidity shock; depreciation rate; funding rate reaction; capital producer; idiosyncratic productivity; cost of funds; commercial bank funding; monopolistic investment banks; Investment banking; Domestic credit; Credit; Commercial banks; Self-employment; Global; East Asia
Cover IMF Working Papers
Credit Growth and Economic Recovery in Europe After the Global Financial Crisis
Sergei Antoshin
,
Mr. Marco Arena
,
Nikolay Gueorguiev
,
Mr. Tonny Lybek
,
Mr. John Ralyea
, and
Mr. Etienne B Yehoue
This paper reviews the empirical relationships between credit growth, economic recovery, and bank profitability in Europe after the global financial crisis (GFC). We find that the post-GFC recoveries in Europe have been weaker than previous recoveries, with the “double-dip” recessions in 2011–12 in many countries and the worldwide reach of the GFC explaining the underperformance. Bank lending has been subdued as well, but this appears to have only held back the recovery relatively moderately. A 10 percent increase in bank credit to the private sector is associated with a rise of 0.6–1 percent in real GDP and 2–2½ percent in real private investment. These relationships have not changed significantly during and after the GFC. Loan quality, customer deposits, bank equity price index, and bank capital appear to be closely linked to bank lending. As expected, bank profitability is positively and significantly influenced by credit growth, but this relationship has weakened after the GFC.
Keywords:
WP; credit growth; economic activity; private sector; price index; economic recovery; creditless recoveries; bank profitability; global financial crisis; Europe; dummy recession; recovery dummy; CESEE recession-recovery pattern; GFC-induced recession; recovery period; GFC recovery; credit dynamics; creditless recovery; GFC recession; credit extension; Credit; Bank credit; Global financial crisis of 2008-2009; Credit booms; Global
Cover Policy Papers
Increasing Resilience to Large and Volatile Capital Flows: The Role of Macroprudential Policies - Case Studies
International Monetary Fund
NULL
Keywords:
PP; bank; central bank; financing; net capital; Banco de la República de Colombia; FX lending; parent bank; return on equity; foreign currency; financial crisis; credit growth; financial system; banking sector; monetary policy; Credit; Capital inflows; Capital flows; Loans; Global
Cover IMF Staff Country Reports
Iceland: Selected Issues
International Monetary Fund. European Dept.
This paper analyzes the explosion of tourism in Iceland, which has surged above all expectations. The number of tourists has almost quadrupled since the Eyjafjallajökull eruptions in 2010, establishing tourism at the heart of the economy. Tourists do not seem to be driven mainly by rising incomes at home, nor have they been deterred by rising costs on the back of króna appreciation—which leaves Iceland’s tourism boom largely unexplained by standard econometric models. Instead, Iceland’s natural wonders, welcoming atmosphere, general safety, improving connectedness, and social media outreach have drawn in visitors. Going forward, tourism is likely to grow less rapidly than in recent years, yet remain at strong levels.
Keywords:
ISCR; CR; Iceland; bank credit growth; post GFC recovery; tourism competitiveness report; NRIR estimate; LWPRF model; macroeconomic variable; Bank credit; Tourism; Inflation; Real interest rates; Credit; Global; Europe
Cover IMF Working Papers
Fiscal Crises
Mrs. Kerstin Gerling
,
Mr. Paulo A Medas
,
Mr. Tigran Poghosyan
,
Juan Farah-Yacoub
, and
Yizhi Xu
A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, there is very limited analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly ignored in the past. Countries faced on average two crises since 1970, with the highest frequency in LIDCs and lowest in advanced economies. The data sheds some light on policies and economic dynamics around crises. LIDCs, which are usually seen as more vulnerable to shocks, appear to suffer the least in crisis periods. Surprisingly, advanced economies face greater turbulence (growth declines sharply in the first two years of the crisis), with half of them experiencing economic contractions. Fiscal policy is usually procyclical as countries curtail expenditure growth when economic activity weakens. We also find that the decline in economic growth is magnified if accompanied by a financial crisis.
Keywords:
WP; fiscal crisis; crisis episode; banking crisis dummy; real GDP; sovereign debt default; economic growth; twin crises; public debt debt ratio; crisis run-up; crisis onset; Debt default; Fiscal consolidation; Credit; Global
Cover IMF Working Papers
Crisis Transmission in the Global Banking Network
Galina Hale
,
Mr. Tümer Kapan
, and
Ms. Camelia Minoiu
We study the transmission of financial sector shocks across borders through international bank connections. For this purpose, we use data on long-term interbank loans among more than 6,000 banks during 1997-2012 to construct a yearly global network of interbank exposures. We estimate the effect of direct (first-degree) and indirect (second-degree) exposures to countries experiencing systemic banking crises on bank profitability and loan supply. We find that direct exposures to crisis countries squeeze banks' profit margins, thereby reducing their returns. Indirect exposures to crisis countries enhance this effect, while indirect exposures to non-crisis countries mitigate it. Furthermore, crisis exposures have real effects in that they reduce banks' supply of domestic and cross-border loans. Our results, based on a large global sample, support the notion that interconnected financial systems facilitate shock transmission.
Keywords:
WP; syndicated loan; commercial bank; balance sheet; return on assets; shock transmission; long-term interbank exposures; systemic banking crises; financial networks; syndicated loans; crisis exposure; bank type; bank performance; bank level; Loans; Foreign currency exposure; Banking crises; Systemic crises; Global
Cover Policy Papers
Review of Access Limits and Surcharge Policies
International Monetary Fund
Scope and strategy: This paper reviews access limits and surcharge policies in the Fund’s General Resources Account (GRA). It builds on the preliminary Executive Board discussion that took place in May 2014, against the backdrop of the 14th Review quotas expected to become effective early in 2016, which will on average double individual members’ quotas. At the meeting in 2014, most Directors considered that a moderate increase in normal access limits in SDR terms would broadly restore the normal Fund access to levels considered acceptable in 2009, and saw merit in adjusting the surcharge threshold to allow for a moderate increase in the SDR value of credit not subject to the charge.
Keywords:
PP; IMF executive board review; financing role; threshold; SDR; refund; surcharge policy; b. paragraph 4; decisions III; Credit; Personal income; Currencies; Balance of payments need; Credit risk; Global