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Europe > Slovenia, Republic of

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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 Working Papers
Calibrating Macroprudential Policies in Europe Amid Rising Housing Market Vulnerability
Ms. Laura Valderrama
Housing market developments are in the spotlight in Europe. Over-stretched valuations amid tightening financial conditions and a cost-of-living crisis have increased risks of a sustained downturn and exposed challenging trade-offs for macroprudential policy between ensuring financial system resilience and smoothing the macro-financial cycle. Against this backdrop, this paper provides detailed considerations regarding how to (re)set macroprudential policy tools in response to housing-related systemic risk in Europe, providing design solutions to avoid unintended consequences during a tightening phase, and navigating the trade-offs between managing the build-up of vulnerabilities and the macro-financial cycle in a downturn. It also proposes a novel framework to measure the effectiveness of tools and avoid overlaps by quantifying the risks addressed by different macroprudential instruments. Finally, it introduces a taxonomy allowing to assess a country’s macroprudential stance and whether adjustments to current policy settings are warranted—such as the relaxation of capital-based tools and possibly some borrower-based measures in the event of a more severe downturn.
Keywords:
Housing markets; household vulnerability; income distribution; economic cycle; financial stability; macroprudential policy.; Macroprudential policy; housing market vulnerability; Policy tool; calibrating Macroprudential policies in Europe amide; Macroprudential Policy stance framework; Countercyclical capital buffers; Mortgages; Housing prices; Credit; Europe; Global
Cover IMF Staff Country Reports
Republic of Slovenia: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper takes the case of Slovenia to analyze credit growth and economic recovery in Europe. The findings reveal that following the global financial crisis recovery in Slovenia significantly lags typical postrecession recoveries for both typical and financial-crisis-driven recessions. Credit dynamics have also been much more subdued. Controlling for Slovenia’s double-dip recession and the slowdown in global growth after the global financial crisis reveals that Slovenia’s recovery is not atypical. The cross-country study also finds that bank-specific factors are the key determinants of bank lending. Bank credit to the private sector also has a positive but modest impact on economic activity, mainly through the investment channel.
Keywords:
ISCR; CR; export; Slovenia; GDP; bank credit growth; export category; Slovenia's export; bank credit dynamics; post GFC-recovery; goods export; Labor markets; Exports; Bank credit; Employment; Unemployment; Global; Europe; Southern Europe; Eastern Europe
Cover IMF Working Papers
Sovereign CDS Spreads in Europe: The Role of Global Risk Aversion, Economic Fundamentals, Liquidity, and Spillovers
Mr. Frigyes F Heinz
and
Ms. Yan M Sun
By analysing data from January 2007 to December 2012 in a panel GLS error correction framework we find that European countries’ sovereign CDS spreads are largely driven by global investor sentiment, macroeconomic fundamentals and liquidity conditions in the CDS market. But the relative importance of these factors changes over time. While during the 2008/09 crisis weak economic fundamentals (such as high current account decifit, worsening underlying fiscal balances, credit boom), a drop in liquidity and a spike in risk aversion contributed to high spreads in Central and Eastern and South-Eastern European (CESEE) countries, a marked improvement in fundamentals (e.g. reduction in fiscal deficit, narrowing of current balances, gradual economic recovery) explains the region’s resilience to financial market spillovers during the euro area crisis. Our generalised variance decomposition analyisis does not suggest strong direct spillovers from the euro area periphery. The significant drop in the CDS spreads between July 2012 and December 2012 was mainly driven by a decline in risk aversion as suggested by the model’s out of sample forecasts.
Keywords:
WP; CDS spread; financial market; area crisis; real GDP; CESEE countries; financial spillovers; CDS spreads; CESEE country; sovereign CDS; area CDS; norm decomposition; periphery country; CDS bid; CDS market liquidity condition; Credit default swap; Government debt management; Spillovers; Liquidity; Current account balance; Global; Baltics
Cover IMF Working Papers
Cross-Country Linkages in Europe: A Global VAR Analysis
Ms. Yan M Sun
,
Mr. Frigyes F Heinz
, and
Giang Ho
This paper uses the Global VAR (GVAR) model proposed by Pesaran et al. (2004) to study cross-country linkages among euro area countries, other advanced European countries (including the Nordics, the UK, etc.), and the Central, Eastern and Southeastern European (CESEE) countries. An innovative feature of the paper is the use of combined trade and financial weights (based on BIS reporting banks’ external position data) to capture the very close trade and financial ties of the CESEE countries with the advanced Europe countries. The results show strong co-movements in output growth and interest rates but weaker linkages bewteen inflation and real credit growth within Europe. While the euro area is the dominant source of economic influences, there are also interesting subregional linkages, e.g. between the Nordic and the Baltic countries, and a small but notable impact of CESEE countries on the rest of the Europe.
Keywords:
WP; CESEE country; real GDP; Nordic country; country VAR; country sample; Spillover; Global VAR; regional model; macro-financial linkages; emerging Europe; VAR model; ith economy; growth rate; Credit; Vector autoregression; Inflation; Long term interest rates; Production growth; Baltics; Europe; Western Europe; Global
Cover IMF Staff Country Reports
Former Yugoslav Republic of Macedonia: Selected Issues Paper
International Monetary Fund. European Dept.
The Macedonian labor market exhibits a high unemployment rate, yet does not demonstrate obvious and large enough constraints on the demand or supply side. Considerable achievements can be made by maintaining macroeconomic stability, attracting FDI, and closing the educational gaps. The second paper assesses ways in which the Macedonian financial sector could better contribute to growth and real convergence, taking stock of where the sector stands and its recent developments. Streamlining bankruptcy procedures, improving collateral and systematic collection and publication of real estate sales data, and revisiting the interest rate cap may serve to moderately boost credit supply.
Keywords:
ISCR; CR; bank; wage; financing; labor market; credit growth; reservation wage; private sector; Macedonian bank; financing model; credit supply; brain drain; equilibrium credit level; Credit; Wages; Commercial banks; Labor markets; Global; Eastern Europe; Europe; Central and Eastern Europe; Central Asia
Cover IMF Staff Country Reports
Republic of Slovenia: Selected Issues
International Monetary Fund
The spike in Slovenian inflation in 2007–08 has shown how structural bottlenecks may hamper Slovenian growth in the future. This Selected Issues paper investigates the role of supply factors and demand-side effects in explaining this surge. The paper concludes that the spike in Slovenian inflation in 2007–08 was a consequence of cost-push and demand-pull factors. The supply-side factors, including the spike in commodity prices and demand-pull factors related to the business cycle, explained approximately two-thirds of the surge.
Keywords:
ISCR; CR; bank; demand-pull; price; HICP inflation; inflation differential; demand-pull factor; inflation perception; Slovenian bank; fuel price; Commercial banks; Inflation; Foreign banks; Loans; Credit; Global
Cover IMF Staff Country Reports
Republic of Slovenia: 2009 Article IV Consultation: Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Slovenia
International Monetary Fund
This 2009 Article IV Consultation highlights that inflation and the current account deficit in Slovenia are expected to moderate. The main downward risks to growth are lower-than-projected growth in Europe, and a credit crunch in the event that foreign financing of domestic banks dries up. In the medium term, the main challenge is that the economy needs to emerge from the global crisis on a sustainable growth path. Executive Directors have commended the authorities for their swift and decisive policy responses to slower growth and financial sector strains.
Keywords:
ISCR; CR; deficit; staff appraisal; debt; Slovenia; policy action; development policy priority; business confidence indicators; IMF staff representative; Government finance statistics; Balance of payments statistics; Credit; Global; Europe
Cover IMF Staff Country Reports
Czech Republic, Republic of Estonia, Hungary, Republic of Latvia, Republic of Lithuania, Republic of Poland, Slovak Republic, and Republic of Slovenia: Export Structure and Credit Growth
International Monetary Fund
Of the new members entering the European Union (EU) in May 2004, several had achieved a decade of impressive export growth, expanding significantly their shares of world markets. The empirical analysis shows that over the period 1994–2004, quality and technology upgrading associated with the structural transformation were, indeed, also associated with increased market share. Several bivariate relationships to motivate an empirical framework for analyzing the evolution of market shares are ascribed. It gives the basic regressions explaining the changes in market shares for 58 countries.
Keywords:
ISCR; CR; market share; credit growth; market share gain; product quality; export share; bank soundness; Bank credit; Credit; Bank soundness; Loans; Real interest rates; Baltics; Global
Cover IMF Staff Country Reports
Republic of Slovenia: Selected Issues and Statistical Appendix
International Monetary Fund
This Selected Issues paper discusses several features of the Slovene economy that may explain the weak relationship between credit and domestic demand growth. It reviews credit growth developments in Slovenia and in selected European Union new member states, and compares their experiences with that of noncore euro area countries, including Ireland, Greece, Portugal, and Spain, before their adoption of the euro. Findings on the relationships between credit and domestic demand based on simple correlation and regression analyses are also presented.
Keywords:
ISCR; CR; credit growth; deposit; Slovenia; private sector; private sector credit; section D; growth variable; Credit-to-GDP ratio; growth measure; demand growth; Credit; Consumer credit; Mutual funds; Private consumption; Loans; Baltics