› › Default Credit Growth And Asset Prices

The Riskiness of Credit Allocation and Financial Stability

Author : Mr.Luis Brandao-Marques

Publisher : International Monetary Fund

Page : 39 pages

File Size : 34,34 MB

Release : 2019-09-27

Category : Business & Economics

ISBN : 151351377X

Get eBook

Book Description

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson (2013)’s ISS indicator, helps predict downside risks to GDP growth and systemic banking crises, two to three years ahead. Our analysis indicates that the riskiness of credit allocation is both a measure of corporate vulnerability and of investor sentiment. Economic forecasters wrongly predict a positive association between the riskiness of credit allocation and future growth, suggesting a flawed expectations process.



Banks, Government Bonds, and Default

Author : Nicola Gennaioli

Publisher : International Monetary Fund

Page : 53 pages

File Size : 28,57 MB

Release : 2014-07-08

Category : Business & Economics

ISBN : 1498391990

Get eBook

Book Description

We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, banks increase their exposure to public bonds, especially large banks and when expected bond returns are high. At the bank level, bondholdings correlate negatively with subsequent lending during sovereign defaults. This correlation is mostly due to bonds acquired in pre-default years. These findings shed light on alternative theories of the sovereign default-banking crisis nexus.



Global Financial Stability Report, April 2018

Author : International Monetary Fund. Monetary and Capital Markets Department

Publisher : International Monetary Fund

Page : 152 pages

File Size : 18,13 MB

Release : 2018-04-18

Category : Business & Economics

ISBN : 1484338294

Get eBook

Book Description

The April 2018 Global Financial Stability Report (GFSR) finds that short-term risks to financial stability have increased somewhat since the previous GFSR. Medium-term risks are still elevated as financial vulnerabilities, which have built up during the years of accommodative policies, could mean a bumpy road ahead and put growth at risk. This GFSR also examines the short- and medium-term implications for downside risks to growth and financial stability of the riskiness of corporate credit allocation. It documents the cyclical nature of the riskiness of corporate credit allocation at the global and country levels and its sensitivity to financial conditions, lending standards, and policy and institutional settings. Another chapter analyzes whether and how house prices move in tandem across countries and major cities around the world—that is, global house price synchronicity.



Default, Credit Growth, and Asset Prices

Author : Miguel Segoviano Basurto

Publisher :

Page : 44 pages

File Size : 19,24 MB

Release : 2008

Category :

ISBN :

Get eBook

Book Description

This paper uses a Merton-type estimate of the probability of default (PoD) for the main banks in a sample of Organization for Economic Cooperation and Development and middle-income countries as a proxy for the fragility of their banking systems. Based on theory and stylized facts, the paper explores a range of financial and real variables that explain such PoDs across time. We find property price fluctuations and bank credit to be important explanatory factors. There is two-way interaction between these variables and a clearer relationship when the variables are entered as a deviation from trend. The lag structure between such developments and PoDs is long and varies widely across countries. The paper assesses the implications of these findings for economic policy.



Financial Crises in DSGE Models

Author : Mr.Jaromir Benes

Publisher : International Monetary Fund

Page : 55 pages

File Size : 50,47 MB

Release : 2014-04-04

Category : Business & Economics

ISBN : 1475515200

Get eBook

Book Description

This paper, together with a technical companion paper, presents MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of both the pre-crisis and crisis phases of financial cycles.



Global Financial Stability Report, April 2013

Author : International Monetary Fund. Monetary and Capital Markets Department

Publisher : International Monetary Fund

Page : 160 pages

File Size : 50,13 MB

Release : 2013-04-17

Category : Business & Economics

ISBN : 1475589581

Get eBook

Book Description

The Global Financial Stability Report examines current risks facing the global financial system and policy actions that may mitigate these. It analyzes the key challenges facing financial and nonfinancial firms as they continue to repair their balance sheets. Chapter 2 takes a closer look at whether sovereign credit default swaps markets are good indicators of sovereign credit risk. Chapter 3 examines unconventional monetary policy in some depth, including the policies pursued by the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank, and the U.S. Federal Reserve.



Financial Soundness Indicators for Financial Sector Stability in Viet Nam

Author : Asian Development Bank

Publisher : Asian Development Bank

Page : 117 pages

File Size : 27,69 MB

Release : 2015-09-01

Category : Business & Economics

ISBN : 9292570900

Get eBook

Book Description

Financial soundness indicators (FSIs) are methodological tools that help quantify and qualify the soundness and vulnerabilities of financial systems according to five areas of interests: capital adequacy, asset quality, earnings, liquidity, and sensitivity to market risk. With support from the Investment Climate Facilitation Fund under the Regional Cooperation and Integration Financing Facility, this report describes the development of FSIs for Viet Nam and analyzes the stability and soundness of the Vietnamese banking system by using these indicators. The key challenges to comprehensively implementing reforms and convincingly addressing the root causes of the banking sector problems include (i) assessing banks' recapitalization needs, (ii) revising classification criteria to guide resolution options, (iii) recapitalization and restructuring that may include foreign partnerships, (iv) strengthening the Vietnam Asset Management Company, (v) developing additional options to deal with nonperforming loans, (vi) tightening supervision to ensure a sound lending practice, (vii) revamping the architecture and procedures for crisis management, and (viii) strengthening financial safety nets during the reform process.



Asset Prices and Monetary Policy

Author : John Y. Campbell

Publisher : University of Chicago Press

Page : 444 pages

File Size : 21,14 MB

Release : 2008-11-15

Category : Business & Economics

ISBN : 0226092127

Get eBook

Book Description

Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.



The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions

Author : Jiri Podpiera

Publisher : International Monetary Fund

Page : 34 pages

File Size : 41,97 MB

Release : 2010-06-01

Category : Business & Economics

ISBN : 1455200573

Get eBook

Book Description

This paper attempts to identify the fundamental variables that drive the credit default swaps during the initial phase of distress in selected European Large Complex Financial Institutions (LCFIs). It uses yearly data over 2004 - 08 for 29 European LCFIs. The results from a dynamic panel data estimator show that LCFIs’ business models, earnings potential, and economic uncertainty (represented by market expectations about the future risks of a particular LCFI and market views on prospects for economic growth) are among the most significant determinants of credit risk. The findings of the paper are broadly consistent with those of the literature on bank failure, where the determinants of the latter include the entire CAMELS structure - that is, Capital Adequacy, Asset Quality, Management Quality, Earnings Potential, Liquidity, and Sensitivity to Market Risk. By establishing a link between the financial and market fundamentals of LCFIs and their CDS spreads, the paper offers a potential tool for fundamentals-based vulnerability and early warning system for LCFIs.



Financial Crises Explanations, Types, and Implications

Author : Mr.Stijn Claessens

Publisher : International Monetary Fund

Page : 66 pages

File Size : 42,75 MB

Release : 2013-01-30

Category : Business & Economics

ISBN : 1475561008

Get eBook

Book Description

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.