It is high time we rediscovered the role of the financial cycle in macroeconomics. In the environment that has prevailed for at least three decades now, it is not possible to understand business ...fluctuations and the corresponding analytical and policy challenges without understanding the financial cycle. This calls for a rethink of modelling strategies and for significant adjustments to macroeconomic policies. This essay highlights the stylised empirical features of the financial cycle, conjectures as to what it may take to model it satisfactorily, and considers its policy implications. In the discussion of policy, the essay pays special attention to the bust phase, which is less well explored and raises much more controversial issues.
This paper investigates the relevance of non-traditional activities in the estimation of bank efficiency levels using a sample of 752 publicly quoted commercial banks from 87 countries around the ...world, allowing comparison of the impact of such activities under different levels of economic development, geographical regions and other country characteristics. We estimate both cost and profit efficiency of banks using a traditional function that considers loans and other earnings assets as the only outputs, and two additional functions to account for non-traditional activities, one with off-balance sheet (OBS) items and the other with non-interest income as an additional output. Controlling for cross-country differences in regulatory and environmental conditions, we find that, on average, cost efficiency increases irrespective of whether we use OBS or non-interest income, although the results for profit efficiency are mixed. Our results also reveal that while the inclusion of non-traditional outputs does not alter the directional impact of environmental variables on bank inefficiency, regulations that restrict bank activities and enhance monitoring and supervision provisions improve both cost and profit efficiency.
International Comparative Household Finance Badarinza, Cristian; Campbell, John Y; Ramadorai, Tarun
Annual review of economics,
01/2016, Letnik:
8, Številka:
1
Journal Article
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This article reviews the literature on international comparative household finance. It presents summary statistics on household balance sheets for 13 developed countries and uses these statistics to ...discuss common features and contrasts across countries. It then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages.
The present study explores the effectiveness of the credit channel of monetary policy transmission in India from the perspective of magnitude, timing, and composition puzzles. To validate, further ...investigation of the effectiveness of the balance sheet channel and bank lending channel using the corporate cash flows and interest rate spreads, respectively, has been done. The study employs the structural vector autoregression model using the long-time quarterly series sample period from June 1998 to June 2022. The findings show that the anomalies concerning magnitude, timing, and composition effect do not exhibit a strong presence in the Indian context. The analysis of the weighted average call money rate and coverage ratio suggests a weak presence of the balance sheet channel in India with a weak negative correlation of 0.2943 (p < 0.05). The overall behavior of spread analysis also shows a weak presence of the bank lending channel in India. Although some presence of the bank lending channel is seen on banks’ managed liability side, the effect of external finance premium is not reflected in the lending rates with a correlation of 0.0577 (p > 0.05) between prime lending rate spread and weighted average call money rate spread. From the evidence, the study concludes the weak presence of the credit channel in India. Therefore, the monetary authorities might have to rely on other channels or may devise other unconventional mechanisms like Operation Twist and Long-Term Repo Operations observed during the COVID-19 pandemic to steer the real economy.
Insolvency of Companies in Romania Iulia Cristina Iuga; Ionela Cornelia Cioca; Teodor Hada
"Ovidius" University Annals. Economic Sciences Series (Online),
02/2024, Letnik:
XXIII, Številka:
2
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The purpose of the paper is to analyze the main aspects regarding the insolvency of companies in Romania. The main objectives considered were the theoretical presentation of the concept of ...insolvency, the principles of insolvency, legislative regulations, the report of the judicial liquidator. In the case study presented for the company X SRL, we presented some accounting records, the statement of payments and receipts, as well as information related to the liquidation balance sheet.
We find that central bank reserves injected by QE crowd out bank lending. We estimate a structural model with cross-sectional instrumental variables for deposit and loan demand. Our results are ...determined by the elasticity of loan demand and the impact of reserve holdings on the cost of supplying loans. The reserves injected by QE raise loan rates by 7.4 basis points, and each dollar of reserves reduces bank lending by 7.7 cents. Our results imply that a large injection of central bank reserves has the unintended consequence of crowding out bank loans because of bank balance sheet costs.
One of the top priorities of the Chinese government's oversight is to address the conflicts between economic growth and resource consumption and between economic development and ecological damage. In ...this regard, the advocacy and compilation of the natural resources balance sheet can boost the efficiency of the government's oversight and improve the quality of resource management. However, China's natural resources balance sheet is still at an exploratory stage, lacking the theoretical framework of balance sheet preparation, preparatory ideas, and a reporting system, which must be established urgently. First, the study states the purpose of compiling the natural resources balance sheet, and, subsequently, analyzes the theoretical basis, framework system, preparatory ideas, and sample sheet format, thereby offering theoretical and methodological support for its preparation. Moreover, the development, functions, deficits, and future development of the balance sheet are analyzed in the context of the Chinese system, which provides theoretical and methodological support for the preparation of the natural resources balance sheet and government oversight.
•National resources balance sheet has information disclosure function.•National resources balance sheet can enhance management and supervision.•National resources balance sheet can reverse ecological damage.
Recent years have seen a sharp decline in the use of balance sheet-based covenants in private debt contracts. I hypothesize that changes in accounting standards can explain part of this decline. ...Standard setting has shifted towards a “balance sheet approach”, which I predict has made the balance sheet less useful for contracting. I measure the effect of the balance sheet approach on specific borrowers using a volatility ratio. I find that borrowers with greater volatility ratios are less likely to have balance sheet-based covenants. This evidence is consistent with reductions in the contracting usefulness of the balance sheet being associated with reductions in balance sheet covenants.
▶ In recent years, balance sheet covenants are used less frequently in debt agreements. ▶ I consider the role of accounting standards in this decline. ▶ Specifically, I examine whether the shift to the “balance sheet approach” has influenced covenants. ▶ I find that accounting standards are associated with balance sheet covenant use. ▶ The same is not true of income statement covenant use, which has not changed.
Central banks often buy or sell reserves—so called FX interventions (FXIs)—to dampen sharp exchange rate movements caused by volatile capital flows. At the same time, these interventions may entail ...unintended side effects. In this paper, we investigate whether FXIs incentivize firms to take on more unhedged FX debt, thereby increasing medium-term corporate vulnerabilities. Using a novel dataset with close to 5,000 nonfinancial firms across 19 emerging markets covering 2002–2017, we find that the firm-level share of FX debt rises following intensive use of FXIs, particularly for non-exporting firms in shallow financial markets with no FX debt to begin with. The magnitude of this effect is economically significant, with one standard deviation increase in the intensity of FXI leading to an average 2 percentage points increase in the FX debt share. For reference, the median share of FX debt in the sample is zero.
•The firm-level share of FX debt rises following intensive use of FX interventions in emerging markets.•This effect is particularly pronounced for non-exporting firms in shallow financial markets with no FX debt to begin with.•The magnitude of this effect is economically significant.
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