Macro-Financial Implications of Corporate (De)Leveraging in the Euro Area Periphery

 
Author/Editor: Manuela Goretti ; Marcos Souto
 
Publication Date: June 26, 2013
 
Electronic Access: Free Full text (PDF file size is 1,219KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: High corporate indebtedness can pose an important threat to the adjustment processes in some of the Euro area periphery countries, through its drag on investment as well as the possible migration of private sector losses to the sovereign balance sheet. This paper examines the macroeconomic implications of corporate debt overhang in recent years, confirming empirical evidence in the literature on the relationship between a firm’s balance sheet position and its investment choices, especially beyond certain threshold levels. Building on an event study of past crisis experiences with corporate deleveraging, it also discusses the expected macro-financial impact of the ongoing deleveraging processes in these countries, presenting available policy options to facilitate an orderly balance-sheet adjustment and support a return to productivity and growth.
 
Series: Working Paper No. 13/154
Subject(s): Corporate sector | Europe | Debt burden | Euro Area | Financial crisis | Debt restructuring

 
English
Publication Date: June 26, 2013
ISBN/ISSN: 9781475577563/2227-8885 Format: Paper
Stock No: WPIEA2013154 Pages: 24
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
Please address any questions about this title to publications@imf.org