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Did the Euro Crisis Affect Non-Financial Firm Stock Prices Through a Financial or Trade Channel?

Author/Editor: Stijn Claessens | Hui Tong | Igor Zuccardi
Authorized for Distribution: September 1, 2011
Electronic Access: Free Full Text (PDF file size is 1,839KB)
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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: This paper analyzes through what channels the euro crisis has affected firm valuations globally. It examines stock price responses over the past year for 3045 non-financial firms in 16 countries to three key crisis events. Using pre-crisis benchmarks, it separates effects arising from changes in external financing and trade conditions and examines how bank and trade linkages propagated effects across borders. It finds that policy measures announced impacted financially-constrained firms more, particularly in creditor countries with greater bank exposure to peripheral euro countries. Trade linkages with peripheral countries also played a role, with euro exchange rate movements causing differential effects.
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Series: Working Paper No. 11/227
Subject(s): Corporate sector | Sovereign debt | Spillovers | Stock prices
Author's keyword(s): Euro crisis; non-financial firms; financial channel; trade channel
    Published:   September 1, 2011        
    ISBN/ISSN:   9781463904951/1018-5941   Format:   Paper
    Stock No:   WPIEA2011227   Pages:   40
    Price:   US$18.00
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