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Author: Mr.Jorge A Chan-Lau
Publisher: International Monetary Fund
ISBN: 1475596456
Category : Business & Economics
Languages : en
Pages : 22
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Book Description
Under adverse macroeconomic conditions, the potential realization of corporate sector vulnerabilities could pose major risks to the economy. This paper assesses corporate vulnerabilities in Indonesia by using a Bottom-Up Default Analysis (BuDA) approach, which allows projecting corporate probabilities of default (PDs) under different macroeconomic scenarios. In particular, a protracted recession and the ensuing currency depreciation could erode buffers on corporate balance sheets, pushing up the probabilities of default (PDs) in the corporate sector to the high levels observed during the Global Financial Crisis. While this is a low-probability scenario, the results suggest the need to closely monitor vulnerabilities and strengthen contingency plans.
Author: Mr.Jorge A Chan-Lau
Publisher: International Monetary Fund
ISBN: 1475596456
Category : Business & Economics
Languages : en
Pages : 22
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Book Description
Under adverse macroeconomic conditions, the potential realization of corporate sector vulnerabilities could pose major risks to the economy. This paper assesses corporate vulnerabilities in Indonesia by using a Bottom-Up Default Analysis (BuDA) approach, which allows projecting corporate probabilities of default (PDs) under different macroeconomic scenarios. In particular, a protracted recession and the ensuing currency depreciation could erode buffers on corporate balance sheets, pushing up the probabilities of default (PDs) in the corporate sector to the high levels observed during the Global Financial Crisis. While this is a low-probability scenario, the results suggest the need to closely monitor vulnerabilities and strengthen contingency plans.
Author: Dale F. Gray
Publisher: World Bank Publications
ISBN: 9780821346037
Category : Business & Economics
Languages : en
Pages : 58
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Book Description
"Once equity has fallen below a certain threshold for a significant period of time, it triggers a suspension of debt payments and distorts incentives for equity holds and managers. But what is a significant period of time? You or I could pay a $10 million annual mortgage payment for a day or two but not two or three months. Similarly, owners and managers can withstand short periods of illiquidity or negative equity but not longer ones. At some point in time, the inability to meet obligations and perception of continued difficulties creates a system-wide breakdown in debt payments." The relationship between the corporate sector and a country's macroeconomy is receiving increased attention from policymakers and investors, especially those affected by the Asian crisis. Recent crises have pointed out the importance of improving our understanding of the links between the corporate sector, the financial sector, and the macroeconomy in a world of volatile capital flows. Assessing the vulnerability of the corporate sector and its links to financial and exchange rate crisis is important for both improved surveillance and in the design of policies in crisis countries. However, the analytical and operational tools available to policymakers and investors to analyze this problem have been limited. This Technical Paper was prepared as part of an initiative to develop new frameworks which can integrate state-of-the art corporate finance principles, macroeconomic, and financial sector analysis. An innovative yet practical framework is provided which has numerous applications for assessing corporate sector vulnerability, design of corporate restructuring strategies, as well as financial sector and macroeconomic policies. It will be of interest to bankers, economic policymakers, corporate finance specialists, and macroeconomists.
Author: Bo Jiang
Publisher: International Monetary Fund
ISBN: 1498314023
Category : Business & Economics
Languages : en
Pages : 47
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Book Description
Using a new firm-level dataset with comprehensive information on Asian firms’ FX liabilities, we show that Asia’s nonfinancial corporate sector is vulnerable to a tightening of global financial conditions. Higher global interest rates and exchange rate depreciation increase the probability of default of Asian firms. A 30 percent currency depreciation is associated with a two-notch downgrade in the corporate credit rating (e.g., from A to BBB+), resulting in 7 percent of Asian firms falling into bankruptcy. But the impact is nonlinear—as the firms’ FX liability increases, the balance sheet channel of exchange rate offsets, then dominates, the competitiveness channel. The balance sheet channel offsets the competitiveness channel when the share of U.S. dollar debt is between 10 and 20 percent. We also find that currency depreciation increases firm-level investment on average, but for firms with the share of FX liabilities above 20 percent, investment contracts with depreciation.
Author: Mindaugas Leika
Publisher: International Monetary Fund
ISBN: 1484326792
Category : Business & Economics
Languages : en
Pages : 56
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Book Description
Household financial fragility has received considerable attention following the global financial crisis, but substantial gaps remain in the analytical underpinnings of household financial vulnerability assessment, as well as in data availability. This paper aims at integrating the contributions in the literature in a coherent fashion. The study proposes also analytical and estimation extensions aimed at improving the quality of estimates and allowing the assessment of household financial vulnerability in presence of data limitations. The result of this effort is a comprehensive framework, that has wide applicability to both advanced and developing economies. For illustrative purposes the paper includes a detailed application to one developing country (Namibia).
Author: Mr.Thomas Rumbaugh
Publisher: International Monetary Fund
ISBN: 1463963319
Category : Business & Economics
Languages : en
Pages : 142
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Book Description
Over the past decade, Indonesia has developed into an important regional and global economy, as well as an active participant in the G20. The chapters in this book document the substantial improvements in the quality of macroeconomic policy that Indonesia has achieved, while also clearly laying out an agenda of measures that should be taken to safeguard these gains and further lower vulnerabilities going forward. Rather than just demonstrating progress in key macroeconomic indicators, the contributors have delved into the ways that global volatility, especially since 2008, has affected Indonesia and how that country has adjusted its policies to meet the new challenges.
Author: International Monetary Fund. Asia and Pacific Dept
Publisher: International Monetary Fund
ISBN: 1513585142
Category : Business & Economics
Languages : en
Pages : 55
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Book Description
This paper focuses on the selected issues of the Indonesian economy: (1) banking sector condition in India, (2) corporate vulnerabilities, (3) analysis of macrofinancial linkages in Indonesia, and (4) infrastructure development in Indonesia. Overall, the banking sector appears well capitalized and profitable. However, rising vulnerabilities from corporate foreign currency leverage and challenging financial market conditions have raised concerns. The risk from the corporate sector remains manageable, and the authorities have strengthened the monitoring framework. Macrofinancial linkages are analyzed using two complementary approaches: sector-level balance sheet analysis and a panel vector autoregressive approach. This paper addresses macrofiscal issues surrounding infrastructure development in Indonesia.
Author: Mr.Luis E Breuer
Publisher: International Monetary Fund
ISBN: 1484355903
Category : Business & Economics
Languages : en
Pages : 336
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Book Description
Analytical work on Indonesian macroeconomic and financial issues, with an overarching theme on building institutions and policies for prosperity and inclusive growth. The book begins with a 20-year economic overview by former Finance Minister Chatib Basri, with subsequent chapters covering diverse sectors of the economy as well as Indonesia’s place in the global economy.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1455209678
Category : Business & Economics
Languages : en
Pages : 111
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Book Description
Indonesia recovered quickly after being hit hard by contagion from the global financial crisis. Banking fundamentals have improved, with most Indonesian banks reporting high capital, comfortable levels of liquidity, and solid profitability. Banks exhibit rising credit exposures to retail and SMEs. The Crisis Management Protocol functioned well during the crisis, but it has lapsed. A viable capital market will diversify the sources of funding and provide long-term investment opportunities. The small insurance industry should be restructured and gradually expanded to broaden the institutional investor base.
Author:
Publisher: Asian Development Bank
ISBN: 9292614894
Category : Business & Economics
Languages : en
Pages : 470
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Book Description
Indonesia's gross domestic product growth rate declined significantly after the Asian financial crisis (AFC) of 1997–1998. The country's potential and balance-of-payments growth rates are only about 5.5% and 3%, respectively. One important reason is that the country's industrialization pace declined after the AFC. Today, Indonesia is still exporting many unprocessed natural resources and simple manufactures (not complex products) with a low income elasticity of demand. This report analyzes how Indonesia's manufacturing sector could diversify and upgrade during 2020–2024 and beyond. This is essential if Indonesia is to attain upper middle-income status as soon as possible. Policy makers and the private sector need to collaborate to identify the coordination failures that hamper the discovery of those products that Indonesia could successfully produce and export. These must be complex products with a high income elasticity of demand. The report proposes a number of policies to expedite this process.
Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher: International Monetary Fund
ISBN: 1484303555
Category : Business & Economics
Languages : en
Pages : 59
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Book Description
This paper assesses the stability of Indonesia’s financial system. Since the 2010 Financial Sector Assessment Program, Indonesia’s macroeconomic performance has been robust and the financial system has been stable. Systemic risk is low and the banking system appears generally resilient to severe shocks. Market-based indicators point to relatively low levels of systemic risk. Under severe stress-test scenarios, banks experience sizable credit losses, particularly from corporate exposures, but high capital levels and strong profitability help absorb most of these losses. Many banks face relatively small shortfalls in liquidity stress tests, including in foreign currency, and these appear manageable for Bank Indonesia.
