Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

World Bank Group President David Malpass spoke about the Coronavirus (COVID-19) pandemic and economic shutdowns that are causing the world's deepest recession since World War II and the first major recession in ASEAN countries since the 1997 Asian devaluation crisis. He mentioned that women are faring worse in the crisis than men across most countries and across several dimensions including loss of jobs, decline in remittances, food insecurity, and the heavy burden of caregiving responsibilities. He explained that the World Bank Group has moved rapidly to deploy its full financial capacity with much of it going to the poorest countries and to private sectors for trade finance and working capital. He highlighted that the World Bank made available up to twelve billion US dollars of fast-track financing to client countries for them to choose, purchase and deploy Coronavirus (COVID-19) vaccine. He spoke about the DSSI debt service suspension initiative, which he called a good first step, but the relief so far has been less than anticipated because not all creditors participated. The World Bank Group is working on effective approaches for debt reduction and debt resolution to address low income countries' unsustainable debt burdens. Countries will need to prepare for a different economy post-COVID, by allowing capital, labor, skills and innovation to move into new businesses and sectors. The World Bank strongly supports trade facilitation measures to encourage greater flows across borders.

Capital Markets and Capital Flows --- Coronavirus --- COVID-19 --- Finance and Development --- Finance and Financial Sector Development --- Poverty --- Trade Facilitation

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper examines the influence of sovereign credit ratings and relative risk ratings on private capital flows to 26 emerging and frontier market economies, using quarterly data for 1998-2017. A dynamic panel regression model is used to estimate the relationship between ratings and capital flows after controlling for other factors that can influence capital flows, such as growth and interest rate differentials and global risk conditions. The analysis finds that while absolute ratings were an important determinant of net capital inflows prior to the global financial crisis in 2008, the influence of relative risk ratings increased in the post-crisis period, which was characterized by easy monetary policies and global liquidity, on the one hand, and greater caution and discretion on the part of investors on the other. The post-crisis effect of relative ratings appears to be driven mostly by portfolio flows. These findings imply that emerging and frontier markets need to pay greater attention to their relative economic performance and not just their sovereign ratings. Tracking changes in relative ratings could help predict macroeconomic disturbances resulting from volatile portfolio capital movements.

Capital Flows --- Capital Markets and Capital Flows --- Debt Markets --- Emerging Market Economies --- Emerging Markets --- External Debt --- Frontier Markets --- Private Capital Flows --- Sovereign Bond Market --- Sovereign Credit Rating

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper analyzes the main trends and patterns of nominal lending interest rates and lending-deposit interest rate spreads in emerging markets and developing economies. Using data from 140 emerging markets and developing economies, analysis shows that nominal lending rates and spreads declined between 2003 and 2017, with regional heterogeneity. In addition, it finds that less economically and financially developed countries tend to exhibit higher lending rates and spreads. These higher rates tend to be driven by higher spreads, not deposit interest rates. Also, illustrative regressions suggest that relevant correlates of nominal lending rates include inflation, public debt, and policy interest rate (macro-fiscal conditions); overhead costs, nonperforming loans, and non-interest income (banking characteristics); and credit bureau coverage and time to resolve insolvency (business environment). Finally, illustrative decompositions of the level and 10-year change between 2007 and 2017 of nominal lending rates find relative differences across regions. On the decline of nominal interest rates in that decade, rising public debt and nonperforming loans have pushed rates up, which was counterbalanced by a reduction in inflation, the policy interest rate, and overhead costs and a better business environment. Since the global financial crisis, a common global factor has increased in importance and has contributed to the downward trend in nominal lending rates.

Capital Markets and Capital Flows --- Emerging Market Economies --- Finance and Financial Sector Development --- Inflation --- Interest Spread --- Lending Rates --- Macroeconomics and Economic Growth --- Spreads

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms' relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from "hibernating," using the minimum bare cash necessary to withstand the pandemic, while using credit to remain alive until the crisis subdues. Fourth, the existing legal and regulatory infrastructure is ill-equipped to deal with an exogenous systemic shock such as this pandemic. Financial sector policies can help increase the provision of credit, while posing difficult choices and trade-offs.

Access to Finance --- Bankruptcy --- Bankruptcy and Resolution of Financial Distress --- Capital Markets and Capital Flows --- Cash Crush --- Coronavirus --- COVID-19 --- Credit Risk --- Economic Crisis --- Financial Crisis Management and Restructuring --- Financial Policy --- Financial Structures --- Pandemic Response --- Small and Medium Size Enterprise

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper aims to fill a gap in the literature on capital formation in China by estimating the capital stock in four economic sectors: business, infrastructure, government, and housing. Such a breakdown is necessary for the purpose of analysis of economic development in China, as the normal models of economic development are based on a competitive economy, which is clearly not the case for the country's infrastructure and government sectors. Moreover, the contribution of housing to gross domestic product in China is very poorly measured. Although the results of this analysis can only be approximate, as the required detailed information for a better estimate is not published, they nonetheless suggest that there has not been overinvestment in the Chinese business sector - its capital-output ratio has risen only slightly over the past 40 years. Yet, there have been surges in the stocks of housing and infrastructure in the past decade. These sectors account nearly all the recent increase in the capital-output ratio in China.

Capital Markets --- Capital Markets and Capital Flows --- Capital Stock --- Depreciation Rate --- Finance and Financial Sector Development --- Fixed Asset Investment --- Fixed Capital Formation --- Housing Finance --- Incremental Capital-Output Ratio --- Investment and Investment Climate --- Macroeconomics and Economic Growth --- Urban Development --- Urban Housing