Political Influence and Financial Flexibility: Evidence from China
Journal of Banking & Finance,
This paper investigates how political influence affects firms’ financial flexibility and speed of adjustment toward target leverage ratios. We find that at the macro level, firms in environments with high political advantages, proxied by provincial affiliations with heads of state as well as political status and party rank of provincial leaders, adjust faster. At the micro level, firms that are state-owned, have CPC members as executives, or bear low exposure to changes in political uncertainty adjust faster. When interacted, the micro-level political factors have more significant impact.
13.12.2018 • 21/2018
Economic activity in the world and in Germany is losing momentum
In the second half of 2018, the upturn of the German economy has stalled. Production of the automotive industry declined because of delays in switching production to WLTP compliant cars. Irrespectively of this, the German export business has been weakening since the beginning of the year, since the global economy, burdened by the political uncertainties surrounding trade conflicts, the impending Brexit and the conflict over the Italian budget, was unable to keep up with the high momentum of 2017. “It is to be expected that the less benign external environment will not only dampen exports, but will also impact on companies’ investment and hiring decisions”, says Oliver Holtemöller, head of the Department Macroeconomics and vice president at Halle Institute for Economic Research (IWH). Gross domestic product is expected to increase by 1.5% in 2018 and by 1.4% in 2019, which is roughly equal to the growth rate of economic capacity in Germany.
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China’s Monetary Policy Communication: Frameworks, Impact, and Recommendations
IMF Working Paper No. 18/244,
Financial markets are eager for any signal of monetary policy from the People’s Bank of China (PBC). The importance of effective monetary policy communication will only increase as China continues to liberalize its financial system and open its economy. This paper discusses the country’s unique institutional setup and empirically analyzes the impact on financial markets of the PBC’s main communication channels, including a novel communication channel. The results suggest that there has been significant progress but that PBC communication is still evolving toward the level of other major economies. The paper recommends medium-term policy reforms and reforms that can be adopted quickly.