A Financial Conditions Index for South Africa
A Financial Conditions Index for South Africa

Author: Mr.Nombulelo Gumata

Publisher: International Monetary Fund

Published: 2012-08-01

Total Pages: 20

ISBN-13: 1475505450

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The main purpose of this paper is to construct a financial conditions index (FCI) for South Africa. The analysis extracts the index by applying two alternative approaches (principal component analysis and Kalman filter), which identify an unobservable common factor from a group of external and domestic financial indicators. The alternative estimated FCIs, which share a similar trajectory over time, seem to have a powerful predictive information for the near-term GDP growth (up to four quarters), and they outperform the South African Reserve Bank’s (SARB) leading indicator as well as individual financial variables. Their recent dynamics suggest that following a strong recovery in late-2009 and 2010, reflecting in part domestic factors such as systematic reductions in the policy rate, the rebound in real economic activity, and a benign inflationary environment, the financial conditions have deteriorated in recent months, though not as sharply as in end-2008. Given their relatively high predictive power regarding GDP growth, a further deterioration may imply that economic activity is likely to slow in the period ahead.

A Financial Conditions Index for Poland
A Financial Conditions Index for Poland

Author: Giang Ho

Publisher: International Monetary Fund

Published: 2013-12-19

Total Pages: 16

ISBN-13: 1475540647

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This paper constructs a financial conditions index for Poland to explore the link between financial conditions and real economic activity. The index in constructed by applying two complementary approaches—factor analysis and vector auto-regression approach. We evaluate the index’s forecasting performance against a composite leading indicator developed by the OECD. We found that the FCI is highly correlated with GDP growth, attesting to the importance of financial sector in Poland’s economy. In-sample and out-of-sample forecasting exercises indicate that the FCI can outperform the CLI in predicting near-term GDP growth.

A Financial Conditions Index for Greece
A Financial Conditions Index for Greece

Author: Mr.Jonathan F Manning

Publisher: International Monetary Fund

Published: 2015-10-02

Total Pages: 29

ISBN-13: 1513520237

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We construct a Financial Conditions Index (FCI) for Greece as a surveillance tool to quantify the degree of the stress in the financial sector. We use principal component analysis to capture the information content of several financial indicators through a single index. We also construct an alternative FCI by purging the business cycle and monetary policy effects on the input variables, and argue that this alternative index is a better indicator of exogenous financial shocks, and thus could be interpreted as a measure of the efficacy of transmission mechanism. We replicate the index for the euro area (EA) as a whole and show that although the developments in the EA were qualitatively in line with those in Greece, they were quantitatively much milder. Our results confirm that monetary transmission was less effective in Greece compared to the EA as a whole. Finally, we argue that our index can be a potentially useful forecasting tool for credit growth.

The Riskiness of Credit Allocation and Financial Stability
The Riskiness of Credit Allocation and Financial Stability

Author: Mr.Luis Brandao-Marques

Publisher: International Monetary Fund

Published: 2019-09-27

Total Pages: 39

ISBN-13: 151351377X

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We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson (2013)’s ISS indicator, helps predict downside risks to GDP growth and systemic banking crises, two to three years ahead. Our analysis indicates that the riskiness of credit allocation is both a measure of corporate vulnerability and of investor sentiment. Economic forecasters wrongly predict a positive association between the riskiness of credit allocation and future growth, suggesting a flawed expectations process.

Mauritius
Mauritius

Author: International Monetary Fund. African Dept.

Publisher: International Monetary Fund

Published: 2019-04-29

Total Pages: 41

ISBN-13: 1498311997

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This Selected Issues paper develops a Financial Conditions Index (FCI) for Mauritius—an instrument to gauge the operational state of the financial sector and predict real economy activity. The evolution of Mauritius’ financial services sector has been supported by a vibrant offshore corporate sector. Given the strong macro-financial linkages, it is imperative to closely monitor domestic financial developments. Financial developments are broader than monetary developments depicting money supply and interest rates. The FCI is a robust predictor of real GDP growth in Mauritius. The FCI can also help inform macroprudential policy decisions. Decisions on setting the countercyclical capital buffer of Basel III could be informed by analyzing developments in the FCI. As historically Mauritius has not experienced drastic swings in financial credit, testing the constructed FCIs for predicting boom-bust episodes is difficult. Nevertheless, the FCI signaled lax financial conditions in 2009 and again in 2012 that likely contributed to accelerated credit growth in 2012–2013 and a subsequent acceleration in nonperforming loans during 2014–2016.

Doing Business 2020
Doing Business 2020

Author: World Bank

Publisher: World Bank Publications

Published: 2019-11-21

Total Pages: 254

ISBN-13: 1464814414

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Seventeen in a series of annual reports comparing business regulation in 190 economies, Doing Business 2020 measures aspects of regulation affecting 10 areas of everyday business activity.

South Africa
South Africa

Author: International Monetary Fund. African Dept.

Publisher: International Monetary Fund

Published: 2014-12-11

Total Pages: 47

ISBN-13: 1484313623

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This Selected Issues paper estimates the potential growth rate for South Africa using different methodologies. In line with existing studies and findings for other emerging markets, the paper finds that South Africa’s potential growth rate has declined in the post global financial crisis period. Though there is substantial uncertainty, South Africa’s potential growth is estimated to have fallen from an average of 3.5 to 4 percent during 2000–08 to 2.25 to 2.50 percent in 2010–14, implying that the output gap in 2014 would be between –0.5 and –1.3 percent of GDP.

Finance in Africa
Finance in Africa

Author: European Investment Bank

Publisher: European Investment Bank

Published: 2023-10-11

Total Pages: 209

ISBN-13: 9286156049

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The Finance in Africa report emphasises the challenges faced by the African banking sector — including the impact of recent shocks, such as the COVID-19 crisis and Russia's invasion of Ukraine — and the importance of gender diversity in business and banking. The report also discusses the need for international support and sustainable finance to advance economic development and climate change in Africa. It provides insights into the financial conditions, banking sector performance, and investment trends in the region. It covers the nature of climate finance flows in Africa and the degree of climate risk on bank balance sheets. With the right measures in place, Africa has the potential to overcome its challenges and unlock its true economic potential.

Financial Soundness Indicators for Financial Sector Stability in Viet Nam
Financial Soundness Indicators for Financial Sector Stability in Viet Nam

Author: Asian Development Bank

Publisher: Asian Development Bank

Published: 2015-09-01

Total Pages: 117

ISBN-13: 9292570900

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Financial soundness indicators (FSIs) are methodological tools that help quantify and qualify the soundness and vulnerabilities of financial systems according to five areas of interests: capital adequacy, asset quality, earnings, liquidity, and sensitivity to market risk. With support from the Investment Climate Facilitation Fund under the Regional Cooperation and Integration Financing Facility, this report describes the development of FSIs for Viet Nam and analyzes the stability and soundness of the Vietnamese banking system by using these indicators. The key challenges to comprehensively implementing reforms and convincingly addressing the root causes of the banking sector problems include (i) assessing banks' recapitalization needs, (ii) revising classification criteria to guide resolution options, (iii) recapitalization and restructuring that may include foreign partnerships, (iv) strengthening the Vietnam Asset Management Company, (v) developing additional options to deal with nonperforming loans, (vi) tightening supervision to ensure a sound lending practice, (vii) revamping the architecture and procedures for crisis management, and (viii) strengthening financial safety nets during the reform process.