A Closer Look at Sectoral Financial Linkages in Brazil I: Corporations’ Financial Statements

By Izabela Karpowicz, Fabian Lipinsky, Jongho Park

March 2, 2016

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Format: Chicago

Izabela Karpowicz, Fabian Lipinsky, and Jongho Park. A Closer Look at Sectoral Financial Linkages in Brazil I: Corporations’ Financial Statements, (USA: International Monetary Fund, 2016) accessed December 22, 2024

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

Understanding the interplay between firms’ balance sheets and the macro-economic environment is important for understanding of the Brazilian economy. A close examination of developments in the nonfinancial corporate sector up to the early 2015 reveals weak equity growth, declining profitability, and rising leverage. The empirical work suggests that adverse shocks to financial variables lead to weaker real GDP growth in Brazil through their effect on corporate leverage, borrowing costs, and default frequencies. An estimation based on a DSGE model with financial frictions indicates that the recent economic downturn in Brazil is largely driven by a decrease in total factor productivity and by negative financial shocks.

Subject: Business cycles, Consumption, Economic growth, Financial statements, National accounts, Production, Productivity, Public financial management (PFM), Return on investment

Keywords: Balance sheet analysis, Business cycles, Consumption, DSGE Bayesian estimation, Emerging economies, Financial statements, Global, Leverage ratio, Leverage shock, NFC sector balance sheet vulnerability, NFCS leverage, Nonfinancial corporate, Percentage share, Productivity, Profitability indicator, Return on investment, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/045
Stock No:

WPIEA2016045
ISBN:

9781513536880
ISSN:

1018-5941

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