This short paper studies the empirical relationship between realized stock returns and bond <p> yields at the 5- and 10-year investment horizons, respectively. Using annual Danish data since <p> 1927, we find that stock returns and bond yields are closely linked in the medium and long <p> term, as we...</p></p></p>

Economic theory suggests that vulnerable financial conditions of the corporate sector can trigger or worsen an economy-wide recession. This paper proposes a measure of corporate vulnerability, the Corporate Vulnerability Index (CVI) and analyses whether it can explain the probability and...

Asian equity markets have grown significantly in size since the early 1990s, driven by strong international investor inflows, growing regional financial integration, capital account liberalization, and structural improvements to markets. The development of equity markets provides a more...

This paper finds that systematic default risk, or the event of widespread defaults in the corporate sector, is an important determinant of equity returns. Moreover, the market price of systematic default risk is one order of magnitude higher than the market price of other risk factors. In...

This paper explores the ability of portfolio and foreign direct investment flows to track movements in the euro and the yen against the dollar. Net portfolio flows from the euro area into U.S. stocks—possibly reflecting differences in expected productivity growth—track movements in the euro...

News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading...

The economic and financial crisis is affecting the fiscal accounts of virtually every country. Public sector support for the financial system, fiscal stimulus and the automatic stabilizers, as well as the revenue decline from the downturn in commodity and asset prices, are leading to sharp...

Using a multi-country panel of banks, we study whether better capitalized banks experienced higher stock returns during the financial crisis. We differentiate among various types of capital ratios: the Basel risk-adjusted ratio; the leverage ratio; the Tier I and Tier II ratios; and the tangible...

According to a dynamic panel estimated over 1995 - 2008 on around 80 banks in the GCC region, the NPL ratio worsens as economic growth becomes lower and interest rates and risk aversion increase. Our model implies that the cumulative effect of macroeconomic shocks over a three year horizon is...

This Article IV Consultation reports that Malta’s economy continues to perform well amidst considerable turbulence in the euro area. While spillovers have remained contained to date, Malta’s large financial sector and highly open economy heighten contagion and financial stability...