Corporate balance sheet adjustment: stylized facts, causes and consequences
AbstractUsing national account data, we define corporate balance sheet adjustment episodes as periods during which major increases in non-financial corporations' net lending/borrowing are experienced. An analysis of such episodes in Germany and Japan, and a more systematic exploration of a sample of 30 countries, show that corporate balance sheet adjustment tends to be long lasting and associated with significant effects on current accounts, wages and investment. The adjustment is generally achieved by reducing investment and increasing savings on the back of a falling wage share. A panel econometric exercise shows that balance sheet adjustment periods are triggered by macroeconomic downturns as well as balance sheet stress due to high debt, low liquidity and negative equity price shocks.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 449.
Length: 28 pages
Date of creation: Feb 2012
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Other versions of this item:
- Eric Ruscher & Guntram B. Wolff, 2013. "Corporate Balance Sheet Adjustment: Stylized Facts, Causes and Consequences," Review of Economics, Lucius & Lucius, vol. 64(2), pages 117-138.
- Guntram B. Wolff & Eric Ruscher, 2012. "Corporate balance sheet adjustment: stylized facts, causes and consequences," Working Papers 696, Bruegel.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-10 (All new papers)
- NEP-BEC-2012-04-10 (Business Economics)
- NEP-EUR-2012-04-10 (Microeconomic European Issues)
- NEP-MAC-2012-04-10 (Macroeconomics)
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- Cussen, Mary & O'Leary, Brídín, 2013. "Why are Irish Non-Financial Corporations so Indebted?," Quarterly Bulletin Articles, Central Bank of Ireland, pages 104-118, January.
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