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KDI 경제교육·정보센터

ENG
  • 경제배움
  • Economic

    Information

    and Education

    Center

한국관련자료
Corporate Sector Vulnerabilities and High Levels of Interest Rates
IMF
2025.01.16
This paper provides a comprehensive overview of corporate sector vulnerabilities that have emerged post-pandemic. The main focus in on the financial stability implications from corporate sector vulnerabilities in a new environment of high interest rates.

The main findings of the paper are as follows. First, the paper finds that interest rate increases may transmit more strongly to the real economy in the current environment since the global share of financially distressed firms has been trending upwards, especially in emerging markets (EMs). Moreover, the lagged effects of past monetary policy tightening may have adverse effects on firms’ capacity to invest. Second, an adverse macroeconomic scenario of negative demand shocks coupled with higher interest rates would lead to a fast and large increase in corporate defaults. Financial stability risks would increase materially, especially for EMs and less-developed banking systems, as bank capital buffers would fall considerably in this scenario. Third, the increasing role of nonbanks in corporate credit intermediation in advanced economies may amplify overall financial stability risks. This paper closes some of the data gaps and shows that since the GFC, nonbanks have been increasing their exposure to riskier firms and to the less productive segment of the economy, including zombie firms and nontradable firms. The migration of credit to the unregulated sector raises concerns about the propagation of risks to the rest of the financial system from a potential corporate default cycle. It is paramount to continue closing data gaps in this sector, while extending the regulatory perimeter to nonbanks to improve the overall resilience of the financial sector.

Finally, the paper documents some progress on insolvency and restructuring regimes to deal with corporate distress since the pandemic.