Reports   Abroad

4/11/2018

IMF, Global Financial Stability Report

“Credits allocated to firms display an increase when financial conditions are looser. Loose financial conditions result with the allocation of riskier credits. An increase in the riskiness of credit allocation signals heightened downside risks to GDP growth and a higher probability of banking crises.“

The International Monetary Fund (IMF) has also published the 2 chapters of the Global Financial Stability Report prior to the Spring Meetings of the IMF and the World Bank. These sections are published under the headings of “The Riskiness of Credit Allocation: A Source of Financial Vulnerability?” and “House Price Synchronization: What is the Role of Financial Factors?”

The findings of IMF are quoted as follows upon analytical studies conducted on these sections:

• Credits allocated to firms display an increase when financial conditions are looser. Loose financial conditions result with the allocation of riskier credits. Risky credits started to be in a rise a few years before the financial crisis in 2007-2008 and reached a record level just before the crisis.
• Risky credits that declined sharply after the financial crisis once more increased in 2017. An increase in the riskiness of credit allocation signals heightened downside risks to GDP growth and a higher probability of banking crises. Thus, a riskier allocation of corporate credit is an independent source of financial vulnerability.

About the synchronized increase in housing prices in developed and developing countries

• Housing prices increased in line with expansive monetary policies and loose financial conditions in a number of developed and developing countries as a sequel of global economic recovery. It accordingly brings forth certain risks.
• An abrupt change in financial conditions can unpredictably lower housing prices as the synchronized increase in house prices result from global financial conditions and not from local conditions.