Large US household balance sheets pose macro risks

Significance An examination of the factors behind the expansion indicates that outsized balance sheets will persist and will pose a number of macroeconomic risks. Impacts Slower workforce growth will pressure GDP growth, trade growth and long-term interest rates, unless productivity gains can offset this. A record number of US business deaths and births in 2020 will affect productivity and have unpredictable impacts on the economy. Lower growth makes it harder to stabilise debt-to-GDP ratios, just as pension and health costs rise as populations age in major economies.

The pillars determining financial inclusion among SMEs in Egypt: service awareness, access and usage metrics and macroeconomic policies

Over the past decade, financial inclusion has been a trending topic and key priority in developing countries seeking to build a resilient financial sector and pursuing economic growth. Most of the recently launched financial inclusion initiatives in Egypt, especially those aligned with the 2030 sustainability strategy, have targeted marginalized and excluded individuals. Only a few have addressed the financial inclusion of small- and medium-sized enterprises (SMEs). Accordingly, this paper aims to identify the main pillars of financial inclusion for SMEs. In keeping up with the mainstream literature, it introduces a number of financial inclusion determinants designed to attract SMEs. They include supply-side determinants such as access to financial services and marketing awareness campaigns, which act as tools to segment financial services and market their benefits to SMEs, and demand-side determinants, which involve the use of financial services. Finally, there is an assessment of the macroeconomic risks to investors and SMEs. The researchers’ methodology was based on first deriving a novel dataset from responses to a questionnaire addressing bankers who manage SME portfolios, second analyzing the dataset through descriptive and inferential statistics and third undertaking a twofold econometric estimation. The econometric estimations started with principal component analysis (PCA) and proceeded to a logistic regression to determine the significant variables pertinent to increasing the financial inclusion of SMEs. The PCA suggested three main pillars determining financial inclusion. They are integrated marketing tools, which increase SMEs’ awareness of and access to the most sophisticated banking services, usage of banking services, and assessment of the macroeconomic risks that would prevent SMEs from gaining access to financial services. As well, the interaction term between the variables derived from the three pillars accounts for a variability of 86.6% in the level of financial inclusion of Egypt’s SMEs.

RISKS IN THE GRAIN MARKET OF THE SIBERIAN FEDERAL DISTRICT: CAUSES, TOOLS AND MANAGEMENT METHODS

The article presents the factors that negatively affect the development of grain production and the grain market of the Siberian Federal District (SFD). The key types of risks that have a negative impact on the development of the grain market of the SFD are presented: production, market and social. The reasons for the emergence of agroecological, technological, innovative, macroeconomic, foreign trade, commercial and social risks in the grain market of the Siberian Federal District are determined. Macroeconomic risks are represented by external and internal risks. Effective tools and methods for risk management in the grain market of the Siberian Federal District are proposed. The applied tariff barriers (the average bound tariff) and their size, which are applied by the main grain importing countries of the SFD for the commodity group «Cereals», are determined. The countries-importers of grain of the SFD applying non-tariff barriers to the commodity group «Cereals» are presented. The forecast of grain production in the SFD until 2025 is given. The article draws conclusions and presents the volume of grain export from the SFD, which will be achieved as a result of the application of the proposed tools aimed at minimizing the negative impact of risks on the grain market and the development of transport and logistics infrastructure.

Impact of idiosyncratic and macroeconomic risks on capital structure: evidence from SADC countries

PurposeThe purpose of this study is to investigate the impact of idiosyncratic and macroeconomic risks on capital structure on SADC countries.Design/methodology/approachEmploying data from the African Financials database, the analysis is conducted over a ten year period spanning from 2009 to 2018 for 309 companies. Unit Root Fisher Chi-Square test and Granger Causality test were employed to test for unidirectional and bidirectional relationships cross-sectionally. To resolve endogeneity issues, System GMM was used as main topology for panel regression analysis.FindingsThe study confirmed that companies become risk averse when there is an increase in idiosyncratic and macroeconomic risk and therefore take less leverage. According to the perking order theory, a higher variability in earnings shows that the bankruptcy probability amplifies. Hence, institutions with high income employ more internal finance during periods of high idiosyncratic and macroeconomic uncertainty thereby lowering leverage. A positive significant and statistically relationship is also confirmed between idiosyncratic risk and leverage in Botswana, South Africa and Tanzania. Companies with higher leverage make riskier investment in line with the trade-off theory. In short, executives from the SADC region consider more importance to fluctuations in risk while accelerating or diminishing leverage in their capital structure.Originality/valueThe study is among one of the pioneering work underpinning the idiosyncratic risk and macroeconomic risk on capital structure and relying on a large number of companies across the SADC region. In this respect, it adds contribution to the existing literature on risks and capital structure to the socio-economic goals of the SADC region.

CLIMATE CHANGE AND FISCAL SUSTAINABILITY: RISKS AND OPPORTUNITIES

Both the physical and transition-related impacts of climate change pose substantial macroeconomic risks. Yet, markets still lack credible estimates of how climate change will affect debt sustainability, sovereign creditworthiness and the public finances of major economies. We present a taxonomy for tracing the physical and transition impacts of climate change through to impacts on sovereign risk. We then apply the taxonomy to the UK’s potential transition to net zero. Meeting internationally agreed climate targets will require an unprecedented structural transformation of the global economy over the next two or three decades. The changing landscape of risks warrants new risk management and hedging strategies to contain climate risk and minimise the impact of asset stranding and asset devaluation. Yet, conditional on action being taken early, the opportunities from managing a net zero transition would substantially outweigh the costs.