Fiscal Stimulus Impact on Firms’ Profitability During the Global Financial Crisis
Higher deficits came alongside improving corporate profitability in the recession era, new International Monetary Fund research shows. A fiscal impulse that increased the structural deficit by 1 percent of potential gross domestic product is associated with a rise in the ratio of corporate profits to assets of around 0.3 percentage point -- enough to be potentially “instrumental in raising subdued private investment.” That means government spending can be an effective salve when central banks are low on crisis-fighting ammunition. The authors look at financial statements for 52 advanced and emerging economies in 2009 and 2010.
UBS Global Economic Outlook 2019-2020
The idea that this business cycle is entering its final innings doesn’t hold up empirically, UBS economists say. Looking at 40 countries over about four decades, they determine that data in the U.S., euro area and Japan are behaving in ways inconsistent with prior peaks. “We never have employment growth accelerating sharply into a recession as employment is doing in Japan,” the write. And U.S. housing indicators “normally fall much more sharply” just before a decline.
This story provided by Bloomberg News.