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This paper aims to find out significant macroeconomic variables, incorporated as sensitivity variables (macroeconomic sensitivities), affecting financial distress for a sample of listed Indian firms.

The study uses a matched pair sample of defaulting and non-defaulting listed Indian firms. It uses two alternative statistical techniques, viz., logistic regression and multiple discriminant analysis. The macroeconomic sensitivities are estimated by regressing the monthly stock return of the individual firm on the monthly changes in each macroeconomic variable.

Sensitivity to changes in the stock market (stock market sensitivity) and sensitivity to changes in inflation [Consumer Price Index (CPI) sensitivity] have a significant impact on the default probability of a firm. Stock market sensitivity has a significant positive relationship with the probability of default, and CPI sensitivity has a significant negative relationship with the probability of default.

The study links the developments in the external environment to the firm’s susceptibility to default. Furthermore, it highlights the significance of sensitivity of a firm to uncertainties in the macroeconomic environment and its impact on default risk. This establishes the fact that each firm is uniquely affected by the changes in the overall macroeconomic environment. The findings could be valuable to lenders such as banks and financial institutions, investors and policymakers.

The purpose of this paper was to construct a canonical correlation analysis (CCA) model for the Zimbabwe stock exchange (ZSE). This paper analyses the impact of macroeconomic variables on stock returns for the Zimbabwe Stock Exchange using the canonical correlation analysis (CCA).

Data for the independent (macroeconomic) variables and dependent variables (stock returns) were extracted from secondary sources for the period from January 1990 to December 2008. For each variable, 132 sets of data were collected. Eight top trading companies at the ZSE were selected, and their monthly stock returns were calculated using monthly stock prices. The independent variables include: consumer price index, money supply, treasury bills, exchange rate, unemployment, mining and industrial index. The CCA was used to construct the CCA model for the ZSE.

Maximization of stock returns at the ZSE is mostly influenced by the changes in consumer price index, money supply, exchange rate and treasury bills. The four macroeconomic variables greatly affect the movement of stock prices which, in turn, affect stock returns. The stock returns for Hwange, Barclays, Falcon, Ariston, Border, Caps and Bindura were significant in forming the CCA model.

During the research period, some companies delisted due to economic hardships, and this reduced the sample size for stock returns for respective companies.

The results from this research can be used by policymakers, stock market regulators and the government to make informed decisions when crafting economic policies for the country. The CCA model enables the stakeholders to identify the macroeconomic variables that play a pivotal role in maximizing the strength of the relationship with stock returns.

Macroeconomic variables, such as consumer price index, inflation, etc., directly affect the livelihoods of the general populace. They also impact on the performance of companies. The society can monitor economic trends and make the right decisions based on the current trends of economic performance.

This research opens a new dimension to the study of macroeconomic variables and stock returns. Most studies carried out so far in Zimbabwe zeroed in on multiple regression as the central methodology. No study has been done using the CCA as the main methodology.

The purpose of this study is to empirically examine the extent to which volatility associated with corporate performance could be attributed to specific adverse macroeconomic conditions in a bivariate causality analysis.

The study uses the Toda–Yamamoto Wald test approach to Granger causality analysis in verifying significant causal interactions if any, between corporate performance volatility and seven macroeconomic conditions or variables.

This study finds that economic policy uncertainty and macroeconomic uncertainty tend to have bidirectional causal interaction with corporate performance volatility. In addition, estimated results further suggest significant unidirectional causal interaction between corporate performance volatility and inflation expectations, exchange rate volatility, inflation and inflation uncertainty, with direction of causality running from the macroeconomic variables toward corporate performance volatility. This study, however, found no significant causal interaction between corporate performance volatility and recessionary probability or likelihood of recession.

This study’s conclusions could have significant and critical policy implications for key corporate policymakers responsible for corporate performance strategy. Various causal interactions identified could inform policy framework and, subsequently, strategies geared toward minimizing volatility associated with performance during episodes of any of the various macroeconomic conditions examined in this study.

The uniqueness of this study stems from its focus on corporate performance volatility instead of corporate performance and potential causal interactions it might have with key adverse macroeconomic conditions, some of which have not been examined in previous studies according to reviewed literature.

This study examines how specific micro-level macroeconomic indicators influence corporate performance volatility among US corporate bodies in the short run.

The study employs error correction autoregressive distributed lagged (ARDL) model (ECM) to examine how micro-level variables influence volatility associated with corporate performance in the short run.

This paper finds that disaggregated or micro-level variables examined, tend to exhibit features that are not readily apparent from the aggregate variable from which such variables are derived. For instance, reported empirical estimate suggests that, growth in expenditures on services and nondurable goods tend to lower volatility associated with corporate performance, whereas government expenditures and expenditures on durable goods rather worsens volatility associated with corporate performance, all things being equal. Additionally, presented empirical estimates further provide evidence suggesting that macroeconomic uncertainty and inflation uncertainty significantly moderate or influence the extent to which disaggregated variables impact corporate performance volatility.

Compared to related studies in the reviewed literature, this study rather examines volatility associated with corporate performance instead of the corporate performance indicator itself. Additionally, this paper also examines how disaggregated variable instead of aggregate variables impact such volatility. Finally, the moderating role of key macroeconomic conditions in such a relationship is also examined.

This study aims to analyze the imbalances in the public finance structure of Pakistan’s economy and highlight the need for comprehensive reforms. Specifically, it aims to contribute to the empirical literature by analyzing the relationship between fiscal vulnerability, financial stress and macroeconomic policies in Pakistan’s economy between 1971 and 2020.

The study develops an index of fiscal vulnerability, an index of financial stress and an index of macroeconomic policies. The fiscal vulnerability index is based on the patterns of fiscal indicators resulting from past trends of the selected variables in Pakistan’s economy. The financial stress in Pakistan is caused from the financial disorders that are acknowledged in the composite index, which is based on variables with the potential to indicate periods of stress stemming from the foreign exchange market, the securities market and the monetary policy components. The macroeconomic policies index is developed to analyze the mechanism through which fiscal vulnerability and financial stress have influenced macroeconomic policies in Pakistan. The causal association between fiscal vulnerability, financial stress and macroeconomic policies is analyzed using the auto-regressive distributive lags approach.

There exists a long-run relationship between the three indices, and a bi-directional causality between fiscal vulnerability and macroeconomic policies.

This study contributes to the development of a fiscal monitoring mechanism, which has the basic purpose of analyzing the refinancing risk of public liabilities. Moreover, it focuses on fiscal vulnerability from a macroeconomic perspective. The study tries to develop a framework to assess fiscal vulnerability in light of “The Risk Octagon” theory, which focuses on three risk components: fiscal variables, macroeconomic-disruption-associated shocks and non-fiscal country-specific variables. The initial contribution of this work to the literature is to develop a framework (a fiscal vulnerability index, financial stress index and macroeconomic policies index) for effective and result-oriented macro-fiscal surveillance. Moreover, empirical literature emphasized and advised developing countries to develop their own capacity mechanisms to assess their fiscal vulnerability in light of the IMF guidelines regarding vulnerability assessments. This study thus attempts to fulfill the said gap identified in literature.

The study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions among economies in sub-Saharan Africa (SSA).

Data for the empirical inquiry were compiled from 35 SSA economies from 1996 to 2019. The empirical estimates were carried out using pooled ordinary least squares (POLS) with Driscoll and Kraay’s (1998) standard errors.

Reported empirical estimates show that macroeconomic risk and exchange rate volatility constrain the efficiency of financial institutions. Further results suggest that inflation uncertainty has a significant influence on the efficiency of financial institutions among economies in the subregion. Additionally, reviewed empirical estimates show that institutional quality positively moderates the nexus between inflation uncertainty and financial institution efficiency. At the same time, political instability is found to worsen the adverse effect of macroeconomic risk on the efficiency of financial institutions.

For policymakers and governments, improved institutional structures are recommended to ensure the operational efficiency of financial institutions, especially during an inflationary period. For decision-makers among financial institutions, the study recommends policies that have the potential to make their institutions less vulnerable to macroeconomic risk and exchange rate fluctuations.

The approach adopted in this study differs significantly from related studies in that the study examines and reviews interactions and relationships not readily found in the reviewed literature.

The purpose of this paper is to examine how specific macroeconomic indicators and conditions impact short- and long-run loan delinquency rates among US commercial banks under various economic episodes.

The study employs an autoregressive distributed lag framework (ARDL) and error correction model in its examination of how loan delinquency rates are impacted by specific macroeconomic variables and conditions.

This study finds that in both the short and long run, a percentage growth in macroeconomic indicators, such as industrial productivity and private domestic investments, reduces loan delinquency rates among commercial banks, given all things being equal. Additionally, this study also finds that adverse macroeconomic conditions, such as inflation, economic policy uncertainty and volatility, associated with specific macroeconomic variables, such as investment growth, etc., tend to worsen loan delinquency rates. Empirical results further suggest that among the various macroeconomic conditions examined, inflationary pressures tend to have the most significant heightening impact on loan delinquency rates among commercial banks.

The uniqueness of this study, compared to similar studies found in the literature, has to do with its verification of potential association between loan delinquency rates and specific hitherto unexamined macroeconomic conditions. Compared to similar studies on loan delinquency, this study collectively examines how conditions of uncertainty, volatility and expectations of macroeconomic conditions shape loan delinquency rates among commercial banks.

The equity premium of the S&P 500 index is explained in this paper by several variables that can be grouped into fundamental, behavioral, and macroeconomic factors. We hypothesize that the statistical significance of these variables changes across economic regimes. The three regimes we consider are the low‐volatility, medium‐volatility, and high‐volatility regimes in contrast to previous studies that do not differentiate across economic regimes. By using the three‐state Markov switching regime econometric methodology, we confirm that the statistical significance of the independent variables representing fundamentals, macroeconomic conditions, and a behavioral variable changes across economic regimes. Our findings offer an improved understanding of what moves the equity premium across economic regimes than what we can learn from single‐equation estimation. Our results also confirm the significance of momentum as a behavioral variable across all economic regimes

Large or increasing stocks of non-performing loans in the banking sector constitute threats to financial stability. This paper considers to which extent various macroeconomic and macro-financial factors may serve as leading indicators for the dynamics of the ratio of non-performing loans to total loans.

The paper estimates panel data models for all EU countries and two groups of EU countries using quarterly data over approximately 20 years.

The estimations show that many macroeconomic and macro-financial variables are leading indicators for non-performing loans in the EU countries, even years ahead. Higher GDP growth, lower inflation and lower debt are robust leading indicators of a lower ratio of non-performing loans in the future. The current account balance and real house prices are important indicators for the Western European group but not for the Central and Eastern European group.

The estimations are carried out for panels of EU countries and the effects may hence be seen as averages for the countries in the particular panel and may not apply for individual countries.

National and international authorities have brought in systems to detect and address imbalances and emerging problems in the financial sectors. Many of the measures operate with long lags, and so it is important to assess whether various macroeconomic and macro-financial variables may serve as leading indicators for future developments of non-performing loans.

The main contribution of the paper is that it estimates models meant expressly for predicting non-performing loans several years ahead. The results are thus of practical use for national and international authorities which typically have access to measures that operate with a long delay. The analysis also includes more macroeconomic and macro-financial variables as leading indicators than have typically been used in earlier studies.

The objective of this paper is to explore the sensitivity of industry‐specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry‐specific South African stock market indices and evaluates the sensitivity of these indices to various unanticipated macroeconomic shocks.

The authors begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian vector autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing them to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR.

The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data, however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.

To the best of the authors' knowledge, this is the first study conducted on South Africa which analyses the impact of a wide range of unanticipated macroeconomic shocks on stock returns. This paper improves on earlier efforts by using measures of monetary policy, as well as other macroeconomic news, which more cleanly isolates the unanticipated elements of the monetary policy variable and other macroeconomic indicators, in studying the impact of these surprises on stock returns in South Africa.