Philippe Bacchetta, Kenza Benhima, Céline Poilly, 19 February 2015

The corporate cash ratio – the share of liquid assets in total assets – comoves with employment in the US. This column argues that disentangling liquidity shocks and credit shocks is key to understanding this comovement, and that liquidity shocks appear to be crucial. These shocks make production less attractive or more difficult to finance, while they also generate a need for internal liquidity to pay wages, which can be satisfied by holding more cash.

Chie Aoyagi, Giovanni Ganelli, 19 August 2014

Japanese corporations hold a very high level of cash on their balance sheets compared to those in other advanced countries. Such excessive corporate savings are likely to be holding back growth by preventing a more efficient use of resources. This column presents recent research showing that improving corporate governance would help unlock Japan’s corporate savings, exit deflation, and revive growth. Comprehensive corporate governance reform should be a key component of Japan’s growth strategy.

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