# Contents

|1<br>Int|roduction .......................................................................................................................................... 3|
|---|---|
|2<br>Lit|erature Review .................................................................................................................................. 5|
|3<br>Em|pirical Approach ............................................................................................................................... 6|
|3.1|IFC Investment Activity ................................................................................................................. 6|
|3.2|Countries Output Series ................................................................................................................ 7|
|3.3|Extracting Cycles for Correlation Analysis ..................................................................................... 7|
|4<br>Ev|idence of IFC Investment Cyclicality .................................................................................................. 8|
|4.1|IFC Investment Cyclicality before and after the Global Financial Crisis ........................................ 9|
|4.2|Regional Comparison .................................................................................................................. 10|
|4.3|Sectoral Comparison ................................................................................................................... 11|
|5<br>Im|plications of Investment Procyclicality for IFC Operations ............................................................. 12|
|5.1|Potential Drivers of Procyclicality ............................................................................................... 12|
|5.2|Investment Cyclicality and Financial Performance ..................................................................... 15|
|6<br>Co|ncluding Remarks, Next Steps and Areas for Further Analysis ....................................................... 17|
|Referen|ces .................................................................................................................................................. 19|
|Append|ix ..................................................................................................................................................... 21<br>|
|A1.|Time series decomposition: Seasonal adjustment ..................................................................... 21|
|A2.|Time series decomposition: De-trending .................................................................................... 22|
|A3.|Suggestive regression model ...................................................................................................... 22|
|A4.|Correlation results by lending category / income group ............................................................ 23|
|A5.|Correlation results by country .................................................................................................... 25|
|A6.|Region-wise cyclical components plot ........................................................................................ 25|
|A7.|Country-level cyclical components plot example for procyclicality/countercyclicality .............. 26|
|A8.|Correlation results for original commitments with 2-qtr, 3-qtr, and 4-qtr GDP lags ................. 26|
|A9.|Correlation results using diff-log cycles in place of cycle-trend ratio ......................................... 26|
|A10.|<br>Country List ................................................................................................................................. 27|

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