nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2023‒07‒10
twenty-two papers chosen by
Georg Man

  1. Financial shocks to banks, R&D investment, and recessions By Ryoji Ohdoi
  2. Uncertainty, risk, and capital growth By Segal, Gill; Shaliastovich, Ivan
  3. Financial Constraints and Firm Size: Micro-Evidence and Aggregate Implications By Miguel H. Ferreira; Timo Haber; Christian Rörig
  4. SME Failures Under Large Liquidity Shocks: An Application to the COVID-19 Crisis By Pierre-Olivier Gourinchas; Şebnem Kalemli-Özcan; Veronika Penciakova; Nicholas Sander
  5. The Economics of Financial Stress By Dmitriy Sergeyev; Chen Lian; Yuriy Gorodnichenko
  6. Determinants of Fintech and Bigtech lending: the role of financial inclusion and financial development By Ozili, Peterson K
  7. Fintech and bank stability in a small-open economy context: The case of Kenya By Osoro, Jared; Cheruiyot, Kiplangat Josea
  8. A Review of Macroeconomic Determinants of Credit Risks: Evidence from Low-Income Countries By yeboah, samuel
  9. Large Banks and Systemic Risk: Insights from a Mean-Field Game Model By Yuanyuan Chang; Dena Firoozi; David Benatia
  10. Empowering Stability: Unveiling the Link between Financial Inclusion and Bank Resilience: A Comprehensive Review By Yeboah, Samuel
  11. Taxing Mobile Money in Kenya: Impact on Financial Inclusion By Diouf, Awa; Carreras, Marco; Santoro, Fabrizio
  12. Assessing the Impact of International Monetary Fund Programs on The Ghanaian Economy: A Review of the Period Between 1992 And 2020 By yeboah, samuel; James Nyarkoh, Bright
  13. The Macroeconomic Effects of Portfolio Equity Inflows By Nick Sander
  14. The Macroeconomic Consequences of Exchange Rate Depreciations By Masao Fukui; Emi Nakamura; Jón Steinsson
  15. The Increasing Impact of Spain on the Equity Markets of Brazil, Chile and Mexico By Andres Rivas; Rahul Verma; Antonio Rodriguez; Pedro H. Albuquerque
  16. Blockchain in Financial Intermediation and Beyond: What are the Main Barriers for Widespread Adoption? By Yerushalmi, Erez; Paladini, Stefania
  17. The Crypto Multiplier By Rodney Garratt; Maarten van Oordt
  18. Do You Even Crypto, Bro? Cryptocurrencies in Household Finance By Michael Weber; Bernardo Candia; Olivier Coibion; Yuriy Gorodnichenko
  19. International Spillovers of ECB Interest Rates Monetary Policy & Information Effects By Santiago Camara
  20. A Monetary Equilibrium with the Lender of Last Resort By Makoto WATANABE; Tarishi Matsuoka
  21. Climate change and banking sector (in)stability in Kenya: A vulnerability assessment By Kimundi, Gillian; Wambui, Reuben
  22. The greening of Kenya's banking sector: Macro-financial stability implications of a low carbon transition By Talam, Camilla C.; Maru, Lucy

  1. By: Ryoji Ohdoi (School of Economics, Kwansei Gakuin University)
    Abstract: In some classes of macroeconomic models with financial frictions, an adverse financial shock successfully explains a decrease in real activity but simultaneously induces a stock price boom. The latter theoretical result is not consistent with data from actual financial crises. This study aims to develop a simple theory to explain both prolonged recessions and stock price declines. I develop a simple macroeconomic model featuring a banking sector, financial frictions, and R&D-based endogenous growth to examine the impacts of an adverse financial shock to banks on firms' R&D investments and stock prices. Both the analytical and numerical investigations show that endogenous R&D investment and a shock hindering banks' financial intermediary function can be key to generating both a prolonged recession and a drop in firms' stock prices.
    Keywords: Banks; Endogenous growth, Financial frictions, Financial shocks
    JEL: E32 E44 G01 O31 O41
    Date: 2023–06
  2. By: Segal, Gill; Shaliastovich, Ivan
    Abstract: We find that high macroeconomic uncertainty is associated with greater accumulation of physical capital, despite a reduction in investment and valuations. To reconcile this puzzling evidence, we show that uncertainty predicts lower depreciation and utilization of existing capital, which dominates the investment slowdown. Motivated by these dynamics, we develop a quantitative production-based model in which firms implement precautionary savings through reducing utilization rather than raising investment. Through this novel intensive-margin mechanism, uncertainty shocks command a quarter of the equity premium in general equilibrium, while flexibility in utilization adjustments helps explain uncertainty risk exposures in the cross-section of industry returns.
    Keywords: Uncertainty, Production, Asset Pricing, Utilization, Depreciation, Equity Premium
    JEL: G12 E32 D81 D50
    Date: 2023
  3. By: Miguel H. Ferreira (QMUL and CEPR); Timo Haber (De Nederlandsche Bank); Christian Rörig (QuantCo)
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firm size distribution, even in the top 1%. Incorporating a richer, empirically supported, productivity process into a standard heterogeneous firms model generates a joint distribution of size and credit constraints in line with the data. The presence of large constrained firms in the economy, together with their elevated capital share, explains about 66% of the response of output to a financial shock. We conclude by providing micro-evidence in support of the model mechanism.
    Keywords: Firm size, business cycle, financial accelerator
    JEL: E62 E22 E23
    Date: 2023–06–14
  4. By: Pierre-Olivier Gourinchas; Şebnem Kalemli-Özcan; Veronika Penciakova; Nicholas Sander
    Abstract: We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms’ borrowing capacity to smooth temporary shocks to liquidity. In this framework, firm exit arises from the interaction between this financial friction and fluctuations in cash flow due to aggregate and sectoral changes in demand conditions, as well as more traditional shocks to productivity. To evaluate the implications of our model, we use firm-level data on small and medium-sized enterprises (SMEs) in 11 European countries. We confirm that our framework is consistent with official failure rates in 2017–2019, a period characterized by standard business cycle fluctuations in demand. To capture a large liquidity shock, we apply our framework to the COVID-19 crisis. We find that, in the absence of government support, SME failure rates would have increased by 6.01 percentage points, putting 3.1 percent of employment at risk. Our results are consistent with the premise that financial frictions lead to inefficient exit as, without government support, the firms failing due to COVID-19 have similar productivity and past growth to firms that survive the COVID-19 crisis.
    Keywords: Firm dynamics; International topics; Coronavirus disease (COVID-19)
    JEL: D22 E65 H81
    Date: 2023–06
  5. By: Dmitriy Sergeyev; Chen Lian; Yuriy Gorodnichenko
    Abstract: We study the psychological costs of financial constraints and their economic consequences. Using a representative survey of U.S. households, we document the prevalence of financial stress in U.S. households and a strong relationship between financial stress and measures of financial constraints. We incorporate financial stress into an otherwise standard dynamic model of consumption and labor supply. We emphasize two key results. First, a psychology-based theory of poverty traps requires two equally important components: financial stress itself and naivete about financial stress. Specifically, sophisticates save enough to escape high-stress states, because they understand that doing so alleviates the economic consequences of financial stress. On the other hand, naifs dis-save, fall into a poverty trap, and incur high welfare losses. Second, the financial stress channel can reverse the counterfactual negative wealth effect on labor supply because relieving stress frees up cognitive resources for productive work. Financial stress also has macroeconomic implications on wealth inequality and fiscal multipliers.
    JEL: D9 E7 O1
    Date: 2023–05
  6. By: Ozili, Peterson K
    Abstract: Credit markets around the world are undergoing digital transformation which has led to the rise in Fintech and Bigtech lending. Fintech and Bigtech lending is the provision of credit by Fintech and Bigtech providers who have more capital, cutting-edge IT systems, worldwide recognition, greater online presence and are able to handle more big data on computers and mobile phones than traditional banks. Fintech and Bigtech lending is growing in importance, but the determinants of Fintech and Bigtech lending have received little attention in the literature. This study investigates the determinants of Fintech and Bigtech lending. The study focused on the effect of financial inclusion and financial development on Fintech and Bigtech lending. Using data for 18 countries from 2013 to 2019 and employing the difference-GMM and 2SLS regression methods, the findings reveal that financial inclusion and financial development are significant determinants of Fintech and Bigtech lending. Financial development is a positive determinant of Fintech and Bigtech lending while financial inclusion has a significant effect on Fintech and Bigtech lending. Also, Fintech and Bigtech lending lead to greater banking sector stability and also poses the risk of rising nonperforming loans. There is also a significant positive correlation between financial development and Fintech and Bigtech lending. These findings add to the emerging literature on the role of Fintech and Bigtech in financial intermediation. This research is significant because it provides insights into the role of financial inclusion and financial development in digital transformation of credit markets.
    Keywords: financial inclusion, financial development, Fintech, Bigtech, lending, ATM, bank branch, access to finance
    JEL: G21 G23
    Date: 2023–05–14
  7. By: Osoro, Jared; Cheruiyot, Kiplangat Josea
    Abstract: This paper seeks to examine the effect of Fintech credit on bank stability using an unbalanced panel dataset of 37 commercial banks in Kenya between 2013 and 2020. The recent evolution of Fintech comes with the promise of being both revolutionary and disruptive. The temptation of a unidirectional expectation that effects of Fintech will only be positive masks the potential destabilization effects, hence the motivation to examine possibility of its being a source of fragility in the banking sector in Kenya. We employ both static panel models and a dynamic panel of System Generalized Method of Moments (GMM) that lead us to the conclusion that Fintech credit has not occasioned concerns of market fragility. If anything, the empirical results reveal that the FinTech credit is associated with higher bank stability in the sense that FinTech intermediated credit is associated with a higher Z-score suggesting higher overall bank stability. The relationship is however nonlinear, with the squared term of the FinTech credit being negative and statistically significant. We infer that the influence of FinTech on bank stability is inverted "U" type relationship. Bank-specific factors such as equity to assets, asset quality and cost-to-income rations having a strong influence on bank stability. That is a pointer to the possibility of the current magnitude of Fintech credit - the possible conduit of instability - not being associated with fragility, with the likelihood of that changing as the its share of bank assets grows with time.
    Keywords: Bank Stability, FinTech, Kenya
    Date: 2023
  8. By: yeboah, samuel
    Abstract: This review aims to provide a comprehensive analysis of the macroeconomic determinants of credit risks in low-income countries. The study explores the factors that influence credit risks, including macroeconomic indicators, institutional frameworks, and external shocks. By examining existing literature and empirical evidence, this review highlights the crucial role of these determinants in shaping credit risk levels in low-income economies. The findings can help policymakers and financial institutions devise appropriate strategies to manage credit risks and promote financial stability in these countries.
    Keywords: credit risks, low-income countries, macroeconomic determinants, review, evidence.
    JEL: G21 G32 O16
    Date: 2023–02–01
  9. By: Yuanyuan Chang; Dena Firoozi; David Benatia
    Abstract: This paper aims to investigate the impact of large banks on the financial system stability. To achieve this, we employ a linear-quadratic-Gaussian (LQG) mean-field game (MFG) model of an interbank market, which involves one large bank and multiple small banks. Our approach involves utilizing the MFG methodology to derive the optimal trading strategies for each bank, resulting in an equilibrium for the market. Subsequently, we conduct Monte Carlo simulations to explore the role played by the large bank in systemic risk under various scenarios. Our findings indicate that while the major bank, if its size is not too large, can contribute positively to stability, it also has the potential to generate negative spillover effects in the event of default, leading to increased systemic risk. We also discover that as banks become more reliant on the interbank market, the overall system becomes more stable but the probability of a rare systemic failure increases. This risk is further amplified by the presence of a large bank, its size, and the speed of interbank trading. Overall, the results of this study provide important insights into the management of systemic risk.
    Date: 2023–05
  10. By: Yeboah, Samuel
    Abstract: This systematic review examines the link between financial inclusion (FI) and bank stability (BS). FI, defined as access to and usage of formal financial services by individuals and businesses, has gained significant attention as a policy goal in many countries. BS, on the other hand, is a critical aspect of financial system resilience and plays a key role in promoting economic growth and stability. The review synthesizes the existing literature to understand the potential linkages, mechanisms, and empirical evidence regarding the link between FI and BS. The findings highlight the complex nature of this link, with both positive and negative implications for BS arising from increased FI. The review concludes with policy implications and directions for future research.
    Keywords: FI, BS, access to finance, formal financial services, financial system resilience, economic growth.
    JEL: G21 G28 O16
    Date: 2023–04–17
  11. By: Diouf, Awa; Carreras, Marco; Santoro, Fabrizio
    Abstract: Many people argue that mobile money has the potential to increase financial inclusion and improve the livelihoods of poor people in Africa. However, while many African governments impose specific taxes on mobile money transactions, very little is known about their effect on the use of mobile money services. This study assesses the short- and long-term impact of the tax on money transfer fees that the Kenyan government introduced in 2013. The tax, more specifically an excise duty, was imposed on fees incurred in all money transactions, including mobile money. It was introduced at 10 per cent and increased to 12 per cent in 2018. Our analysis has two parts. We use country-level data to see if the tax affected the use of mobile money – transaction values and volume – and the number of active mobile money agents. In addition, we use four rounds of nationally representative survey data to estimate changes in the use of mobile money after introduction of the tax. We find that the excise duty did not have a significant impact on different aggregated indicators relating to the use of mobile money. However, survey data shows that the tax may have reduced the rate of increase in use of mobile money services affected by the changes in tax, such as sending and receiving money, compared to services that were not, like savings and paying bills. Importantly, while the amounts transacted may not change, users send and receive money within households less regularly. In addition, the tax seems to have a more detrimental impact on poorer households, which were less likely to be financially included before the tax was introduced. Larger households also show more negative effects after the tax.
    Keywords: Finance,
    Date: 2023
  12. By: yeboah, samuel; James Nyarkoh, Bright
    Abstract: This article presents a comprehensive review of the impact of International Monetary Fund (IMF) programs on the Ghanaian economy during the period between 1992 and 2020. The study examines the achievements, challenges, and criticisms associated with these programs, with a specific focus on macroeconomic stability, debt relief, and the implementation of structural reforms. The review highlights the positive outcomes of IMF programs in Ghana, including the successful attainment of macroeconomic stability through fiscal consolidation, inflation control, and effective exchange rate management. Furthermore, debt relief initiatives under the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief (MDR) programs have significantly alleviated Ghana's debt burden, enabling the redirection of resources towards investment and development. The implementation of structural reforms has also enhanced the efficiency and competitiveness of key sectors such as finance, trade, and agriculture. However, the review acknowledges the challenges and criticisms surrounding IMF programs in Ghana. Notably, concerns arise regarding inequality, as certain policies have had uneven distributional impacts, exacerbating social disparities. Additionally, the social consequences of these programs, particularly in areas such as healthcare and education, have raised concerns about the welfare of vulnerable populations. The sustainability of the implemented reforms is also a subject of scrutiny, as long-term durability necessitates continuous monitoring and evaluation of fiscal consolidation efforts, debt management strategies, and structural reforms. Furthermore, environmental implications, particularly in terms of natural resource management and sustainable development practices, require careful consideration. The experiences and lessons learned from IMF programs have significantly influenced Ghana's economic policies and continue to shape ongoing efforts towards achieving sustainable and inclusive growth. In light of the findings, this review offers policy recommendations to address the identified challenges, including strengthening social safety nets, promoting inclusive growth, enhancing revenue mobilization, and bolstering institutional capacity.
    Keywords: IMF programs, Ghanaian economy, macroeconomic stability, debt relief, structural reforms, inequality, social impacts, sustainability, policy recommendations, and future research directions
    JEL: E02 E44 F33 O55
    Date: 2023–04–10
  13. By: Nick Sander
    Abstract: I provide evidence that portfolio equity inflows can have expansionary effects on GDP and inflation if not offset by monetary policy. I use a shift-share instrument to estimate equity inflows based on plausibly exogenous timing of inflows into mutual funds with heterogeneous country portfolios. For countries with fixed exchange rates, GDP rises for at least two years following an exogenous inflow with a peak effect of 0.8 percent after 18 months. This is driven by rises in investment and exports, where the latter response is inconsistent with standard expenditure switching channel mechanisms. Non-fixing countries maintain GDP roughly at the same pre-shock levels but achieve this with higher interest rates.
    Keywords: Business fluctuations and cycles; International financial markets; International topics; Monetary policy
    JEL: E32 F32 F44
    Date: 2023–06
  14. By: Masao Fukui; Emi Nakamura; Jón Steinsson
    Abstract: We study the consequences of "regime-induced" exchange rate depreciations by comparing outcomes for peggers versus floaters to the US dollar in response to a dollar depreciation. Pegger currencies depreciate relative to floater currencies and these depreciations are strongly expansionary. The boom is not associated with an increase in net exports, or a fall in nominal interest rates in the pegger countries. This suggests that expenditure switching and domestic monetary policy are not the main drivers of the boom. We develop a financially driven exchange rate (FDX) model in which multiple shocks originating in the financial sector drive exchange rates and households and firms can borrow in foreign currencies. Following a depreciation, UIP deviations lower the costs of borrowing from abroad and stimulate the economy, as in the data. The model is consistent with (unconditional) exchange rate disconnect and the Mussa facts, even though exchange rates have large effects on the economy.
    JEL: F31 F41
    Date: 2023–05
  15. By: Andres Rivas (Primerica); Rahul Verma (University of Houston, Downtown); Antonio Rodriguez (Texas A&M International University); Pedro H. Albuquerque (Aix Marseille Univ, CNRS, AMSE, Marseille, France and ACCELERATION & ADAPTATION, Aix-en-Provence, France)
    Abstract: The article examines stock index price responses in Brazil, Chile and Mexico to those in the US, Spain and four European countries during three sub-periods surrounding the neoliberal reforms of the 1990s: 1988 to 1994, 1995 to 1998, and 1999 to 2004, using VAR modeling. It finds that equity markets became more interconnected as countries opened to international trade and capital flows, and that there was an increasing impact of Spain on Latin American equity markets. Stronger economic linkages (more trade and foreign direct investment) between Spain and these countries, specially in Brazil, seem to explain increased equity markets interconnectedness.
    Keywords: Emerging markets, Latin America, Spain, Stock markets interdependence, VAR modeling
    JEL: G15 O54 C22
    Date: 2023–05
  16. By: Yerushalmi, Erez; Paladini, Stefania
    Abstract: Blockchain-enabled cryptocurrency instruments have gradually filtered into financial intermediation, disrupting traditional institutions. This paper discusses the benefits of blockchain to household welfare, focusing on financial intermediation services (FIS). Its main aim is to highlight points of incompatibility with current institutional frameworks and outlines the greatest barriers for its widespread adoption (i.e., regulatory, technological, and environmental). To support our discussion, we develop a stylized general equilibrium model with two competing FIS technologies (i.e., traditional and blockchain). We show that removing these barriers could displace traditional institutions with blockchain technology and raise welfare. Finally, we argue that the 2022 and 2023 cryptocurrency scandals and the ongoing calls for comprehensive, cross-country, institutional changes will be remembered as a turning point in terms of serious efforts to integrate this new technology and make it more mainstream.
    Keywords: Blockchain; Institutional Barriers; Fintech; Cryptocurrencies; Financial Intermediation
    Date: 2023–06–14
  17. By: Rodney Garratt; Maarten van Oordt
    Abstract: The exchange rates of cryptocurrencies are highly volatile. This paper provides insight into the source of this volatility by developing the concept of a "crypto multiplier, " which measures the equilibrium response of a cryptocurrency's market capitalization to aggregate inflows and outflows of investors' funds. The crypto multiplier takes high values when a large share of a cryptocurrency's coins is held as an investment rather than being used as a means of payment. Empirical evidence shows that the number of coins held for the purpose of making payments is rather small for major cryptocurrencies suggesting large crypto multipliers. The analysis explains why announcements by large investors, celebrity endorsements or financial crises can result in substantial price movements.
    Keywords: Bitcoin, cryptocurrency, exchange rates, monetary economics, risk management
    JEL: E42 E51
    Date: 2023–06
  18. By: Michael Weber; Bernardo Candia; Olivier Coibion; Yuriy Gorodnichenko
    Abstract: Using repeated large-scale surveys of U.S. households, we study the cryptocurrency investment decisions and motives of households relative to other financial assets. Cryptocurrency holders tend to be young, white, male and more libertarian relative to non-crypto holders. They expect much higher rates of returns for crypto and perceive it as relatively safer than do other households. They also view it as a better hedge against inflation. For those holding cryptocurrencies, changes in Bitcoin prices translate into their purchases of durable goods. Finally, exogenously-provided information about historical returns of cryptocurrencies leads individuals to increase their desired crypto holdings and makes them more likely to actually purchase cryptocurrency subsequently. We compare these views and behaviors to those of households toward other financial assets and argue that cryptocurrency is unique in many of these respects.
    JEL: D8 E4 G5
    Date: 2023–05
  19. By: Santiago Camara (Northwestern University)
    Abstract: This paper shows that disregarding the information effects around the European Central Bank monetary policy decision announcements biases its international spillovers. Using data from 23 economies, both Emerging and Advanced, I show that following an identification strategy that disentangles pure monetary policy shocks from information effects lead to international spillovers on industrial production, exchange rates and equity indexes which are between 2 to 3 times larger in magnitude than those arising from following the standard high frequency identification strategy. This bias is driven by pure monetary policy and information effects having intuitively opposite international spillovers. Results are present for a battery of robustness checks: for a sub-sample of “close” and “further away” countries, for both Emerging and Advanced economies, using local projection techniques and for alternative methods that control for “information effects”. I argue that this biases may have led a previous literature to disregard or find little international spillovers of ECBrates
    Keywords: ECB monetary policy; Information Effects; International Spillovers; Emerging Markets; Advanced Economies.
    JEL: F1 F4 G32
    Date: 2023–06
  20. By: Makoto WATANABE; Tarishi Matsuoka
    Abstract: This paper studies the role of a lender of last resort (LLR) in a monetary model where a shortage of a banks monetary reserves (a liquidity crisis) occurs endogenously. We show that discount window lending by the LLR is welfare improving but reduces banks ex-ante incentive to hold monetary reserves, which increases the probability of a liquidity crisis, and can cause moral hazard in capital investment. We also analyze the combined effects of monetary and extensive LLR policies, such as a nominal interest rate, a lending rate, and a haircut.
    Keywords: Monetary Equilibrium, Liquidity Crisis, Lender of Last Resort, Moral Hazard JEL Classification Number:E40
    Date: 2023–06
  21. By: Kimundi, Gillian; Wambui, Reuben
    Abstract: This paper offers a climate change vulnerability assessment of the Kenyan banking sector by examining the time-varying linkages of climate risk drivers, economic sectors that get impacted by a disorderly low-carbon transition (climate policy relevant sectors (CPRSs)), and banking sector stability. We use temperature and precipitation climate data, identify 5 CPRSs and their quarterly outputs, construct a banking sector stability index, and examine the time-varying linkages of these variables. Effectively, we assess the response of banking sector stability to sectoral output shocks arising from physical and transition risks. Three important findings emerge: First, the agriculture sector is the sole channel of physical climate risk transmission. Second, manufacturing and utilities sectors are becoming increasingly critical/significant channels for transmitting transition risks. Third, during the COVID-19 era, all CPRSs have become increasingly linked to banking sector stability, effectively exacerbating the transmission of climate risks to the banking sector.
    Keywords: climate change, climate risk drivers, climate policy relevant sectors (CPRS), banking sector, stability
    Date: 2023
  22. By: Talam, Camilla C.; Maru, Lucy
    Abstract: Against the backdrop of climate-mitigation and green growth policies as well as regulations to account for climate-related risks in the financial sector, this study employs the Computable General Equilibrium model and Merton's Distance to Default model to study the implications of Kenya transitioning to a low carbon economy through introduction of a carbon tax on a carbon intensive sector. The study finds that a carbon tax would result in rise in general prices, and lower investment to GDP. These adverse effects are offset by a rise in real GDP and narrower fiscal and current account balances supported by a rise in government revenue and higher exports in low-carbon intensive sectors. A carbon tax policy would have adverse effects of declining output and income of firms in carbon intensive sectors. These adverse effects are varied which hedges the probability of default of a bank portfolio and allows for natural diversification to mitigate the adverse effects of such a policy for the banking sector. The carbon tax may also increase resilience in low carbon intensive firms where a bank may have exposures thus mitigating the environmental risks for these banks' exposures. From the findings, the paper persuades policymakers to consider a carbon tax rather than an emission trading system as a key carbon mitigation policy.
    Keywords: Green finance, Transition Risks, Carbon Pricing, Probability of Default
    Date: 2023

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