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on Financial Development and Growth |
| By: | Jonung, Lars (Department of Economics, Lund University) |
| Abstract: | Sweden’s economic growth in relation to developments in the rest of the world exhibits three distinct phases over the past 170 years. From 1890 to 1950, Sweden experienced faster growth than comparable countries. This period of liberalization was followed by a phase of lagging behind until around the turn of the millennium. This relative stagnation is closely associated with the financial repression implemented by the social democratic governments in the post-World War II period. Strong anti-competitive regulations of the financial system, including the political determination of interest rates and allocation of capital, were likely the main cause of the Swedish lagging behind. After financial deregulation, a third phase begins, marked by a weak relative recovery. In line with current research, the three phases of Sweden’s relative growth are explained by the degree of liberalization of the Swedish economy, in other words, by the level of economic freedom. |
| Keywords: | Economic growth; liberalization; neoliberalism; financial repression; financial deregulation; economic freedom; social democracy; Sweden; |
| JEL: | E44 G18 N14 O47 O52 |
| Date: | 2026–02–03 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lunewp:2026_001 |
| By: | Beth Hammack |
| Abstract: | President Hammack spoke at the Ohio Bankers League’s 2026 Economic Summit in Columbus, Ohio on February 10, 2026, discussing banking, monetary policy, and the outlook for the economy. |
| Date: | 2026–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcsp:102428 |
| By: | Rodrigo Cuenca-de-Armas (Department of Economics, Universitat Jaume I, Castellón, Spain); Luisa Alamá-Sabater (Department of Economics and IIDL, Universitat Jaume I, Castellón, Spain); Miguel Ángel Márquez (Department of Economics, Universidad de Extremadura, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | This paper examines the complex interrelationships between bank branches, employment, and population dynamics in Spanish municipalities from 2008 to 2019. Using a simultaneous equations model based on Carlino and Mills’ (1987) framework, we analyse data from 8, 014 municipalities to investigate whether people follow jobs and financial services, whether jobs follow people and financial services, and whether financial services follow people and jobs. Our findings reveal a bidirectional relationship between population and employment, with employment following population more strongly than vice versa, particularly in urban areas. We also find a bidirectional relationship between population and bank branches, with bank branches following population more intensely than population following bank branches. Interestingly, no significant relationship was observed between employment and bank branches. Furthermore, our results indicate that bank branch closures influenced depopulation in certain territories, though banks primarily responded to rather than caused population movements. These decisions were not significantly influenced by the percentage of elderly residents in municipalities. Additionally, we find that rural and intermediate municipalities with higher per capita income gained population during the study period. Our research contributes to the literature on financial inclusion, left-behind places, and regional development by providing empirical evidence on the role of banking services in economic activity and population dynamics in Spain. |
| Keywords: | bank branches; depopulation; financial inclusion; left-behind places; simultaneous equations |
| JEL: | G21 R23 R11 O18 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2026/04 |
| By: | Mohammed Elhaj Mustafa Ali1 (University of Khartoum; Academic Center for Education, Culture, and Research (ACECR)); Hamed Najaf (UN Administrative and Budgetary Expert, Iran Representative) |
| Abstract: | This study examines the role of foreign direct investment (FDI) in advancing peacebuilding in Sudan via promoting youth employability using the autoregressive distributed lag (ARDL) model and time series data from 1992 to 2023. The findings indicate that both FDI and financial development substantially decrease youth unemployment rates over the long run. Conversely, the findings reveal that elevated inflation rates lead to higher youth unemployment over time. Furthermore, we find that the prevalent rates of youth unemployment considerably hamper peacebuilding efforts both in the short and long run. The primary conclusion is that augmenting FDI inflows can facilitate peacebuilding initiatives within the Sudanese setting by broadening employment prospects for unemployed youth. Accordingly, by harnessing FDI inflows strategically, Sudan can create a more inclusive labor market that not only provides employment opportunities but also fosters stability and peace. |
| Date: | 2025–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1775 |
| By: | Helmi Mansour (University of CarthageAuthor-Email: helmi.mansour.2022@ihec.ucar.tn); Monia Ghazali (University of CarthageAuthor-Email: monia.ghazali@ihec.u-carthage.tn) |
| Abstract: | Driven by climate change concerns and the transition toward renewable energy, the dynamics of global investment are shifting significantly. This rapid change is particularly concerning for MENA countries, as their dependence on oil revenues exposes their economies to substantial sustainability risks. In this context, soft power—an intangible form of influence rooted in a country's attractive qualities—emerges as a critical yet underexplored factor influencing the decisions of policymakers and investors. Using a dynamic panel model, the research first analyzes data from 77 countries, then narrows the focus to the MENA region to explore the relationship between soft power trends and inward FDI flows. The System GMM estimation results reveal that soft power has a positive and significant influence on inward foreign direct investment flows, with this effect being particularly strong in MENA countries. As such, this study highlights the strategic importance of leveraging soft power to enhance investment appeal on the global stage and serves as a reference for policymakers aiming to attract foreign investors, especially for MENA countries, where the need to move beyond oil dependence is becoming increasingly critical. |
| Date: | 2025–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1794 |
| By: | Philippe Bacchetta; Kenza Benhima; Yannick Kalantzis; Maxime Phillot |
| Abstract: | We build a two-country heterogenous-agent non-Ricardian model featuring asset scarcity and financial frictions in international capital markets. Due to the non-Ricardian nature of our framework, a demand for liquidity emerges and the supply of bonds matters. We show that shocks affecting the supply or demand of assets have very different international spillovers for an economy in a liquidity trap. A decrease in the supply of assets issued abroad leads to an asset shortage domestically. In normal times, the nominal interest rate decreases, stimulating investment and output. In a liquidity trap, deflation hits instead and the currency appreciates, which may cause a recession. |
| Keywords: | International Spillovers, Zero Lower Bound, Liquidity Trap, Asset Scarcity |
| JEL: | E40 E22 F32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1032 |
| By: | Charles Nolan |
| Abstract: | The "financial trilemma" asserts that deep financial integration, purely national financial policies and financial stability cannot simultaneously be achieved. Existing formalizations employing ex post burden-sharing games imply the trilemma result hinges on equilibrium selection. We develop a minimal ex ante prudential-effort model where financial integration amplifies cross-border crisis risk and national regulators internalise only part of global losses. The unique symmetric Nash equilibrium underprovides prudential effort and cannot deliver first-best stability when both integration and national policy autonomy are high. That provides a unique-equilibrium foundation for the financial trilemma and clarifies when supranational prudential arrangements are needed. |
| Keywords: | Financial trilemma; Financial stability; Prudential coordination |
| JEL: | F33 G28 H41 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2026_03 |
| By: | Fotios Gkatzoglou (DUTH - Democritus University of Thrace); Emmanouil Sofianos (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Amélie Barbier-Gauchard (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This study examines the evolution of public debt among the 27 EU member states using Graph Theory tools; the Threshold Weighted-Minimum Dominating Set (TW-MDS) and the k-core decomposition method, alongside a standard network quantitative metric, the density. By separating the data into three distinct periods, pre-crisis (2000-2007), European sovereign debt crisis (2008-2015), and post-crisis (2016-2023), we examine the potential synchronization of the debt ratios among EU countries through cross-correlations of the public debts. The findings reveal that public debt correlation was at its highest level during the 2008-2015 period, reflecting the universal impact of the crisis and the subsequent synchronized fiscal and monetary policy measures taken within EU. A significantly lower network density is observed in both the pre-and post-crisis periods. These results contribute to the overall debate on fiscal stability and policy coordination by showing how EU countries tend to align their fiscal behaviors during periods of crisis while behaving more independently during stable times. In addition, we yield a deeper insight into how economic shocks reorganize public debt interconnections within the crisis period. Finally, this analysis highlights to what extent European economic integration strengthens connections between the fiscal positions (through public debt) of the European Union member countries. |
| Keywords: | E62, C63, O52, graph theory JEL Classification: H63, synchronization, correlation, complex networks, European integration, public debt, public debt European integration complex networks correlation synchronization graph theory JEL Classification: H63 O52 E62 C63 |
| Date: | 2025–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05464661 |
| By: | Kamila Kuziemska-Pawlak (Narodowy Bank Polski; University of Lodz); Hiroyuki Ito (Portland State University) |
| Abstract: | In a financially integrated world, some countries become international net creditors while others become international net debtors. This paper examines the long-run determinants of the net international investment position (NIIP). Using a cross-sectionally augmented error correction model estimated with the dynamic common correlated effects estimator on data for 38 countries from 1990 to 2023, we test several theoretical hypotheses – including the stages of development hypothesis, the life-cycle hypothesis, and Ricardian equivalence. The results show that an increase in relative GDP per capita and relative central government (CG) debt/GDP reduces the NIIP/GDP in the long run, while a rise in relative old-age dependency increases it. For selected countries, we decompose changes in the long-run NIIP/GDP since 1990. In the United States, a decline in the long-run NIIP/GDP reflects rising relative GDP per capita, falling relative old-age dependency, and, from 2018, growing CG debt/GDP. In Japan, relative population aging and a decline in relative GDP per capita support an increase in the long-run NIIP/GDP, while the expansion of relative CG debt/GDP weighs it down. |
| Keywords: | Net international investment position, capital flows, Ricardian equivalence, stages of development hypothesis, life-cycle hypothesis, cross-section dependence, dynamic common correlated effects estimator |
| JEL: | F21 F30 F41 C23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nbp:nbpmis:380 |
| By: | Wenjie Li |
| Abstract: | This paper introduces the FinOpen index, a novel measure of capital flow management for 193 countries from 1996 to 2022. Using information from the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), the index is constructed by estimating the level of openness annually and updating it daily by incorporating changes in capital flow management measures (CFMs). Therefore, this index goes beyond the traditional indexes that rely on binary labels that only distinguish between full capital openness and any control. Within the range of [0, 1], the FinOpen index quantifies granular policy intensity and allows comparisons across countries (with higher values indicate greater capital openness). In addition, the dataset extends back to 1960 for 42 emerging and developing countries, and the methodology can be applied to construct long-term series for other countries. |
| Keywords: | Capital flows management measures; Capital Control; Capital Openness |
| Date: | 2026–02–06 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/021 |
| By: | Chikako Baba; Ricardo Cervantes; Mr. Salim M. Darbar; Annamaria Kokenyne; Viktoriya Zotova |
| Abstract: | Countries implement and liberalize capital controls opportunistically. To show this point, this paper introduces two novel indices—the Financial Account Restrictiveness Index (FARI) and the AREAER Change Index (ACI)—to measure and track capital flow restrictions across 190 countries quarterly from 1999 to 2022. FARI quantifies the restrictiveness of capital accounts, while ACI captures policy changes over time. These indices offer a comprehensive, objective, and high-frequency toolset to analyze capital account policies and their evolution over the past two decades. Using the two indices, the paper highlights global liberalization trends, regional differences, and the cyclical use of capital controls in response to macroeconomic conditions and crises.60 |
| Keywords: | capital controls; restrictiveness; liberalization; crisis management; countercyclical |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/016 |
| By: | Sergio A. Correia; Stephan Luck; Emil Verner |
| Abstract: | Bank failures can stem from runs on otherwise solvent banks or from losses that render banks insolvent, regardless of withdrawals. Disentangling the relative importance of liquidity and solvency in explaining bank failures is central to understanding financial crises and designing effective financial stability policies. This paper reviews evidence on the causes of bank failures. Bank failures—both with and without runs—are almost always related to poor fundamentals. Low recovery rates in failure suggest that most failed banks that experienced runs were likely fundamentally insolvent. Examiners’ postmortem assessments also emphasize the primacy of poor asset quality and solvency problems. Before deposit insurance, runs commonly triggered the failure of insolvent banks. However, runs rarely caused the failure of strong banks, as such runs were typically resolved through other mechanisms, including interbank cooperation, equity injections, public signals of strength, or suspension of convertibility. We discuss the policy implications of these findings and outline directions for future research. |
| Keywords: | bank failures; bank runs; liquidity; solvency; banking regulation; supervision |
| JEL: | G01 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102433 |
| By: | Fernando Broner; Juan Cortina; Sergio Schmukler; Tomas Williams |
| Abstract: | This paper examines how shifts in investor demand influence firm financing and investment decisions. For identification, the paper exploits a large-scale MSCI methodological reform that mechanically redefined the stock weights in major international equity benchmark indexes, changing the portfolio allocation of 2, 508 firms across 49 countries. Because benchmark-tracking investors closely follow these indexes, the rebalancing constituted a clean shock to equity demand. The results show that portfolio rebalancing by benchmark-tracking investors generated significant capital inflows and outflows at the firm level. Firms experiencing larger inflows increased equity issuance, even more so debt financing, and real investment. The paper complements the empirical analysis with a simple model of firm financing in which a decline in the cost of equity increases the value of equity and relaxes borrowing constraints. Higher equity valuations allow firms to expand borrowing even without issuing substantial new equity, so debt financing responds more strongly than equity issuance. |
| Keywords: | asset managers; benchmark indexes; corporate debt; equity; investment; institutional investors; issuance activity. |
| JEL: | F33 G00 G01 G15 G21 G23 G31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2026-002 |
| By: | Mariusz Kapuściński (Narodowy Bank Polski) |
| Abstract: | In this research note I propose a simple yet novel method to decompose changes in the credit-to-GDP ratio. Instead of modelling or filtering the credit-to-GDP ratio directly, I make a historical decomposition of the components of the ratio. I use Bayesian structural vector autoregressive models identified with sign and zero restrictions. Then, I make a historical decomposition of the credit-to-GDP ratio based on the decompositions of its components. I apply the method to data for Poland. I find that between 64 and 70% of (the explainable part of) the decrease in the credit-to-GDP ratio in Poland after the COVID-19 pandemic can be attributed to shocks affecting mainly demand for credit, while credit supply shocks made up the remaining 30-36% of the decrease. |
| Keywords: | credit, banking, macro-finance, VAR modelling |
| JEL: | E51 G21 E44 C32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nbp:nbpmis:381 |
| By: | G. Jacob Blackwood |
| Abstract: | Combining confidential business-level microdata with housing and banking data, I document large and persistent effects of local house prices on employment at small businesses, and particularly young businesses, during the Great Recession. I show that the effect on entry is important for explaining the disproportionate effect on young businesses, while young firm exit is also disproportionately affected. I then explore the channels through which house prices affect business outcomes. I use survey data to show that reliance on either personal assets or home equity is associated with increased sensitivity to house prices. I then use local bank balance sheet information to show both young and old firms are sensitive to local credit shocks, with some evidence of a larger effect on young businesses. I develop a macroeconomic model that is consistent with these findings where house prices work through two channels: a bank credit supply channel and a housing collateral channel. |
| Keywords: | Firm Dynamics, House Prices, Credit Supply, Business Cycles |
| JEL: | E44 D22 D25 R31 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-03 |
| By: | Longmuir, Maximilian |
| Abstract: | Household investment behavior shapes financial wealth inequality, yet the roles of return heterogeneity and risky asset participation remain insufficiently understood. This study examines their distributional effects using individual asset data from the DNB Household Survey and cross-country portfolio information from the Household Finance and Consumption Survey. Applying the Global Capital Asset Pricing Model, I find that returns do not systematically correlate with financial wealth in the Netherlands. Counterfactual simulations indicate that inequality remains stable under the Dutch status quo. However, rising returns or increased return heterogeneity amplify inequality, particularly if participation gaps persist. Broadening financial market participation mitigates these effects and reduces long-term uncertainty in wealth inequality trends. (Stone Center on Socio-Economic Inequality Working Paper) |
| Date: | 2026–01–21 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:7hkj6_v1 |
| By: | Willem THORBECKE |
| Abstract: | The correlation between sovereign bond prices and stock prices was positive from the 1970s to 2000 and then turned negative. Researchers have investigated this phenomenon using data from the 1970s to the present. This paper uses data beginning in the 1960s, when there were negative correlations between bond and stock prices, to investigate how positive bond-stock price comovements arose. Evidence from identified vector autoregressions indicates that monetary policy shocks beginning in the late 1960s caused bond and stock prices to covary positively. Evidence from estimating a multi-factor model indicates that news of both monetary policy and inflation contributed to positive bond-stock comovements. The findings imply that rising inflation now that elicits contractionary monetary policy could alter bonds’ risk characteristics, causing them to again covary positively with stocks. To this end, policymakers should be vigilant that large budget deficits do not stoke inflation. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26011 |
| By: | Mr. Damien Capelle |
| Abstract: | This paper develops a theory of how investors’ tastes are transmitted to aggregate investment through the market structure of financial intermediation. Whether tastes affect equilibrium capital allocation depends on where they originate—from households or from intermediaries—and on the degree of competition and segmentation in funding markets. Strong competition amplifies the pass-through of households’ tastes for amenity assets, but arbitrages away intermediaries’ own tastes. The same forces shape the effectiveness of financial-sector policies targeting households or intermediaries. I apply and quantify the framework in the context of green finance. |
| Keywords: | taste-based investing; bank; capital allocation; market structure; competition; financial intermediation; green finance |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/019 |
| By: | Giulia Ajmone Marsan (Economic Research Institute for ASEAN and East Asia (ERIA)); Adelia Rahmawati (Economic Research Institute for ASEAN and East Asia (ERIA)) |
| Abstract: | Fintech is emerging as a key driver of financial inclusion and innovation across emerging and developing economies. Its rapid growth is underpinned by large unbanked and underbanked populations, rising internet penetration, a shift towards mobile-first consumer behaviour, younger demographic profiles, and the digital acceleration catalysed by the COVID-19 pandemic. This paper examines how different fintech ecosystem models evolve under varying institutional, regulatory, and technological conditions. Drawing on illustrative cases from Latin America, ASEAN, Africa, and South Asia, it highlights how enabling regulatory frameworks, digital public infrastructure, startup ecosystems, and mobile-first solutions have shaped fintech development. These models are not mutually exclusive and often coexist within the same ecosystem, generating shared challenges such as fragmented markets, uneven regulatory capacity, persistent digital divides, and weaknesses in digital infrastructure. Realising fintech’s transformative potential therefore requires deliberate policy choices that promote equitable digital participation, foster competition, and support responsible innovation. For ASEAN, regional initiatives such as the ASEAN Regional Payment Connectivity and the Digital Economy Framework Agreement present timely opportunities to deepen integration, expand cross-border fintech services, and support sustained growth. Aligning fintech development with financial inclusion objectives will be critical to ensuring that digital finance contributes to sustainable and equitable development across the region. |
| Keywords: | Fintech; Innovation; Emerging Market; ASEAN |
| JEL: | L26 O14 O3 P52 |
| Date: | 2026–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2025-11 |
| By: | Mesbah Fathy Sharaf (University of Alberta); Abdelhalem Mahmoud Shahen (Imam Mohammad Ibn Saud Islamic University (IMSIU)); Mansour Abdullateef Alharaib (Imam Mohammad Ibn Saud Islamic University (IMSIU)) |
| Abstract: | This study explores the evolution, determinants, and disparities of digital financial inclusion (DFI) in Saudi Arabia from 2011 to 2021, with a focus on the post-COVID-19 period. Using micro-level cross-sectional data from the World Bank’s Global Findex database, we apply a multivariate Probit regression to examine the drivers of DFI across demographic, socioeconomic, and infrastructural dimensions. While Saudi Arabia has made notable progress in digital finance, gaps persist among women, the less educated, low-income groups, and the unemployed. Access to mobile phones and internet connectivity significantly enhances DFI, underscoring the role of digital infrastructure. As the first systematic analysis of DFI in Saudi Arabia using Global Findex data, this study provides timely insights into the inclusive digital transformation process. Importantly, it highlights how expanding equitable access to digital financial services can support broader goals of socioeconomic sustainability, reduce structural inequalities, and contribute to the Vision 2030 agenda. The findings offer practical guidance for policymakers seeking to design sustainable, inclusive financial ecosystems in the digital era. |
| Date: | 2025–07–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1783 |
| By: | Pavel Ciaian; d'Artis Kancs; Miroslava Rajcaniova |
| Abstract: | Around three quarters of Bitcoin transactions take place off-chain. Despite their significance, the vast majority of the empirical literature on cryptocurrencies focuses on on-chain transactions. This paper presents one of the first analysis of both on- and off-chain demand- and supply-side factors. Two hypotheses relating on-chain and off-chain demand and supply drivers to the Bitcoin price are tested in an ARDL model with daily data from 2019 to 2024. Our estimates document the differential contributions of on-chain and off-chain drivers on the Bitcoin price. Off-chain demand pressures have a significant impact on the Bitcoin price in the long-run. In the short-run, both demand and supply drivers significantly affect the Bitcoin price. Regarding transactions on the blockchain, only on-chain demand pressures are statistically significant - both in the long- and short-run. These findings confirm the dual nature of the Bitcoin price dynamics, where also market fundamentals affect the Bitcoin price in addition to speculative drivers. Bitcoin whale trading has less significant impact on price in the long-run, while is more pronounced contemporaneously and one-period lag. |
| Keywords: | Bitcoin, price, on-chain, off-chain, blockchain, supply, demand, LocalBitcoins. |
| JEL: | E31 E42 G12 |
| Date: | 2026–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2026_01 |
| By: | Daniel Kim (University of Waterloo [Waterloo]); Sébastien Pouget (TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We empirically study whether carbon emissions affect firms' cost of capital raised on conventional bond markets. We find that firms with higher carbon emissions face higher spreads in the secondary market but not in the primary market. We show that this gap is related to uncertainty about climate concerns that affects differently primary and secondary market. This gap is also affected by the reputation of underwriting dealers: high reputation promotes the incorporation of climate concerns into bond yields. Our findings imply that, on average, carbon emissions do not affect the cost of capital in bond markets, thereby reducing firms' financial incentives for decarbonization. |
| Keywords: | Climate finance, Carbon premium, Bond markets, Green investors, Underwriting dealers |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05470890 |