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on Financial Development and Growth |
| By: | Ali, Amjad; Iram, Wafaria; Alam, Mehboob |
| Abstract: | This study examines the dynamic relationships between financial globalization, entrepreneurship development, and economic growth across 18 Asian nations from 2013 to 2024. The results reveal that financial globalization significantly enhances entrepreneurial activity primarily by improving access to capital, fostering a better regulatory environment, and increasing financial literacy. Furthermore, entrepreneurship is found to be an effective driver of GDP growth, especially when accompanied by technology adoption, workforce skills development, flexibility, and infrastructure investment. While the study highlights the general positive impact of financial globalization and entrepreneurship, it also acknowledges variations due to institutional weaknesses and uneven market competition among countries. The findings offer nuanced insight into how globalization, supported by strong institutions and targeted policy interventions, can promote sustainable development. Based on empirical analysis, this research provides practical guidance for policymakers seeking to design inclusive growth strategies based on global financial integration and to foster robust entrepreneurship ecosystems. |
| Keywords: | Financial Globalization, Entrepreneurship Development, Economic Growth |
| JEL: | G2 O4 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128750 |
| By: | Olayinka Oyekola (Department of Economics, University of Exeter); Olabambo Oluwasuji (Cabinet Office, Glasgow) |
| Abstract: | Can resource windfalls explain the accumulation of productive capabilities? We examine this question using a panel of 140 countries over the period 1995-2023, leveraging plausibly exogenous variation in international commodity prices through countries' predetermined net export structures. We find that resource windfalls have a robust negative effect on productive capabilities. Using our preferred dynamic specifications, a one-standard-deviation increase in resource windfalls is associated with a long-run decline in productive capabilities of approximately 0.10 standard deviations. Beyond the average effect, we document substantial heterogeneity across countries. The adverse effects are concentrated among lower-income and initially less sophisticated economies, while richer and more sophisticated economies exhibit greater resilience to resource windfalls. We also provide evidence suggesting that resource windfalls alter the composition of investment in ways that contribute relatively little to capability accumulation. Our findings suggest that resource windfalls may hinder structural transformation by slowing the accumulation of productive capabilities. |
| Keywords: | resource windfalls, productive capabilities, structural transformation, economic development, commodity prices |
| JEL: | F43 O11 O13 O14 O30 Q32 |
| Date: | 2026–06–08 |
| URL: | https://d.repec.org/n?u=RePEc:exe:wpaper:2608 |
| By: | Meyer, Tim |
| Abstract: | Die Mobilisierung privaten Kapitals ist ein zentraler Hebel für private Investitionen und eröffnet neue Wachstumspotenziale. Kapitalmarktfinanzierung stärkt die wirtschaftliche Resilienz, begrenzt Risiken eines übergroßen Bankensektors und sichert Unternehmen den Zugang zu Liquidität. Schuldenfinanzierte Staatsausgaben ("Sondervermögen") oder die Aufweichung fiskalischer Regeln sind hingegen keine nachhaltige Alternativen und kontraproduktiv. Deutschlands Kapitalmärkte sind jedoch in Tiefe und Breite noch immer unterentwickelt. Der relativ kleine Wagniskapitalmarkt erhöht das Risiko, dass junge und innovative Unternehmen in attraktivere Finanzierungsstandorte abwandern. Gerade in einem Umfeld anhaltender Stagnation und schwacher gesamtwirtschaftlicher Dynamik kann durch die Mobilisierung privaten Kapitals neues Wachstumspotential entstehen, wenn Entwicklungshemmnisse auf nationaler und europäischer Ebene gezielt beseitigt werden: Der Abbau steuerlicher und bürokratischer Fehlanreize erleichtert Unternehmen den Kapitalmarktzugang und kann die Eigenkapitalfinanzierung attraktiver machen. Eine Lockerung regulatorischer Vorgaben für institutionelle Anleger setzt Impulse, das Angebot an Wagnis- und Beteiligungskapital auszuweiten. Eine Reform der privaten Altersvorsorge kombiniert mit besserer Finanzbildung legt die Grundlage für eine stärkere Beteiligung privater Haushalte am Kapitalmarkt. Harmonisiertes Insolvenzrecht, gemeinsame Standards bei Berichterstattung und paneuropäische Börsenplätze sind darüber hinaus zentrale Bausteine tiefer integrierter Kapitalmärkte in Europa. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:smwarg:341420 |
| By: | Luca Fornaro; Veronica Guerrieri; Will Hotten; Lucrezia Reichlin |
| Abstract: | This paper studies how financial conditions affect research and development (R&D) by firms specialized in green innovation. Using U.S. patent data matched with Compustat, we identify “green innovators” as firms with a high cumulative share of green patents. Although they account for a small share of total green patenting, these firms occupy central positions in the green-innovation ecosystem. Estimating firm-level impulse responses to exogenous changes in broad financial conditions, we find that tightening has a disproportionately large and persistent negative effect on the R&D of specialized green innovators. In contrast, R&D by diversified innovators and non-innovators responds only weakly. Green innovators are younger, smaller, and more dependent on external finance, suggesting that financial tightening introduces a systematic bias against upstream green technological development. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1946 |
| By: | Sekimonyo, Jo M.; Casimir, Tara |
| Abstract: | This paper reexamines the foundations of business cycle theory by proposing that macroeconomic instability arises endogenously from the structural organization of production, distribution, and finance rather than from exogenous shocks or nominal frictions. It introduces the Distribution–Leverage Cycle (DLC), a framework in which cyclical dynamics emerge from the interaction between surplus distribution and leverage accumulation. The analysis identifies the distribution gap, defined as the divergence between productive capacity and effective demand, as a central mechanism driving instability. This gap emerges when surplus is concentrated among claimants with relatively low propensities to consume, including financial, entrepreneurial, and knowledge-based capital, particularly in the context of artificial intelligence. Credit expansion acts as a compensatory mechanism that sustains demand in the short run while increasing leverage and financial fragility over time. To provide a micro-foundation for surplus allocation, the paper builds on the concept of Socially Necessary Participation (SNP), defined as the institutional recognition of participation in value creation as the basis for claims on surplus. In this framework, macroeconomic instability reflects both demand imbalances and a structural decoupling between participation and entitlement to income. When participation is displaced, especially through technological change, credit substitutes for income and reinforces cyclical dynamics. Financial crises can be interpreted as the endogenous outcome of economies that rely on leverage to offset persistent distributional asymmetries. Building on Ethosism, a normative institutional framework, the paper extends this approach to examine how alignment between participation and surplus allocation can be restored through mechanisms such as profit-sharing, broadened ownership, and incentive-compatible distributive structures. By integrating distribution, leverage, and participation, the DLC framework moves beyond equilibrium-centered macroeconomic models and characterizes business cycles as structural and endogenous features of modern economies. |
| Keywords: | Business cycles; Distribution–Leverage Cycle (DLC); Socially Necessary Participation (SNP); Surplus distribution; Leverage dynamics; Artificial intelligence and capital; Endogenous instability; Financial fragility; Macroeconomic structuralism; Political economy |
| JEL: | B5 B52 D31 E12 E21 E32 E44 G01 O33 Q41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129008 |
| By: | Ararat Gocmen; Clara Martínez-Toledano; Vrinda Mittal |
| Abstract: | This paper examines how expanding private capital markets contribute to rising economic inequalities in the U.S. We show that the share of early-stage financing raised from U.S. high-net-worth individuals tripled from 2004 to 2022. Exploiting the expansion of the QSBS tax exclusion, we find that HNWIs' investments made startups 5.6% more likely to stay private. Counterfactual simulations reveal that HNWIs' excess returns on early-stage investments explain 26% of the growth in the top 0.5% wealth share over 2010-2022. Finally, investor entry increased incumbents' returns and encouraged further investments, generating a self-reinforcing feedback loop between private capital market growth and inequality. |
| Keywords: | private capital markets, early-stage investing, income inequality, wealth inequality |
| JEL: | D31 G24 H24 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26147 |
| By: | Katariina Nilsson Hakkala (Asian Development Bank); Abhishek Kumar (University of Southampton) |
| Abstract: | Distressed and zombie firms are widespread in economies with weak insolvency regimes. This study investigates whether reforming insolvency laws can reduce capital misallocation. We introduce a framework for decomposing financial misallocation and derive metrics adequate to capture two conceptually distinct sources of inefficiency. The first refers to composition misallocation from inefficient leverage distribution, while the second refers to scale misallocation from suboptimal capital allocation among firms. Using firm-level data from 22 economies between 2003 and 2024, we find that effective reforms significantly reduce scale misallocation, especially in sectors with a high concentration of distressed and zombie firms. Event studies reveal a steady decline in scale misallocation following reform, mirroring higher recovery rates and shorter insolvency durations, leading to a 3.5% productivity gain over 5 years. We present additional firm-level evidence substantiating these gains: reforms reduce debt among distressed and zombie firms, increase their borrowing costs, and enable previously credit-constrained firms to access greater funding for investment, thereby improving overall capital allocation. |
| Keywords: | distressed firms;zombie lending;insolvency reform;capital allocation;event studies |
| JEL: | D21 D22 G21 G32 G33 |
| Date: | 2026–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:022616 |
| By: | Chun-Yu Ho; Dan Li; Shut Tian; Xiaodong Zhu |
| Abstract: | This paper examines how bank behavior contributes to capital misallocation from the supply side, leveraging China’s 2008 fiscal stimulus as a quasi-experimental setting. Using proprietary loan-level data from a major state-owned bank, we document systematic credit misallocation favoring state-owned enterprises (SOEs) over private firms. Following the stimulus announcement, the bank reduced interest rates significantly more for SOEs than for comparable private enterprises—a differential reduction of 0.36 standard deviations—despite SOEs exhibiting higher default rates and unchanged credit ratings. We identify the mechanism as a loosening of risk-based pricing: interest rates became less sensitive to internal credit ratings for SOEs. This risk-based pricing misallocation largely relates to the industrial policy in supporting government-preferred industries. Notably, no such distortion appears in bankers’ acceptances, a less-regulated shadow banking activity, suggesting policy intervention—not financial frictions—drives the observed misallocation. Our findings provide direct micro-level evidence on how government directives and industrial policy induce capital misallocation through weakened credit risk management in state-owned banks. |
| Keywords: | Capital Misallocation, Stimulus Plan SOEs Shadow Banking, China |
| JEL: | G21 G28 O16 |
| Date: | 2026–06–09 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-823 |
| By: | Peter Hoerdahl; Burcin Kisacikoglu; Dora Xia |
| Abstract: | Bond yields react to macroeconomic surprises, but the magnitude of this responsiveness depends on macroeconomic forecast disagreement and monetary policy uncertainty. Using intraday responses of US Treasury futures to surprises in macroeconomic data releases, we find that greater forecast disagreement about an economic indicator prior to its release dampens the yield curve response, while higher monetary policy uncertainty amplifies it. An exception is inflation surprises: prior to the post-COVID inflation surge, bond yield reactions to inflation surprises were not amplified by monetary policy uncertainty. We use a model with Bayesian learning to rationalize these findings. Specifically, large forecast disagreement indicates a weak link between the macroeconomic variable and future monetary policy, reducing the information value of macro news to forecast monetary policy. In contrast, during periods of high monetary policy uncertainty, macro news becomes more informative. Before the post-COVID inflation surge, investors may have perceived that the Federal Reserve placed little emphasis on its price stability mandate, which could have muted the yield curve response to inflation news even when policy rate uncertainty was high. The proposed model generates distinct, empirically testable effects of disagreement and monetary policy uncertainty on yield responses which, when extended to allow time-varying signal precision, accounts for the post-COVID shift in inflation sensitivity within a single unified framework. |
| Keywords: | macroeconomic news, forecast dispersion, policy uncertainty, bond yields, Bayesian learning |
| JEL: | E43 E44 G14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1361 |
| By: | Konstantin Kucheryavyy (CUNY Baruch College); Alexander Monge-Naranjo (FRB Atlanta, Emory University, and CEPR); Kenichi Ueda (The University of Tokyo, CEPR and TCER) |
| Abstract: | Major industrialization episodes—from nineteenth-century Britain to Germany, the United States, Japan, Korea, and China—were followed by persistent current account surpluses and large accumulations of external wealth, a pattern at odds with standard current-account models. We develop a model of the transition dynamics of an emerging economy that explains this behavior. Two financial frictions are central: a gold-in-advance constraint requiring hard-currency settlement of debt service and consumption imports, and a pledgeability constraint linking foreign borrowing to capital-goods imports. These frictions generate an endogenous transition from net debtor to persistent net creditor during industrialization. Doing so, the framework resolves the Lucas Paradox and reproduces the falling-then-rising external-wealth dynamics observed across industrialization episodes since 1845, which are key for understanding the observed global imbalances. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cfi:fseres:cf628 |
| By: | Sebastian Horn; Carmen M. Reinhart; Christoph Trebesch |
| Abstract: | States are major international financiers, but their role is poorly understood. We study state-driven cross-border lending over two centuries using a new database covering 1.2 million official loans and grants by 134 governments and 70 multilateral institutions since 1790. We document a dual, state-contingent structure of international credit. In normal times, private creditors dominate cross-border lending. In adverse states of the world, such as wars and financial crises, official creditors step in, at times on a massive scale. These official flows are driven by great powers, are highly subsidized, and are largely absent from canonical models in international macroeconomics. |
| JEL: | E42 F33 F34 F35 F36 G01 G20 N01 N2 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35225 |
| By: | Geetika Palta (xKDR Forum); Renuka Sane (Trustbridge); Susan Thomas (xKDR Forum) |
| Abstract: | We examine the impact of borrowing on consumption smoothing for households entering credit markets for the first time, using a large panel dataset with income, expenditure and financial choices of 150, 000 households in India. Compared to households that never borrow, first-time borrowers are poorer, younger, less educated, and face higher income volatility. Their decision to borrow is often preceded by a change in income or consumption, regardless of whether it is a decrease or an increase. The act of borrowing increases both the level and the volatility of consumption expendit- ure. Credit does not help to smooth consumption, even for first time borrowers with no shocks to income and consumption. Higher volatility of consumption persists after borrowing, particularly for expenditure on non-durable goods such as food or planned household expenditure. This suggests that new borrowers use credit as one component of a broader risk-management strategy that involves multiple adjustments within their consumption portfolio. |
| JEL: | D14 E21 G51 O16 I32 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:anf:wpaper:49 |
| By: | yeboah, samuel |
| Abstract: | The study synthesises existing theoretical and empirical literature on the relationship between inflation, credit conditions, and consumer market expansion in Ghana within a dynamic consumption framework. Consumer market expansion, proxied by household final consumption expenditure, is a key driver of economic growth in developing economies but remains highly sensitive to macroeconomic instability and financial market constraints, particularly in Ghana, where inflation volatility and credit access limitations persist. The study adopts a qualitative thematic synthesis approach covering literature published between 2010 and 2026, drawn from major academic databases. The analysis is grounded in Keynesian consumption theory, the permanent income hypothesis, credit constraint theory, and monetary transmission theory, conceptualising consumption as a dynamic process influenced by inflation, income fluctuations, credit accessibility, and monetary policy conditions. The originality of this study lies in its integration of inflation and credit conditions within a single dynamic consumption framework, rather than treating them as isolated determinants, as is common in existing literature. Its innovative contribution is the development of a unified interpretive synthesis that highlights how monetary policy transmission channels jointly shape consumption behaviour in Ghana. Evidence indicates that inflation reduces household consumption through erosion of real income, declining purchasing power, and increased uncertainty, while improved credit conditions enhance consumption by relaxing liquidity constraints and enabling intertemporal smoothing. However, these effects vary across contexts depending on financial system development and household access to formal and informal credit channels. The review further shows that inflation and credit conditions are interlinked through monetary policy transmission mechanisms, where inflationary pressures often lead to monetary tightening by the Bank of Ghana, increasing lending rates and reducing credit availability, thereby amplifying consumption contractions. The study concludes that consumer market expansion in Ghana is a dynamic and context-specific process shaped by interacting macroeconomic and financial constraints, offering a creative and integrated perspective that improves conceptual understanding and informs more coherent policy design. |
| Keywords: | Inflation, Credit Conditions, Consumer Market Expansion, Ghana, Dynamic Consumption, ARDL, Household Consumption |
| JEL: | D12 E21 E31 E44 E51 O55 |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129215 |
| By: | Ozili, Peterson K |
| Abstract: | Accelerating digital finance transformation initiatives across African countries is essential to develop the African continent. Using the conceptual discourse method and the global findex data, this article explores the on-going digital finance transformation in Africa, the benefits for digital financial inclusion in Africa as well as the challenges that lie ahead. The article emphasises the importance of the digital finance transformation in Africa and urges for coordination with stakeholders to accelerate the use of digital financial services in African countries. It also emphasises the need to balance digital finance transformation initiatives with the risks. This study contributes to ongoing discussions about the role of digital finance in transforming nations. |
| Keywords: | digital finance, financial inclusion, Africa, open banking, digital financial inclusion, fintech, digital public infrastructure, DPI, mobile money, financial literacy, MPesa, eNaira, flutterwave |
| JEL: | G21 G23 O3 O31 O33 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128972 |
| By: | Christopher Clayton; Antonio Coppola |
| Abstract: | We study whether AI methods applied to large-scale portfolio holdings data can improve macroprudential financial regulation. We build a graph-based deep learning model tailored to security-level data on the holdings of financial intermediaries. The architecture incorporates economic priors and learns latent representations of both assets and investors from the network structure of portfolio positions. Applied to the universe of non-bank financial intermediaries, covering nearly $40 trillion in wealth, the model substantially outperforms existing approaches in out-of-sample forecasts of intermediary trading behavior, including in crisis episodes. The model has more than ten times the explanatory power for the cross-sectional variation in asset returns during stress events compared to traditional approaches, and it outperforms existing systemic risk metrics at the institution level. Its learned representations show that the holdings network encodes rich, economically interpretable information about fire- sale vulnerability. The architecture is fully inductive, producing informative estimates even when entire asset classes or investors are withheld from training. We embed our empirical approach into a macroprudential optimal policy framework to formalize why these objects matter for policy and welfare. We show that even in an equilibrium environment subject to the Lucas critique, the predictive information from the model improves welfare by sharpening the cross-sectional targeting of policy interventions, and we demonstrate a complementarity between prediction and structural knowledge. |
| JEL: | C4 G1 G2 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35227 |
| By: | Anneke Kosse; Tara Rice; Fabian Schär; Takeshi Shirakami; Jirapat Siridhasanakul |
| Abstract: | Stablecoin transfers are often interpreted as payments. On programmable blockchains, however, they are frequently embedded in atomically executed transaction bundles that combine trading, lending, arbitrage, liquidity provision, and settlement. We show that ignoring this structure materially distorts the interpretation of stablecoin activity. Using 593 million event logs from 141 million Ethereum transactions involving three major U.S. dollar stablecoins, we develop a replicable framework to measure transaction complexity from archive node data, public contract labels, and event signatures. The analysis combines measures of token and contract co-usage, action type, computational complexity, urgency, and timing. Two results emerge. First, complexity is a first-order feature of stablecoin activity: nearly 60 percent of transfer events occur within complex transactions. Second, the three stable coins are not used interchangeably: their use differs systematically across transaction structures, urgency, and timing, consistent with distinct institutional designs and economic functions. Analyses that treat transfers as standalone payments therefore risk misclassifying a large share of on-chain stablecoin use, with implications for empirical measurement, market monitoring, and policy. |
| Keywords: | blockchain, payments, policy and regulation, stablecoins, transaction complexity |
| JEL: | E42 O33 G28 C81 G23 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1359 |
| By: | Ruixue Jing; Luis Enrique Correa Rocha |
| Abstract: | Cryptocurrencies are increasingly adopted as investment assets, making their interactions with traditional financial markets central to cross-asset diversification and systemic risk. This paper studies the integration of cryptocurrencies, fiat currencies, and S&P500 equities using a balanced panel of 381 assets from October 2017 to February 2024. We combine rolling correlation networks, consensus-based community detection, market-specific and system-wide Turbulence Indices, and VAR-based connectedness analysis to examine how market stress, network topology, and shock transmission co-evolve across regimes. The results show that cross-asset integration is episodic. In normal periods, the three asset classes remain relatively segmented, whereas under stress, local clustering increases, modular separation weakens, and communities become more compositionally mixed across asset classes. Connectedness analysis further shows that regime shifts alter the structure of transmission rather than simply increasing spillover magnitudes. In high-turbulence states, fiat-market turbulence becomes the main propagation channel, while network clustering and modularity become more involved in forecast-uncertainty transmission. These findings support the interpretation of network topology as an emergent, state-dependent amplification channel rather than a persistent exogenous driver of turbulence. The results highlight the need for regime-aware risk monitoring, since full-sample connectedness estimates can understate the coupling that arises when diversification benefits are most vulnerable. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.30442 |
| By: | Saou Badr-Eddine (University Ibn Toufail = Université Ibn-Tufayl = جامعة ابن طفيل) |
| Abstract: | Zusammenfassung Der rasante Aufstieg der Kryptowährungen seit 2008 hat das globale Finanzsystem tiefgreifend verändert. Angetrieben durch die Blockchain-Technologie haben Kryptowährungen zunehmendes Interesse bei Investoren, Finanzinstituten und Regulierungsbehörden geweckt. Diese Entwicklung geht jedoch mit einer hohen Volatilität und einer wachsenden Verflechtung mit den traditionellen Finanzmärkten einher, insbesondere in Zeiten wirtschaftlicher Krisen, was Bedenken hinsichtlich der Finanzstabilität hervorruft. Vor diesem Hintergrund untersucht die vorliegende Studie die Auswirkungen von Krypto-Assets, insbesondere Bitcoin und Ethereum, auf die Dynamik des Finanzsystems, ihren Integrationsgrad in traditionelle Märkte sowie die Wirksamkeit bestehender Regulierungsrahmen. Aus empirischer Sicht wird ein Time-Varying Parameter Vector Autoregression (TVP-VAR)-Modell eingesetzt, um die dynamischen Interaktionen und Volatilitätsübertragungseffekte (Volatility Spillovers) zwischen Kryptowährungen und anderen Finanzanlagen zu analysieren. Dadurch werden die Mechanismen identifiziert, über die sich Schocks ausbreiten, sowie deren potenzieller Beitrag zum systemischen Risiko untersucht. Die Ergebnisse zeigen, dass Krypto-Assets trotz ihres Innovationspotenzials weiterhin durch eine hohe Volatilität, zeitlich variable Verbindungen zu traditionellen Finanzmärkten und lediglich eine teilweise Integration in das Finanzsystem gekennzeichnet sind. Diese Erkenntnisse verdeutlichen die Notwendigkeit, die regulatorischen Rahmenbedingungen zu stärken, um die Finanzstabilität zu gewährleisten und gleichzeitig die Entwicklung finanzieller Innovationen zu fördern. Schlüsselwörter Kryptowährungen; Bitcoin; Stablecoins; Finanzstabilität; Finanzielle Ansteckungseffekte (Financial Spillovers); Blockchain. |
| Abstract: | Abstract The rapid rise of cryptocurrencies since 2008 has profoundly reshaped the global financial system, driven by blockchain technology and attracting growing interest from investors, financial institutions, and regulatory authorities. However, this expansion is accompanied by high volatility and increasing interconnections with traditional financial markets, particularly during periods of economic crisis, raising concerns about financial stability. In this context, the study examines the impact of crypto-assets, notably Bitcoin and Ethereum, on the dynamics of the financial system, their degree of integration with traditional markets, and the effectiveness of existing regulatory frameworks. Empirically, it employs a Time-Varying Parameter Vector Autoregression (TVP-VAR) model to analyze the dynamic interactions and volatility Spillovers between cryptocurrencies and other financial assets, thereby identifying the mechanisms through which shocks propagate and their potential contribution to systemic risk. The results indicate that, despite their innovative potential, crypto-assets remain characterized by high volatility, time-varying linkages with traditional markets, and only partial integration into the financial system, thereby underscoring the need to strengthen regulatory frameworks in order to safeguard financial stability while supporting the development of financial innovation. Keywords — Cryptocurrencies; Bitcoin; Stablecoins; Financial Stability; Financial Spillovers; Blockchain. |
| Abstract: | Resumen El rápido auge de las criptomonedas desde 2008 ha transformado profundamente el sistema financiero mundial, impulsado por la tecnología blockchain y despertando un creciente interés por parte de inversores, instituciones financieras y autoridades reguladoras. Sin embargo, esta expansión va acompañada de una elevada volatilidad y de una creciente interconexión con los mercados financieros tradicionales, especialmente durante períodos de crisis económica, lo que genera preocupaciones en materia de estabilidad financiera. En este contexto, el presente estudio analiza el impacto de los criptoactivos, en particular Bitcoin y Ethereum, sobre la dinámica del sistema financiero, su grado de integración con los mercados tradicionales y la eficacia de los marcos regulatorios existentes. Desde una perspectiva empírica, se emplea un modelo de Vectores Autorregresivos con Parámetros Variables en el Tiempo (TVP-VAR) para examinar las interacciones dinámicas y los efectos de contagio de volatilidad (volatility spillovers) entre las criptomonedas y otros activos financieros, identificando así los mecanismos mediante los cuales se propagan los choques y su posible contribución al riesgo sistémico. Los resultados muestran que, a pesar de su potencial innovador, los criptoactivos continúan caracterizándose por una elevada volatilidad, vínculos variables en el tiempo con los mercados financieros tradicionales y una integración solo parcial en el sistema financiero. Estos hallazgos ponen de manifiesto la necesidad de reforzar los marcos regulatorios con el fin de preservar la estabilidad financiera y, al mismo tiempo, fomentar el desarrollo de la innovación financiera. Palabras clave Criptomonedas; Bitcoin; Stablecoins; Estabilidad financiera; Efectos de contagio financiero (Financial Spillovers); Blockchain. |
| Abstract: | Résumé L'essor des crypto-actifs depuis 2008 a profondément bouleversé le système financier mondial, en s'appuyant sur la technologie blockchain et en suscitant un intérêt croissant de la part des investisseurs, des institutions financières et des autorités de régulation. Néanmoins, cette expansion s'accompagne d'une forte volatilité et d'une interconnexion accrue avec les marchés financiers traditionnels, notamment dans les périodes de crise économique, ce qui soulève des préoccupations quant à la stabilité financière. Dans ce cadre, l'étude examine l'impact des crypto-actifs, notamment le Bitcoin et l'Ethereum, sur la dynamique du système financier, leur degré d'intégration avec les marchés traditionnels ainsi que l'efficacité des dispositifs réglementaires en vigueur. Sur le plan empirique, elle mobilise un modèle TVP-VAR afin d'analyser les interactions dynamiques et les transmissions de volatilité entre les crypto-actifs et les autres actifs financiers, permettant ainsi d'identifier les mécanismes de propagation des chocs et leur contribution potentielle au risque systémique. Les résultats indiquent que, malgré leur potentiel d'innovation, les crypto-actifs demeurent caractérisés par une volatilité élevée, des interactions variables avec les marchés traditionnels et une intégration encore partielle au système financier, ce qui confirme la nécessité de renforcer les cadres réglementaires afin de préserver la stabilité financière tout en accompagnant le développement de l'innovation. Mots-clés — Crypto-actifs ; Bitcoin ; Stablecoins ; Stabilité financière ; Spillovers financiers ; Blockchain. |
| Keywords: | Cryptocurrencies Bitcoin Stablecoins Financial Stability Financial Spillovers Blockchain, African Scientific Journal, Financial Spillovers, Financial Stability, Bitcoin, Cryptocurrencies, Transmission des chocs financiers, Crypto-actifs, Stablecoins, Stabilité financière, Blockchain, Technologie blockchain. La première version est la tra |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05641061 |
| By: | Carlos Baquero |
| Abstract: | Bitcoin price prediction has attracted hundreds of academic papers and continuous social media debate, yet the field lacks consensus on even basic questions: can any model beat a naive "today's price" baseline at horizons of one to six months? We survey the peer-reviewed landscape, categorize papers by evaluation methodology, and contrast academic findings with informal but substantive discourse on X/Twitter. The picture that emerges is sobering. At short-to-medium horizons, no peer-reviewed study has shown robust superiority over the naive baseline across multiple market regimes. Daily predictability is real but does not extend to hourly or monthly horizons, and may not survive transaction costs. The stock-to-flow model has failed formal out-of-sample testing, and Metcalfe's Law valuations have been challenged as spurious. The Bitcoin price power law, while empirically compelling, has not been subjected to formal distributional tests. Meanwhile, social media practitioners raise valid statistical critiques -- ordinary least squares (OLS) violations, backtest overfitting, spurious regressions -- that the academic literature has not formalized. We identify open research directions and propose concrete methodological standards for future work -- walk-forward evaluation, multi-regime holdout windows, naive baseline comparison, inclusion of zero in hyperparameter grids, and Diebold-Mariano significance testing -- arguing that the field's primary need is not more models but better evaluation. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.00071 |
| By: | Sheldon, George |
| Abstract: | It is well known that state bank debt guarantees create a significant moral hazard problem by encouraging banks to invest in more risk in the pursuit of higher returns, knowing that the state will bail them out if they fail. Researchers have recently postulated that the higher returns stemming from investing in more risk may lead banks to share the proceeds with their personnel through higher wages. In this case, moral hazard effects should manifest themselves in wages that exceed the pay that banks unshielded by debt guarantees offer. Based on this rationale and employing an econometric approach that makes it possible to measure the impact of debt guarantees and risk exposure on wages directly, we find clear evidence of such moral hazard effects in the Swiss banking industry. In light of these findings, it seems important to ensure that remuneration structures do not inadvertently reward risk enhancing behavior. Our results also seem relevant for ongoing reforms of public liquidity backstops and capital frameworks, where the design of compensation and guarantee mechanisms aims to mitigate moral hazard effects. |
| JEL: | G21 G28 G32 J31 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2026/05 |