|
on Financial Development and Growth |
| By: | Salvador Currao, Carlos Alejo |
| Abstract: | La presente investigación analiza la relación estadística entre el crédito y la actividad económica a nivel internacional, abarcando 35 países en el período 2004-2019. Se utiliza un enfoque metodológico cuantitativo, donde se emplean fuentes de información secundarias provenientes de organismos nacionales e internacionales, tales como el BIS (Bank for International Settlements), la FRED (Reserva Federal del Banco de St. Louis) y Bancos Centrales. Este trabajo aplica técnicas estadísticas y econométricas específicas que incluyen modelos VAR (Vector Autorregresivo), test de causalidad de Granger, funciones impulso- respuesta y análisis de correlación contemporánea y cruzada, las cuales permiten evaluar la relación bidireccional entre el crédito y la actividad económica, utilizando series trimestrales. Los resultados obtenidos evidencian que, en una proporción significativa de los países analizados, la actividad económica causa al crédito en sentido de Granger, constituyéndose como la dirección causal predominante. No obstante, esta dinámica varía según el nivel de desarrollo: en los países emergentes predomina una relación en la que el crecimiento del PIB impulsa la expansión del crédito, mientras que en los países desarrollados se observan patrones más diversos. Las funciones impulso-respuesta y los análisis de correlación cruzada refuerzan estos hallazgos, mostrando resultados consistentes. En síntesis, la investigación aporta evidencia en favor de la relación entre el crédito y el PIB destacando la importancia de considerar el nivel de desarrollo de cada país al analizar el vínculo entre las variables. Futuros estudios podrían beneficiarse de enfoques alternativos, como el uso de variables de flujo para representar el crédito, a fin de capturar de manera más precisa las dinámicas de corto plazo o extender el análisis al período de la pandemia y pospandemia. |
| Keywords: | Crédito; Actividad Económica; Producto Bruto Interno; Ciclos Económicos; Análisis Econométrico; 2004-2019; |
| Date: | 2025–11–20 |
| URL: | https://d.repec.org/n?u=RePEc:nmp:nuland:4425 |
| By: | De Carvalho Reis Neves, Mateus; Bressan, Valéria; Shinkoda, Marcelo; Romero, João; Souza, Gustavo Henrique |
| Keywords: | Community/Rural/Urban Development, International Development |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:343658 |
| By: | Mabrouki, Mohamed |
| Abstract: | This study examines the synergistic effects of digitalization and financial development on inclusive growth in Sub-Saharan Africa. Using a balanced panel from 13 countries (2000–2022) and the Pooled Mean Group Vector Error Correction Model (PMG-VECM), we establish a robust long-run equilibrium. Findings reveal digitalization (Internet penetration) and institutional quality as the strongest drivers, with elasticities of 0.084 and 0.424, respectively. Financial development shows a moderate positive effect (0.075), while investment and trade openness present counterintuitive negative coefficients, suggesting structural inefficiencies. A significant error correction mechanism confirms convergence towards long-run equilibrium at a 19.5% annual speed. As the first comprehensive application of PMG-VECM to this nexus in SSA, this study provides methodologically robust evidence that distinguishes short-run dynamics from long-run effects. The results underscore the necessity for integrated, long-term policies that simultaneously advance digital infrastructure, financial sector deepening, and institutional quality to foster inclusive growth. |
| Keywords: | 1. Digital Transformation 2. Financial Development 3. Inclusive Growth 4. PMG-VECM 5. Sub-Saharan Africa 6. Institutional Quality 7. Panel Cointegration |
| JEL: | O55 |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126558 |
| By: | Plaasch, Jannick; Röthig, Andreas |
| Abstract: | This paper describes a Growth-at-Risk (GaR) model of the Bundesbank for Germany. This model takes the form of a quantile regression that quantifies downside risk to German GDP growth associated with financial developments. A systematic comparison of diverse model specifications is performed to select the most suitable GaR model based on economic criteria and out-of-sample predictive performance. The preferred model relates the 10% quantile of the conditional distribution of GDP growth to financial stress in Germany as captured by the Country-Level Index of Financial Stress (CLIFS), as well as US financial conditions as meas- ured by the National Financial Conditions Index (NFCI) for the USA. In addition, the preferred specification includes GDP growth of the two preceding periods to account for serial dependence and a business confidence indicator (BCI) of German companies, which underscores that economic sentiment also matters for downside risk to growth. The evaluation shows that the 10% quantile coefficients are more stable than those of the 5% quantile, making the 10% quantile a more robust measure of downside risk for German GDP. Data from the COVID period are excluded, as the pandemic was not a financial system-driven crisis. Estimation results show that financial stress, measured by both CLIFS and NFCI, contributed most strongly to downside risk to GDP growth during the 2007/2008 Global Financial Crisis. The CLIFS also significantly increased downside risk in the early 2000s and following the Russian invasion of Ukraine. In recent years, historically low financial stress has corresponded to moderate downside risk, with economic sentiment acting as the main amplifier. |
| Keywords: | Growth-at-Risk, GDP Growth, Germany, Tail Risk, Financial Conditions |
| JEL: | C53 E23 E27 E32 E44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubtps:333425 |
| By: | Leonardo N. Ferreira; Haroon Mumtaz; Gabor Pinter |
| Abstract: | We study macroeconomic fluctuations in the United Kingdom over seven centuries (1271--2022) using a time-varying VAR with stochastic volatility. We identify business cycle shocks as innovations explaining the largest share of future output variance. Before 1900, these shocks display a stagflationary, supply-driven pattern, while post-1900 shocks become demand-driven, raising both output and inflation. Output volatility declines over time, peaking in the seventeenth century. Monetisation had large real effects in the sixteenth and seventeenth centuries, shifting to more inflationary impacts thereafter. Our results highlight how business cycle dynamics evolve with institutional, monetary, and structural transformations. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.15643 |
| By: | Luigi Ventura (Department of Economics and Law, Sapienza, University of Rome, ITALY); Charles Yuji Horioka (Research Institute for Economics and Business Administration, Kobe University, Institute of Social and Economic Research, Osaka University, Asian Growth Research Institute, JAPAN, and National Bureau of Economic Research, U.S.A.) |
| Abstract: | Previous authors have asserted that precautionary saving will arise only if consumers are not only risk-averse but also prudent, but in this paper, we first show that when saving occurs in the context of a financial economy featuring at least one other asset, prudence is neither necessary, nor sufficient, to generate precautionary saving, i.e. saving induced only by variance in income. Then, simplifying and elaborating on some results presented in Eeckhoudt and Schlesinger (2008), we address a particular form of precautionary saving, which we name “intertemporal precautionary saving” to distinguish it from purely intertemporal and purely precautionary saving, and show that it will inevitably arise in the case of pure (downside) risk as long as consumers are risk-averse, regardless of whether or not they are prudent, and that prudence will affect only its extent. Thus, our paper challenges the conventional wisdom on precautionary saving in at least two ways. |
| Keywords: | Household saving; Precautionary saving; Prudence; Pure risk; Risk aversion; Saving; Speculative risk |
| JEL: | D11 D14 D15 D81 E21 G51 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2025-28 |
| By: | Gerrit Meyerheim (University of Munich) |
| Abstract: | This paper integrates tail aversion, implemented via a one-period entropic tilt, with rare disasters in a consumption-based asset pricing model with CRRA utility to jointly address the equity premium and risk-free rate puzzles. The model delivers closed-form expressions for the risk-free rate and asset moments, pushes out the Hansen-Jagannathan bound, implies a low risk-free rate via diffusion and disaster channels, and delivers natural upper and lower bounds of risk aversion. Calibrated to long-run return data and disciplined by disaster evidence, the model matches average returns, volatility, and a low real risk-free rate with very modest risk aversion. |
| Keywords: | equity premium puzzle; risk-free rate puzzle; rare disasters; entropic tilt; multiplier (kl) preferences; robust control; consumption-based asset pricing; |
| JEL: | G12 E44 E43 E21 D81 |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:549 |
| By: | Bergh, Andreas (Department of Economics, Lund University, and); Nordin, Martin (AgriFood Economics Centre and Department of Economics) |
| Abstract: | Capital income is known to increase income inequality when measured on an annual basis, but the role of personal capital income in long-run inequality is rarely studied. Theoretically, capital income can increase or decrease long-term inequality depending on the correlation with other income. We examine, using Swedish register data, the evolution of annual and long-term income inequality in Sweden 1991–2021, using disposable income with and without capital income. Capital income had a marginally equalizing effect on long-term inequality for the period 1991 to 2006 but added substantially to long-term inequality for the period 2007 to 2021. To fully understand the distributional effects of capital income, a long-term perspective is needed. |
| Keywords: | Income distribution; Capital income; Inequality; Register data |
| JEL: | D31 D63 E22 |
| Date: | 2025–11–24 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1543 |
| By: | Álvarez Nogal, Carlos; Prados de la Escosura, Leandro |
| Abstract: | Contemporary perspectives highlight significant inequality in early modern Spain.Quantitative measures of inequality are often either broad and rough or based on local orscattered estimates, which do not offer a precise overall picture over time. The sale of theBull of the Crusade provides an opportunity to examine inequality trends consistently inearly modern Spain. The Bull of the Crusade was a form of almsgiving granted by the Popeand collected by the Hispanic Monarchy, widely purchased by a population convinced of itsspiritual benefits. There were two types of bulls: the standard 2 Reales bull for ordinarypeople and the 8 Reales bull for the wealthy and individuals of high social standing. Weargue that the ratio of the 8 Reales to the 2 Reales bulls sold reflects concentration at theupper end of the distribution. Three main phases emerge: fluctuations around a flat trendfrom 1570-1630, a sustained decline in the following century, and a notable upward trendthereafter, reaching its peak in the late eighteenth century. A closer study reveals distinctpatterns within the Crown of Castile and the Crown of Aragon that converged in the lateeighteenth century. |
| Keywords: | Top income concentration; Inequality; Early modern Spain |
| JEL: | N33 O15 Z12 |
| Date: | 2025–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:cte:whrepe:48551 |
| By: | Florian Léon (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Sitraka Rabary (FERDI - Fondation pour les Etudes et Recherches sur le Développement International) |
| Abstract: | FERDI's Impact Investing Chair mapped impact investing in Africa for 2024 (Léon and Rabary, 2024), identifying the key actors in the sector. Beyond a straightforward data update, the 2025 mapping provides a measure of the share of investments in Africa for each of the funds identified, in other words, their "African footprint". According to the latest data collected, 250 funds operate in Africa, half of which invest exclusively on the continent. |
| Abstract: | La chaire « Investissement d'impact » de la Ferdi a réalisé une cartographie de l'investissement d'impact pour l'Afrique en 2024 (Léon et Rabary, 2024) permettant d'identifier les acteurs du secteur. Au-delà de l'actualisation stricto sensu des données, la mise à jour de la cartographie 2025 propose une mesure de la part des investissements en Afrique pour chacun des fonds identifiés, autrement dit leur « empreinte africaine ». Selon les dernières données collectées, 250 fonds opèrent en Afrique dont la moitié exclusivement sur ce continent. |
| Keywords: | Afrique, Investissement d'impact |
| Date: | 2025–11–18 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05373456 |
| By: | Matthieu Boussichas (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Clara Pugnet (FERDI - Fondation pour les Etudes et Recherches sur le Développement International) |
| Abstract: | The African Development Fund (ADF) is much less active than the World Bank's IDA in Africa. This predominance of the IDA is only found in Africa. In fact, disbursements by other major regional banks exceed those of the World Bank in their respective regions (Central America and the Caribbean, South America, Asia, Oceania). This shortfall in concessional resources in Africa is not offset by non-concessional or slightly concessional funds. Why is there such a shortfall? Why is it specific to Africa? The document seeks to identify the reasons for this situation, whether institutional, political, or technical. The document begins with a descriptive statistical analysis of the relative weight of each major regional development bank compared to the World Bank in each major region, and its evolution over the last 20 years, distinguishing between concessional and non-concessional resources. To interpret these figures, it then examines three hypotheses already put forward by Nancy Birdsall in a 2018 article. |
| Keywords: | Africa, Development banks, World bank |
| Date: | 2025–10–27 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05333536 |
| By: | Browne, Stephen; Matthys, Frederik; Palm, Detlef; Baumann, Max-Otto |
| Abstract: | This discussion paper advances a new vision for the United Nations (UN)'s development function at a moment when the organisation is facing profound pressures and persistent scepticism about its relevance. Although a consensus exists that reform is overdue, past initiatives have been too incremental, focusing on coordination and efficiency without addressing deeper institutional and political pathologies. The result is a UN development system that has grown financially large but is losing political significance. It is increasingly shaped by donor earmarking, entrenched patronage and a project delivery model that bears little resemblance to how national development actually occurs. Our vision marks a significant departure from the UN's historical role as an aid channel predicated on the North-South divide. Instead, the UN's future relevance lies in leveraging its universal legitimacy, normative authority and convening power. We argue for a UN development system that: 1. Acts as a trusted knowledge facilitator: providing high-level and technical advice, supporting peer exchange and helping governments navigate complex policy trade-offs in ways that are independent, politically informed and normatively grounded. 2. Engages in public advocacy that matters: elevating norms, correcting misinformation and shaping national debates in line with globally agreed standards, with sensitivity to national contexts. 3. Applies universality in practice: moving beyond the outdated distinction between donor and recipient to engage with all member states - including middle- and high-income countries - through global monitoring and peer accountability. 4. Serves as an actor of last resort in fragile settings: providing operational support only where national governments cannot or will not act, with strict sunset clauses and safeguards against unintentional harm. This reconceptualisation is not primarily about money. It implies a financially smaller but politically stronger UN development system that is less dependent on donors and more relevant to today's multipolar world. The real benchmark for success is not the volume of aid provided but the quality of advice, advocacy and resulting cooperation. Reaching this vision will be difficult. The UN's development apparatus is shaped by vested interests, path dependency and political inertia. Yet, opportunities for change exist. The collapse of traditional aid financing, the insistence of middle-income countries on equitable partnerships and fatigue with the current project-heavy model all point towards the need for a new approach. The Secretary-General's UN80 Initiative offers a platform for bold ideas, but only if the debate moves beyond technical fixes and acknowledges the political trade-offs inherent in transformation. |
| Keywords: | United Nations, Development, UN80, Reform, Multilateralism, Global Governance, Beyond Aid, Policy Advice, Universality, Patronage |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:diedps:333387 |
| By: | Dercon, Stefan |
| Abstract: | Development aid faces a crisis of budgets, legitimacy, and political alignment. Framed in recent decades as technocratic and benevolent, aid has always been political, shaped by donor and recipient incentives. Its post-Cold War expansion reflected a permissive era of unipolarity and globalization, when Western foreign policy, business, and security establishments provided broad support. That equilibrium has now collapsed. Multipolar rivalry, protectionism, and fragmented domestic coalitions have left aid vulnerable, shallowly supported, and increasingly driven by narrow donor interests. The paper calls for recognition of the need for a globalization 2.0 that enables poorer countries to grow, warning that without such a framework, remaining aid will become more fragmented and ineffective. It also cautions against a euphemistic reliance on "mutual interest, " as evidence of genuine donor-recipient benefits is limited; trade facilitation and post-conflict stabilization are rare exceptions. Finally, the paper advances four propositions: aid must be selective, avoid entrenching dependency, balance short-term results with long-term system building, and support reformers willing to challenge the status quo. Only by acknowledging its political nature and aligning incentives within a reconfigured global order can aid remain relevant to development. |
| Keywords: | Foreign aid, Political economy, Donor-recipient incentives |
| JEL: | F35 O19 H87 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:331880 |
| By: | Bau, Nicolas; Dietrich, Simone |
| Abstract: | We review the literature on the political economy of foreign aid, examining the geopolitical returns generated by Official Development Assistance (ODA). Our paper identifies conditions under which donors are able to influence political and economic outcomes in recipient countries, shape their behavior in global affairs, and adjust to domestic and international challenges. First, we introduce our paper and outline the structure of our review. Second, we examine how the international system influences foreign aid motivations. Third, we discuss the literature on aid-giving practices and their geopolitical effects. Fourth, we explore the relationship between aid and international organizations. Fifth, we identify key challenges to the traditional aid architecture. Sixth, building on an emerging body of research in international development finance, we propose future directions for the study of ODA in a contested global landscape. Finally, we conclude by summarizing the main insights from our review. |
| Keywords: | foreign aid, geopolitics, foreign policy, development, international organizations, development finance, aid effectiveness |
| JEL: | F35 O19 P45 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:331878 |
| By: | Berger, Allen N. (University of South Carolina - Darla Moore School of Business); Guo, Jiarui (University of International Business and Economics); Li, Xinming (Nankai University); Wang, Aluna (HEC Paris); Wang, Wenting (University of South Carolina) |
| Abstract: | We revisit the bank capital-liquidity creation debate using quarterly US bank data for 20 years from 2003:Q1-2022:Q4, investigating for first time how relations differ for bank outputs versus inputs and for major outputs and inputs. We find a negative overall relation between capital and liquidity creation for small banks, consistent with the Financial Fragility-Crowding Out (FFCO) Hypothesis and a positive relation for large banks, consistent with the Risk Absorption (RA) Hypothesis. Key contributions are that we find much of the explanation of the size-class difference lies in the different effects for outputs versus inputs and for major outputs and inputs. |
| Keywords: | bank liquidity creation; bank equity capital; banks |
| JEL: | G01 G21 G28 |
| Date: | 2025–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1582 |
| By: | Arnone, Massimo; Costantiello, Alberto; Drago, Carlo; Leogrande, Angelo |
| Abstract: | This paper investigates the influence of environmental, social, and governance (ESG) factors on financial development, using Domestic Credit to the Private Sector by Banks (DCB) as the core indicator of credit market development. To effectively market the research within the broader literature on finance and ESG issues, the authors employ an approach combining econometric analysis, K-Nearest Neighbors (KNN), cluster analysis, and network analysis. By analyzing the impact through the estimation of the model parameters through the impact of instrumental variable estimation on the model parameters (using Two-Stage Least Squares (IV), Random Effects (IV), and First-Differenced (IV) methods), the study confirms that access to clean fuels and natural resource depletion impact the model margins significantly. However, across all the models used in the analysis, the impact of access to clean energy is positive. By analyzing the significance of the issue using the KNN model throughout the research process on the impact of ESG on credit market dynamics across countries, the research demonstrates that the issue is significant. By performing hierarchical cluster analysis on the significance of the research by considering the significance of the issue in its contribution to the impact on credit market dynamics in countries, in terms of climate stress issues being core in influencing the dynamics of credit in countries, through network analysis mapping performed by carrying out research on the topic. |
| Date: | 2025–11–28 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:4yvnh_v1 |
| By: | Babo Amadou Ba (UAM - Université Amadou Mahtar Mbow) |
| Abstract: | Cet article analyse les déterminants de la profitabilité des banques dans la zone UEMOA, en comparant l'impact du Produit Net Bancaire (PNB) et du Résultat Net (RN). Utilisant un modèle dynamique en données de panel (méthode GMM système) sur 133 banques observées entre 2010 et 2020, l'étude révèle que le PNB (coefficient 0, 357) influence davantage la rentabilité que le RN (0, 279). Les variables micro-bancaires (crédits, dépôts) et macroéconomiques (croissance du PIB) ont un effet positif significatif, tandis que l'inflation et les charges d'exploitation affectent négativement la performance. Les résultats valident des théories comme la structure du marché et la théorie de l'agence, soulignant l'importance d'un équilibre entre concurrence et efficacité opérationnelle. Les implications managériales incluent l'optimisation des coûts, la gestion proactive des risques de crédit et le renforcement des produits générateurs de commissions. L'étude offre des pistes pour améliorer la stabilité financière et la résilience du secteur bancaire ouest-africain face aux chocs économiques. |
| Keywords: | Résultat net, Rentabilité Produit net bancaire Résultat net GMM profitabilité Profitability Net banking income Net result GMM profitability, Rentabilité, profitability, Net result, Net banking income, profitabilité Profitability, GMM, Produit net bancaire, profitabilité. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05314750 |
| By: | Young Soo Jang; Dasol Kim; Amir Sufi |
| Abstract: | We compare the lending technology of direct lenders, banks, and finance companies using a unique data set on secured borrowing by the universe of U.S.-based private middle market firms. The borrowers of direct lenders are distinct relative to those of traditional lenders; they are younger, more likely to be in intangible capital industries, and more likely to be located in the biggest cities in the United States. These differences reflect the focus of direct lenders on private equity-owned firms; direct lenders have negligible impact in industries and cities with low private equity presence. The lending technology of direct lenders is distinct from banks: they have almost no branch network, they are geographically distant from borrowers, they write collateral claims more focused on the continuation value of firms after a default, and they have a higher degree of specialization in certain industries. Direct lenders and private equity sponsors match on industry specialization more strongly than geographic proximity. The findings suggest that direct lenders are not a general substitute for traditional lenders in middle market business lending, but they are instead specialized lenders focused on a particular segment of the U.S. economy with a distinct lending technology. |
| JEL: | G00 G20 G30 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34500 |
| By: | International Monetary Fund |
| Abstract: | The Swiss financial system has navigated turbulent times since the 2019 FSAP. The COVID 19 pandemic, geopolitical conflicts, and the collapse of Credit Suisse (CS) in 2023—previously the second largest G-SIB relative to domestic GDP in the world—have tested the resilience of the Swiss financial center and the economy. Financial stability has been maintained, even though the government-assisted merger between UBS and CS, entailing significant contingent fiscal liabilities, has undermined the credibility of the Too-Big-To-Fail (TBTF) regime and revealed gaps in supervision, resolution, and crisis management in Switzerland. |
| Date: | 2025–11–24 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2025/311 |
| By: | Cecchetti, Stephen G.; Lumsdaine, Robin L.; Peltonen, Tuomas; Sánchez Serrano, Antonio |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:srk:srkasc:202516 |
| By: | Jeremy Srouji (International Institute of Social Studies, Erasmus University Rotterdam, The Netherlands; Université Côte d'Azur, CNRS, GREDEG, France); Dominique Torre (Université Côte d'Azur, CNRS, GREDEG, France); Qing Xu (ICL, Junia, Université Catholique de Lille, LITL, Lille, France) |
| Abstract: | This article examines proposals to establish a BRICS Central Bank Digital Currency (CBDC) aimed at facilitating trade flows among the members, as part of their broader discussions around reforming the international monetary and financial system. It sets these proposals within the context of global CBDC efforts, South-South convergence processes and the challenges the BRICS have faced in navigating global geo-political tensions, while aligning national CBDC efforts with groupwide initiatives. We focus on a Brazilian proposal to establish a unified BRICS cross-border payment system, seen as a first step towards a full-fledged BRICS CBDC. Our main finding is that while this cross-border digital currency can be useful for smoothing payments and reducing the trade deficits of the smaller BRICS members, it does little to redress their asymmetric position vis-à-vis the larger country, China. The implication is that sustainable convergence among the grouping through the adoption of a unified cross-border currency would require a higher level of monetary and policy coordination than that set out in the Brazilian proposal. |
| Keywords: | CBDC, BRICS, cross-border payments, international currency, international trade, stablecoins |
| JEL: | F33 F36 E12 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-48 |
| By: | Emilio Ocampo; Nicolás Cachanosky |
| Abstract: | In this brief note, we evaluate the conclusions of a recent paper by Lopez Almirante and Neumeyer (2024). Simulations of a well-known model calibrated for Ecuador led them to conclude that dollarization can lead to a higher probability of a sovereign default and that only a high inflation rate would make it a welfare enhancing option for a non-dollarized economy. We find data misspecification and erroneous assumptions invalidate the results of the analysis. |
| Keywords: | Dollarization, Default Risk, Latin America. |
| JEL: | E31 E52 E58 F31 F32 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:cem:doctra:871 |