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on International Finance |
| By: | María José Arteaga Garavito; Riccardo Colacito; Mariano Max Croce; Biao Yang |
| Abstract: | We develop novel high-frequency indices that measure climate attention across a wide range of developed and emerging economies. By analyzing the text of over 23 million Tweets published by leading national newspapers, we find that a country experiencing more severe climate news shocks tends to see both an inflow of capital and an appreciation of its currency. In addition, brown stocks experience large and persistent negative returns after a global climate news shock if located in highly exposed countries. A risk-sharing model in which investors price climate news shocks and trade consumption and investment goods in global markets rationalizes these findings. |
| JEL: | F3 F4 G1 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34084 |
| By: | Lorenzo Menna (Banco de México); Rubens Moura (Banco de México); Martin Tobal (Banco de México) |
| Abstract: | This paper explores how global shocks transmits to emerging market and developing economies (EMDEs) when assets in major financial centers are overvalued. While international organizations and historical experience have long warned about asset overvaluation, academic research has yet to scrutinize its role as a source of global financial vulnerability. Using a panel local projection model and plausibly exogenous shocks, we find that a tightening in global financial conditions raises sovereign spreads in EMDEs and the effect is amplified when assets are overvalued. Strong external balances help cushion this impact, which is particularly important in current context of elevated volatility |
| Keywords: | Global Financial Cycle; Asset Overvaluation; Asset Pricing; Financial; Risk-taking |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:369 |
| By: | Daniel Marcel te Kaat; Alexander Raabe; Yuanjie Tian |
| Abstract: | Using granular data on global investment funds in difference-in-differences regressions around the announcement of the US Inflation Reduction Act (IRA), we identify a novel international spillover channel of green industrial policies. Sustainable global investment funds received more inflows upon the act announcement, in turn increasing their cross-border portfolio investments worldwide. Recipient economies better prepared to address climate change benefited most from sustainable global funds' additional investments. Our results are stronger for funds with a larger portfolio share invested in the US and in IRA-targeted industries. Yet, we see strong international spillovers even for non-US domiciled sustainable funds investing entirely outside the US. Thus, global investment funds have become an important conduit for the international spillover of climate policies. |
| Keywords: | sustainable finance, climate policy, industrial policy, cross-border spillover, portfolio reallocation, portfolio capital flows, investment fund, Inflation Reduction Act |
| JEL: | F3 G1 G2 Q5 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-46 |
| By: | Bluhm, Richard; Dreher, Axel; Fuchs, Andreas; Parks, Bradley C.; Strange, Austin M.; Tierney, Michael J. |
| Abstract: | This paper studies the causal effect of transport infrastructure on the spatial distribution of economic activity within subnational regions across a large number of developing countries. To do so, we introduce a new global dataset of geolocated Chinese grant- and loan-financed development projects from 2000 to 2014 and combine it with measures of spatial concentration based on remotely sensed data. We find that Chinese financed transportation projects decentralize economic activity within regions, as measured by a spatial Gini coefficient, by 2.2 percentage points. The treatment effects are particularly strong in regions that are less developed, more urbanized, and located closer to cities. |
| Keywords: | Development finance, Transport costs, Infrastructure, Foreign aid, Spatial concentration, China |
| JEL: | F35 R11 R12 P33 O18 O19 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:323671 |
| By: | Carlos Giraldo (Fondo Latinoamericano de Reservas - FLAR); Iader Giraldo-Salazar (Fondo Latinoamericano de Reservas - FLAR); Jose E. Gomez-Gonzalez (Department of Finance, Information Systems, and Economics, City University of New York – Lehman College); Jorge M Uribe (Universitat Oberta de Catalunya) |
| Abstract: | This paper examines the transmission of U.S. monetary policy shocks to bank lending in 12 Latin American countries between 2000 and 2020. Using data from 118 banks, we find evidence of an international bank lending channel, even in countries with low direct exposure to U.S. banks. Crucially, the strength and direction of this transmission depend on the degree of financial dollarization. While U.S. tightening is, on average, associated with rising credit, in more dollarized economies it leads to slower loan growth. These findings underscore the vulnerability of dollarized banking systems and point to the need for strengthened local macroprudential and supervisory frameworks. |
| Keywords: | International bank lending channel; Financial dollarization; U.S. monetary policy shocks |
| Date: | 2025–08–06 |
| URL: | https://d.repec.org/n?u=RePEc:col:000566:021498 |
| By: | Saadaoui, Jamel |
| Abstract: | This paper introduces a novel identification strategy of geopolitical turning points, defined as sharp, unanticipated inflection points in bilateral relations. These shocks are measured using the second difference of the Political Relationship Index (Δ²PRI), an event-based monthly index derived from Chinese sources. Unlike standard geopolitical risk indices, Δ²PRI isolates events that represent exogenous shifts in diplomatic relationships. Using quantile IV-local projections, the paper studies the causal and asymmetric impact of these shocks on global oil prices. An improvement in US–China relations reduces oil prices by 0.2% in the short run and raises them by 0.3% in the medium run, with effects varying across the oil price distribution. The extension to the Japan–China dyad supports external validity. The Δ²PRI instrument offers a reusable framework for analyzing bilateral political shocks across various macroeconomic outcomes, making a methodological contribution to the international economics literature. |
| Keywords: | Geopolitical Risk, Oil Prices, Quantile Local Projections, Instrumental Variables. |
| JEL: | C26 C32 F41 F51 |
| Date: | 2025–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125586 |
| By: | Alberto Cavallo; Gaston Garcia Zavaleta |
| Abstract: | We introduce a novel methodology for detecting inflation turning points that com-bines high-frequency, disaggregated price data with standard structural break techniques to provide policymakers with more timely and precise signals of inflation dynamics. The methodology consists of three key components: measuring inflation as the slope of the log price index rather than using conventional inflation rates, employing structural break techniques to detect shifts in this slope, and leveraging highly disaggregated price indexes to identify trend breaks at a granular level. We apply this approach to study two critical recent episodes: Argentina’s 2024–2025 disinflation and the inflationary impact of U.S. tariff adjustments in 2025. For Argentina, we detect a broad-based disinflationary turning point in May 2024. For the U.S., we find evidence of a turning point in February 2025, with significant sectoral inflation accelerations despite stable aggregate inflation measures. These applications demonstrate the utility of our approach for enhancing real-time inflation monitoring and policy decision-making. |
| JEL: | C22 C55 E31 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34102 |
| By: | Monnin, Pierre; Feyertag, Joe; Robins, Nick; Wollenweber, Alexander |
| Abstract: | Sovereign bonds are central to aligning finance flows with the net zero transition required to meet the Paris Agreement temperature goals. This report aims to understand the system-wide context within which central banks can make a responsible contribution to this alignment. It reviews market innovations and challenges, considers existing practice and sets out robust options for action. |
| Keywords: | central banks; climate finace; climate risk; net zero transition; sovereign bond; sovereign debt |
| JEL: | F3 G3 |
| Date: | 2024–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129233 |
| By: | Xing Guo; Pablo Ottonello; Thomas Winberry; Toni Whited |
| Abstract: | We study the macroeconomic consequences of asymmetric information between firms and external investors. To do so, we develop a heterogeneous firm macro model in which firms have private information about their quality. Private information creates a lemons problem in the market for external finance, depressing investment relative to the full information benchmark. We measure the distribution of private information, and therefore the magnitude of this lemons problem, using high-frequency stock price changes when firms raise new funding (revealing their quality to the market). We find that changes in distribution of private information are a quantitatively important determinant of aggregate fluctuations. For example, a spike in private information accounts for 40% of the decline in aggregate investment during the 2007-2009 financial crisis and made monetary stimulus significantly less effective at that time. |
| Keywords: | Business fluctuations and cycles; Financial market; Firm dynamics; Monetary policy |
| JEL: | D82 E22 E32 E52 G30 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:25-20 |
| By: | Paola DOrazio; Torsten Schmidt; Maximilian Dirks |
| Abstract: | This paper investigates climate-related transition risks in the financial sectors of Botswana, Namibia, Mozambique and South Africa, focusing on exposure to carbon-intensive industries and the macrofinancial transmission of transition shocks. Drawing on sectoral loan allocation data, greenhouse gas emissions and transition risk metrics, the analysis applies the Climate Policy Relevant Sectors taxonomy, loan carbon intensity and a transition risk index to quantify financial sector vulnerabilities across the four economies. To assess the macrofinancial effects of transition risk shocks, a set of country-specific Bayesian vector autoregression models is estimated. The results reveal heterogeneous responses: while transition shocks lead to current account deterioration in Namibia and South Africa, trade volumes show resilience or expansion, particularly in Botswana. Credit supply and non-performing loans respond only modestly, with financial sector effects remaining limited and sensitive to identification strategies. The findings underscore the importance of integrating transition risk into financial supervisory frameworks. Enhancing climate-related prudential regulation through improved risk disclosure, stress testing and capital requirements for high-carbon exposures can strengthen financial system resilience and facilitate the reallocation of capital towards low-emission sectors. Aligning domestic regulatory practices with international climate finance standards will be essential to mitigate systemic risks and ensure stability during the transition to a low-carbon economy. |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11085 |