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on International Finance |
| By: | Arce, Fernando; Bengui, Julien; Bianchi, Javier |
| Abstract: | We propose a macroprudential theory of foreign reserve accumulation that can rationalize the secular trends in public and private international capital flows. In middle-income countries, the increase in international reserves has been associated with elevated private capital inflows, both in the aggregate and in the cross-section, and economies with a more open capital account have accumulated more reserves. We present an open economy model of financial crises that is consistent with these features. We show that optimal reserve management policy leans against the wind, raising gross private borrowing while improving the net foreign asset position and reducing exposure to crises. |
| Keywords: | Macroprudential policy;International reserves;Financial Crises;Gross capital flows |
| JEL: | E58 F31 F32 F34 F51 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14336 |
| By: | Arvis, Jean-Francois; Burman, Akanksha; Espitia Rueda, Alvaro Raul; Maur, Jean-Christophe; Rocha, Nadia; Ulybina, Daria |
| Abstract: | This work discusses simple frameworks for measuring a country's exposure and vulnerability to international trade shocks at the sector and product levels based on widely available data. Exposure refers to measuring reliance, at the country or sector level, on purchases or sales abroad, and vulnerability assesses the risks associated with exposure. The paper argues that traditional measures of trade openness, such as trade over gross domestic product, which measure participation in international trade and exposure to it, fail to capture the true extent of a country's reliance on international markets and do not allow for more granular insights at the sectoral level. A set of indicators based on multi-region input-output data and disaggregated trade data is proposed to address these shortcomings. Multi-region input-output–based indicators highlight the need to consider both drivers of supply and demand through participation into global value chains and resulting indirect trade linkages as important dimensions of exposure to global trade. Whether exposure to international markets leads to vulnerabilities is captured by identifying risk features of participation in international trade. Vulnerability will arise when foreign sourcing (imports) and foreign demand (exports) cannot be easily substituted to mitigate shocks on international markets. When assessing risks of disruption to international trade flows, this work proposes to combine three dimensions related to trade concentration, its volatility, and logistics complexity, highlighting both the risks associated with overreliance on specific and volatile trade partners and products in the absence of easy substitutes, as well as inherent risks associated with international logistics supply chains. |
| Date: | 2025–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11243 |
| By: | Lewandowski, Piotr (Institute for Structural Research (IBS)); Madoń, Karol (Institute for Structural Research (IBS)); Park, Albert (Hong Kong University of Science & Technology) |
| Abstract: | This paper develops a task-adjusted, country-specific measure of workers’ exposure to Artificial Intelligence (AI) across 108 countries. Building on Felten et al. (2021), we adapt the Artificial Intelligence Occupational Exposure (AIOE) index to worker-level PIAAC data and extend it globally using comparable surveys and regression-based predictions, covering about 89% of global employment. Accounting for country-specific task structures reveals substantial cross-country heterogeneity: workers in low-income countries exhibit AI exposure levels roughly 0.8 U.S. standard deviations below those in high-income countries, largely due to differences in within-occupation task content. Regression decompositions attribute most cross-country variation to ICT intensity and human capital. High-income countries employ the majority of workers in highly AI-exposed occupations, while low-income countries concentrate in less exposed ones. Using two PIAAC cycles, we document rising AI exposure in high-income countries, driven by shifts in within-occupation tasks rather than employment structure. |
| Keywords: | AI, occupations, job tasks, technology, skills |
| JEL: | J21 J23 J24 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18235 |
| By: | Tesfaye T. Lemma; Michael Machokoto; Marvelous Kadzima |
| Abstract: | This study examines the impact of climate risk and climate policies on capital flows in Southern African Development Community (SADC) countries. Using data from 10 SADC countries spanning 2000 to 2022, we find that climate risk proxied by extreme weather and climatic events negatively affects aggregate international capital flows and their individual components: direct investments, portfolio investments and other investments. Similarly, the extensiveness of climate policies is associated with a decline in capital flows across all three categories. These inverse relationships persist whether international capital inflows or outflows are used as the dependent variable. The findings remain robust after addressing potential biases related to omitted variables, measurement issues, endogeneity and self-selection. This study offers important policy insights for SADC economies a region highly vulnerable to climate change yet relatively under-researched. |
| Date: | 2025–11–06 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11093 |
| By: | Barry Eichengreen; Raul Razo-Garcia |
| Abstract: | In a paper 20 years ago, we analyzed the evolution of the international monetary system over the preceding 20 years and projected its evolution 20 years into the future, on the assumption of unchanged transition probabilities. Here we compare those projections with outcomes and provide new projections, again 20 years into the future. Although the world as a whole has seen financial opening and movement away from intermediate exchange rate regimes, as projected, movement has been slower than projected on the basis of observed transition probabilities in the 20 years preceding our forecast. New projections again based on unchanged transition probabilities but allowing countries to shift between advanced, emerging and developing country groupings and reclassifying exchange rate regimes to accord with current practice again suggest that policy regimes will be modestly different in 2045 than today. There will be a continued decline in intermediate exchange rate arrangements, and gains for hard pegs, as emerging markets move in this direction, and for more freely floating rates, driven by developing countries. There will be a further increase in the share of countries with open capital accounts, driven by emerging markets and developing countries. |
| JEL: | F0 F33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34416 |
| By: | Ugo Panizza (Geneva Graduate Institute and CEPR); Beatrice Weder di Mauro (Geneva Graduate Institute and CEPR); Shuyang Shi (Geneva Graduate Institute); Mitu Gulati (University of Virginia, Law School) |
| Abstract: | This paper investigates the existence, magnitude and drivers of the sovereign greenium: the yield discount on sovereign and quasi-sovereign green bonds relative to conventional bonds. Using a dataset of 332 matched pairs of green and conventional bonds issued between 2014 and 2023 by sovereigns, sovereign-backed agencies, and multilateral development institutions, we analyze secondary-market pricing to capture both crosssectional and time-varying heterogeneity. We find a small but statistically significant greenium, averaging about 2 basis points for advanced economies and nearly 13 basis points for emerging markets. The greenium is larger for lower-rated issuers and increases when climate transition risks become more salient or when issuers are more vulnerable to climate change. Interaction effects indicate that global awareness of transition risks and domestic climate vulnerability jointly amplify the greenium. While green sovereign bonds trade at lower yields, the resulting fiscal savings are economically modest relative to total interest expenditures. A novel analysis of bond documentation shows that sovereign green bonds contain no binding commitments regarding environmental outcomes, suggesting that the observed greenium reflects symbolic rather than contractual sustainability value. |
| Keywords: | Green bonds; Sovereign debt; Greenium; Sustainable finance; Climate risk; ESG investing |
| JEL: | Q54 Q56 H63 G15 G12 |
| Date: | 2025–11–04 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp16-2025 |
| By: | Luigi Bocola; Alessandro Dovis; Kasper Jørgensen; Rishabh Kirpalani |
| Abstract: | Policymakers often cite the risk that inflation expectations might “de-anchor” as a key reason for responding forcefully to inflationary shocks. We develop a model to analyze this trade-off and to quantify the benefits of stable long-run inflation expectations. In our framework, households and firms are imperfectly informed about the central bank’s objective and learn from its policy choices. Recognizing this interaction, the central bank raises interest rates more aggressively after adverse supply shocks and accepts short-run output costs to secure more stable inflation expectations. The strength of this reputation channel depends on how sensitive long-run inflation expectations are to surprises in interest rates. Using high-frequency identification, we estimate these elasticities for emerging and advanced economies and find large negative values for Brazil. We fit our model to these findings and use it to quantify how reputation building motives affect monetary policy decisions, and the role of central bank's credibility in promoting macroeconomic stability. |
| JEL: | E52 E58 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34436 |
| By: | Tanguy Bonnet |
| Abstract: | Low-carbon technologies are highly intensive in critical minerals for which extraction and transformation generate heavy socio-environmental negative externalities. Global trade flows of such materials and technologies are part of a singular macroeconomy, filled with geopolitical issues and national strategies.This paper aims to draw on environmental justice and ecological macroeconomics theoretical frameworks in order to assess the global material allocation of critical minerals and low-carbon technologies, and question its equity and efficiency, in the lens of the ecologically unequal exchange theory.Peripheral mining countries assume the heavy socio-environmental costs related to the extractive activities, while global trade flows enable an asymmetrical material allocation toward richer core countries. Two countries stand out : China, as the semi-periphery, and the US, as the challenged core.The paper also discusses how shifting geopolitics, geo-economic fragmentation and national strategies could modify such patterns of ecologically unequal exchange. |
| Keywords: | critical minerals ; global trade flows ; ecologically unequal exchange ; environmental justice ; geo-economic fragmentation |
| JEL: | Q42 L72 F18 Q37 Q56 Q57 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-39 |
| By: | Itskhoki, Oleg; Mukhin, Dmitry |
| Abstract: | Trade wars and financial sanctions are again becoming an increasingly common part of the international economic landscape, and the dynamics of the exchange rate are often used in real time to evaluate the effectiveness of sanctions and policy responses. We show that sanctions limiting a country’s exports or freezing its assets depreciate the exchange rate, while sanctions limiting imports appreciate it, even when both types of policies have exactly the same effect on real allocations, including household welfare and government fiscal revenues. Beyond the direct effect from sanctions, increased precautionary savings in foreign currency also depreciate the exchange rate when they are not offset by the sale of official reserves or financial repression of foreign-currency savings. We show that the dynamics of the ruble exchange rate following Russia’s invasion of Ukraine in February 2022 are quantitatively consistent with the combined effects of these forces calibrated to the observed sanctions and government policies. We evaluate the associated welfare, fiscal and inflationary consequences for both Russia and the coalition of Western countries. |
| Keywords: | trade sanctions; financial sanctions; financial repression; FX market |
| JEL: | E50 F31 F32 F41 F51 |
| Date: | 2025–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129422 |