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on Open Economy Macroeconomics |
| By: | Luttini, Emiliano Evaristo; Mekonnen, Dawit Kelemework; Mercer-Blackman, Valerie; Sorensen, Bent |
| Abstract: | Using world commodity prices as an instrument, this paper proposes a novel method for decomposing channels of international risk sharing for commodity-exporting countries. The method identifies the commodity “sector”' as the projection of gross national product growth on commodity-price growth, and the non-commodity “sector”' as its orthogonal complement. The findings show that commodity-price-induced risk is shared significantly more than other risks, in particular via pro-cyclical government savings, but also via counter-cyclical net international factor income. |
| Date: | 2026–01–14 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11297 |
| 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: | Kristin Forbes; Jongrim Ha; M. Ayhan Kose |
| Abstract: | Business cycles are increasingly driven by global shocks, rather than the domestic demand shocks prominent in earlier decades, posing challenges for central banks seeking to meet domestic mandates and communicate their policy decisions. This paper analyzes the evolving influence and characteristics of global and domestic shocks in advanced economies from 1970-2024 using a new FAVAR model that decomposes movements in interest rates, inflation, and output growth into four global shocks (demand, supply, oil, and monetary policy) and three domestic shocks (demand, supply, and monetary policy). We find that the role of global shocks has increased sharply over time and that their characteristics differ from those of domestic shocks across multiple dimensions. Compared to domestic shocks, global shocks have a larger supply component, higher variance, more persistent effects on inflation, and are more asymmetric (contributing more to tightening than to easing phases of monetary policy). As global supply shocks have become more prominent, central banks have also been less willing to "look through" their effects on inflation than for comparable domestic shocks. The distinct characteristics and rising influence of global shocks - particularly global supply shocks - have significant implications for modeling monetary policy and designing central bank frameworks. |
| Keywords: | demand shocks, supply shocks, geopolitical risk, oil prices, supply-chain disruptions, global uncertainty, central banks, Federal Reserve, European Central Bank |
| JEL: | E52 E31 E32 Q43 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-05 |
| 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: | Juan Manuel Campana; Eckhard Hein |
| Abstract: | This article links different approaches to analysing demand and growth regimes with the structure of international trade. We apply the national income and financial accounting as well as the Sraffian supermultiplier demand-led growth decomposition approaches to analyse the growth regimes of two advanced economies (Germany and Spain) and five emerging economies (Argentina, Brazil, India, South Africa and Turkey) over the period 2000-2019. Our analysis shows that exports have become an increasingly important autonomous source of growth in most countries. However, structural changes in exports are uneven and reveal growing polarisation. We therefore identify a spectrum of export-led regimes and propose a classification typology based on technological content, economic complexity rankings, and the dominance of different autonomous demand components. The findings highlight the limitations of treating export-led growth as a homogeneous model or regime and underscore the importance of considering the country-specific structural characteristics that shape different export-led regimes. |
| Keywords: | accounting, economic growth, trade, structural change, political economy |
| JEL: | E11 F43 P51 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2604 |
| 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: | Hany Abdel-Latif; Khalil Bechchani; Mr. Antonio David; Thibault Lemaire |
| Abstract: | This paper estimates the macroeconomic effects of fiscal consolidations in sub-Saharan Africa using a newly constructed narrative dataset of discretionary fiscal policy actions for 14 countries over 1990–2024. The dataset, documented in Abdel-Latif et. al. (2025), identifies fiscal measures undertaken for reasons unrelated to current or prospective economic conditions, providing a credible basis for estimating fiscal multipliers. The results show that a fiscal consolidation of 1 percent of GDP reduces output by about 0.54 percent after two years, a larger effect than what is found using alternative identification methods. Fiscal consolidations also reduce imports, improve the current account balance, and lead to a depreciation of the real effective exchange rate. Our findings suggest that the composition of adjustment matters: spending cuts have larger multipliers than tax increases. Moreover, fiscal consolidations produce larger output losses when implemented during downturns and when development aid inflows are low. These findings are robust to several checks, including alternative estimation strategies. Overall, the findings highlight the critical role of timing and composition in designing effective fiscal adjustment strategies across sub-Saharan Africa. |
| Keywords: | Fiscal consolidation; Narrative approach; Artificial intelligence; Sub-Saharan Africa; Fiscal multipliers |
| Date: | 2026–01–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/012 |
| By: | Jens H. E. Christensen; Daan Steenkamp |
| Abstract: | Using a novel arbitrage-free dynamic term structure model of nominal and real bond prices that accounts for bond-specific liquidity risk premia, this paper provides estimates of bond investors’ inflation expectations and associated inflation risk premia in South African sovereign bonds. The results suggest that investors’ long-term inflation expectations have gradually been declining towards the tolerance band adopted by the South African Reserve Bank in 2000. Although volatile, the estimated inflation risk premia have declined significantly since 2021, while a market-based estimate of the natural real rate has remained stable and slightly negative. A related measure of the stance of monetary policy is currently assessed to be mildly restrictive. Leveraging the estimated model’s rich dynamics to assess the outlook for these key variables suggests that expected inflation is likely to gradually fall further, while monetary policy is projected to ease towards neutral in the context of a stable natural real rate. |
| Keywords: | term structure modeling; inflation risk; liquidity risk; financial market frictions; emerging bond markets |
| JEL: | C32 E43 E52 E58 F41 F42 G12 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:102406 |
| 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: | Marco Graziano; Marius Koechlin; Andreas Tischbirek |
| Abstract: | We study the spillovers of large-scale asset purchases (LSAPs) in the U.S. on financial intermediation in the euro area using bank-level supervisory data and high-frequency identified policy surprises. Our detailed panel data permit us to trace the impact of LSAPs through bank balance sheets. We find that the Federal Reserve affects credit provision in the euro area through a channel that we refer to as the ``international bank capital channel'' of unconventional monetary policy. In response to an LSAP shock that leads to a steepening of the U.S. Treasury yield curve, the Treasury positions of euro area banks shrink, capital ratios worsen, and banks that are less well capitalized contract their lending relative to banks that are better capitalized. Our results are consistent with an important role of revaluation effects, imperfect risk hedging, and credit as an adjustment margin for banks in the proximity of regulatory capital constraints. |
| Keywords: | U.S. Treasury securities; Monetary policy transmission; Capital requirements; Asset purchase operations |
| JEL: | E52 F42 F44 G21 |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:102399 |
| By: | Adam Jakubik; Yuting Wei |
| Abstract: | This paper investigates the implications of trade policy uncertainty (TPU) in the United States for current account balance (CAB) dynamics, given renewed interest in pursuing trade policy measures to address persistent current account deficits. We examine whether TPU, a distinct source of policy uncertainty and separate from enacted tariff and non-tariff measures, can influence aggregate macroeconmic outcomes. Using a local projection framework that controls for domestic and global macroeconomic factors and enacted trade policy changes, we find that TPU shocks generate a statistically significant but transitory positive effect on the CAB, primarily through a sharper contraction in imports relative to exports, with durable goods relatively more affected. From a savings and investment perspective, TPU raises precautionary savings in the private sector and modestly depresses investment. This is primarily driven by government investment and partially offset by private investment, particularly in high-tech sectors. Bilateral trade effects are heterogenous across different groups of trading partners: geopolitical distance and closer GVC and FDI linkages imply larger declines. Our findings suggest that while TPU can momentarily shift external balances, it does not deliver sustained improvements, highlighting the importance of transparent and predictable trade policy frameworks that mitigate costly uncertainty and avoid unintended macroeconomic distortions. Our findings also imply that econometric analyses of the CAB effects of trade policy should control for uncertainty in order to avoid spurious correlations. |
| Keywords: | Trade Policy Uncertainty; Current Account Balance |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/017 |
| 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: | Chaimae Lazzarou (Bank Al-Maghrib – Central Bank of Morocco) |
| Abstract: | This paper estimates Morocco's natural interest rate (NIR) using two approaches: a standard HLW-type framework and an augmented specification that incorporates external factors, namely imported inflation, and movements in the real effective exchange rate. The results point to a downward trend in the natural rate following the Global Financial Crisis and an increase during the post pandemic inflationary episode. The REER-augmented model delivers higher estimates than the baseline, particularly in periods of inflationary pressures. On average, the natural interest rate is estimated to stand at around 2.6 percent over the sample period, implying a negative interest rate gap relative to the policy rate. |
| Keywords: | Natural interest rate; Monetary policy; Small open economy; Bayesian estimation |
| JEL: | E43 E52 F41 C11 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp01-2026 |
| By: | Ece Ozge Emeksiz; Mr. Güneş Kamber; Ms. Julia Otten; Gurnain Kaur Pasricha |
| Abstract: | This paper assesses the transmission of monetary policy using a new state-of-the-art intra-day dataset of monetary policy shocks for 16 advanced economies and emerging markets, the most comprehensive cross-country coverage to date. Using 30-minute windows around policy announcements, we construct target and path factor shocks for a broad sample of countries and assess their transmission to government bond yields, stock prices, and exchange rates. High-frequency identification improves the significance of estimated responses relative to lower-frequency intraday or daily data. Both target and path surprises generate large and consistent effects across asset classes. We find limited evidence of central bank information effects, confirming the validity of high-frequency methods. Post-COVID-19, transmission to yields and equity prices remains stable, but exchange rate responses weaken—likely due to synchronized monetary tightening across countries. The findings underscore the value of high-frequency data for robust identification and cross-country analysis of monetary policy transmission. |
| Keywords: | Monetary Policy; High-Frequency Identification; Asset Prices; Yield Curve; Central Bank Communication; Emerging Markets; Advanced Economies; Quantitative Easing; Post-COVID-19 Inflation; Financial Market Response |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/018 |
| By: | Schmidt, Sebastian |
| Abstract: | I study price level determination in a currency union when some member countries’ government securities earn a convenience yield. These ”convenience assets” generate fiscal seigniorage revenues that, given appropriate fiscal and monetary policies, back the union’s price level, much like primary surpluses and monetary seigniorage do. An exogenous drop in the private-sector demand for convenience assets reduces seigniorage revenues and raises the price level. It also results in a wealth transfer across countries owing to the heterogeneity in convenience yields. JEL Classification: E31, E63, F45 |
| Keywords: | convenience yield, cross-country heterogeneity, currency union, fiscal theory of the price level |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263183 |
| By: | Alexander Mihailov; Giovanni Razzu; Zhe Wang |
| Abstract: | This paper examines the gendered effects of monetary policy shocks on key labour market outcomes in the Euro Area spanned by the 11 original member states from 2000 to 2016. Using a quarterly panel dataset and an identification strategy based on high-frequency financial surprises, we isolate exogenous monetary policy shocks from central bank information effects and trace their transmission across labour market outcomes for men and women. We provide new evidence on the distributional consequences of the common monetary policy shocks originating at the European Central Bank. A contractionary shock significantly increases unemployment for both genders, with systematically larger effects for men. At the same time, women exhibit a stronger rise in labour force participation, consistent with household labour supply adjustments. Gender differences in unemployment and participation are primarily driven by individuals aged 25–55 and are most pronounced among those with basic and intermediate education. Finally, labour market institutions shape the magnitude of these effects, either mitigating or amplifying gender disparities. |
| Keywords: | gender gaps, labour market outcomes, monetary policy shocks, labour market institutions, Euro Area |
| JEL: | E24 E32 E52 F45 J16 J24 |
| Date: | 2026–02–08 |
| URL: | https://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2026-01 |
| By: | Oscar Botero-Ramírez (Central Bank of Colombia) |
| Abstract: | This paper quantifies how demand and supply shocks transmit to yields in Colombia's sovereign bond market by estimating investor–level demand elasticities and translating them into equilibrium price effects. Using investor–security microdata and two complementary identification strategies, I recover elasticities for major investor groups within a structural demand-system framework. Pension funds and banks absorb a large share of marginal issuance and hold much of the outstanding stock, giving them substantial influence on yields despite their relatively elastic demand. Foreign investors, though absorbing less supply, still exert meaningful price effects. A 1% change in an investor group’s holdings moves yields by roughly 2–5 basis points, while a 1% increase in total debt raises yields by about 37–47 basis points. Applying the estimates to recent dynamics shows that foreign divestment since 2022 generated gradual upward pressure on yields and that absorption capacity has tightened as marginal absorption shifted toward less elastic domestic investors. |
| Keywords: | Capital flows; foreign investment; investor classification; J.P. Morgan GBI-EM index; emerging markets |
| JEL: | F3 F4 G01 G11 G12 G15 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp02-2026 |