|
on Open Economy Macroeconomics |
| By: | Naveed Javed; Nicolas Groshenny |
| Abstract: | We estimate SVAR models for six advanced small open economies to evaluate the extent of deviations from uncovered interest parity following SOE and US monetary policy shocks. Since UIP implies that currency movements are driven by the expected path of the spread between the domestic and foreign short-term interest rates, our econometric strategy disciplines the dynamic response of the SOE-US policy rate differential to monetary disturbances. Specifically, our approach jointly identifies the systematic component of SOE and US monetary policy by combining block exogeneity and sign restrictions on policy parameters. We find that UIP broadly holds conditional on SOE and US monetary policy shocks irrespective of the observed exchange rate overshooting patterns. |
| Keywords: | uncovered interest rate parity, monetary policy shocks, systematic component of monetary policy, forward discount puzzle, vector autoregressions, small open economies, block exogeneity |
| JEL: | C32 E52 F31 F41 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-68 |
| By: | Ambrosino, Ludovica; Chan, Jenny; Tenreyro, Silvana |
| Abstract: | How does trade fragmentation affect inflationary pressures? What is the response of monetary policy needed to sustain inflation at target? To address these questions, we develop a two-sector, small open-economy model that features imperfect international risk-sharing and household heterogeneity, capturing both the supply-side and demand-side effects of fragmentation. In the model, fragmentation takes the form of import-price increases or a decline in tradable-sector productivity. The sign and magnitude of its impact on inflationary pressures, and the appropriate policy response, depend not only on the direct effect of higher import prices or lower productivity on supply but also, crucially, on how aggregate demand adjusts to lower real incomes. In turn, this depends on the pace of fragmentation (gradual versus front-loaded) and other key structural factors highlighted by the model. We compare outcomes under Taylor-type monetary policy rules to a constrained-efficient allocation. |
| Keywords: | monetary policy;trade fragmentation;open economies;inflation;heterogeneity;globalisation |
| JEL: | F12 F15 F41 |
| Date: | 2026–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130958 |
| By: | Petr Jakubik (Cayman Islands Monetary Authority, Cayman Islands & Charles University, Faculty of Social Sciences, Institute of Economic Studies, Prague, Czechia); Matej Korinek (Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Prague, Czechia); Saida Teleu (Anglo-American University, Prague, Czechia) |
| Abstract: | This paper examines how global financial conditions shape bank profitability in small, open, and externally dependent economies. Using bank-level data for Caribbean and Central American countries and System GMM estimation, we assess the impact of U.S. long-term interest rates on two profitability measures: return on equity (ROE) and return on assets (ROA). We find that U.S. Treasury yields have a strong positive effect on ROE, while the response of ROA is considerably weaker. This asymmetric transmission is consistent with portfolio and balance-sheet frictions that constrain balance-sheet adjustment and may limit asset expansion and portfolio reallocation, with global yield movements operating as an indicator of external financial conditions within the global financial cycle rather than as a purely isolated U.S.-specific monetary shock. Using a leverage-based benchmark, we show that the magnitude of the ROE response cannot be explained by accounting mechanics alone, supporting the interpretation that the ROE-ROA divergence reflects constrained adjustment rather than purely mechanical leverage amplification. The findings indicate that equity-based profitability measures are more informative indicators of external financial transmission, with implications for international financial analysis and financial stability monitoring in small open economies. |
| Keywords: | Bank profitability, Portfolio friction; Global financial cycle; Small open economies; System GMM; Caribbean banks |
| JEL: | G21 G15 E44 E58 F36 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_23 |
| By: | Matteo Cacciatore; Daniela Hauser; Yuko Imura |
| Abstract: | The global economy is entering a period of greater volatility and structural change, with rising geopolitical fragmentation and a partial reversal of decades-long globalization trends. This note examines the implications of deglobalization and trade fragmentation for the Bank of Canada's flexible inflation-targeting framework, focusing on the inflation–output trade-off faced by a small open economy. Using a two-country, multi-sector general equilibrium model calibrated to Canada and the United States, we trace how trade-cost shocks propagate through production networks and assess the monetary policy trade-offs they generate. A bilateral 10 percentage-point increase in trade costs produces a non-trivial trade-off: fully stabilizing CPI inflation over a two-year horizon requires accepting a 0.16% reduction in output relative to potential, while fully closing the output gap implies tolerating a 0.32 percentage-point increase in inflation. The severity of the trade-off depends on shock size and persistence, on whether tariffs target final or intermediate goods, and on the inflation measure the central bank stabilizes. For trade-cost shocks of magnitudes comparable to recent policy measures, the existing framework retains sufficient flexibility to return inflation to target within the standard horizon. Larger or more persistent shocks, however, would make "look-through" policies costlier and raise the risk of expectation de-anchoring. |
| Keywords: | Monetary policy; Monetary policy framework and transmission; Monetary policy tools and implementation; Structural challenges; International trade, finance and competitiveness |
| JEL: | D57 E52 E58 F13 F41 F62 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsap:26-24 |
| By: | Romain Houssa; Jean Paul Madrigal Rodríguez |
| Abstract: | This paper studies the macroeconomic effects of sudden stops using a newly constructed database that expands country coverage to 137 economies and extends the sample to 1985Q1–2025Q4. We document a new wave of sudden-stop episodes in the 2020s, partly reversing the apparent decline observed after the post-global-financialcrisis. Local-projection estimates show that sudden stops are typically preceded by economic expansions and followed by persistent output losses lasting up to two years. The contraction is driven mainly by sharp declines in investment and consumption, while net exports rise because imports contract more strongly than exports. The results reveal two distinct transmission mechanisms. Sudden stops in net external financing operate through forced external adjustment and import compression, with larger and more persistent effects under pegged exchange-rate regimes. By contrast, gross-inflow sudden stops operate through financial conditions: leverage rises, credit conditions tighten, asset prices fall, and investment declines. This financial transmission of gross-inflow sudden stops also differs across country groups, reflecting differences in financial structure. Developing countries are more exposed to increases in financing costs, whereas advanced economies display stronger debt deflation and asset-price effects. |
| Keywords: | inflow-driven sudden stops, dynamics, local projections, economic growth |
| JEL: | E3 E43 E52 C51 C33 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12890 |
| By: | Kenneth Clements (Department of Economics, University of Western Australia); Yihui Lan (Department of Accounting and Finance, University of Western Australia) |
| Abstract: | This paper introduces an internally consistent approach to measure the global economy with indexes of inflation, growth and currency movements, which together account for the changing rankings of countries. This leads to three key patterns. First, global inflation above a modest threshold comes with more cross-country raggedness or dispersion, meaning more uncertainty in the world. The minimum-variance rate of global inflation follows from this, together with the “natural rate” of cross-country dispersion. Second, countries’ propensity to import inflation differs substantially. High-inflation countries tend to be more susceptible to global inflation, while more affluent ones are more insulated. Surprisingly, the economic size of a country seems to have no impact on the transmission of inflation. Finally, using a Markov-chain approach and more traditional measures, inflation is found to be surprisingly fluid, not sticky. |
| Keywords: | global inflation, inflation transmission, inflation persistence |
| JEL: | E31 F41 C32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:uwa:wpaper:26-04 |
| By: | Eduardo Amaral; Rafael Guerra; Alejandrina Salcedo; Pablo Tomasini; Christian Upper |
| Abstract: | Public debt has reached multi-decade highs in the Americas. Additionally, public interest costs have generally increased over the past decade. High public debt and interest costs increase the sensitivity of risk premia to fiscal deficits – regardless of the exchange rate regime – and amplify the sensitivity of short-term inflation expectations to fluctuations in risk premia.Our analysis underscores the relevance of disciplined fiscal policies, which assume heightened significance in the context of current debt dynamics. On the monetary side, safeguarding central bank independence is crucial for ensuring macroeconomic stability. |
| Date: | 2026–08–19 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:133 |
| By: | Reis, Ricardo |
| Abstract: | Large stocks of public and external debt tempt policymakers to extract resources from their creditors. This article characterizes three broad forms of financial repression that serve this purpose. The first consists of direct taxation of the financial sector through levies on financial transactions, banks’ income, or pension-fund assets. The second is a sudden and sufficiently persistent devaluation of the currency. The third raises the demand for the non-monetary services provided by different types of government liabilities while keeping their supply scarce, thereby creating yield discounts. Reviewing historical experience, including recent years, the article concludes that each of the three often fails to deliver sustained revenues, even if they can sometimes be temporarily large. Financial repression is an alluring temptation with illusory gains: yielding to it may generate substantial efficiency losses and produce only limited revenue. |
| Keywords: | twin debt problem;debasement;discounts on returns;convenience yields |
| JEL: | E44 E60 F30 F41 H20 H60 |
| Date: | 2026–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138502 |
| By: | Barry Eichengreen; George Cui; Asmaa A. El-Ganainy; Yevgeniya Koriyenko; Elyad Shojaei; Li Zeng; Shihangyin Zhang |
| Abstract: | We link two global trends—AI and geoeconomic fragmentation—asking how fragmentation affects the international diffusion of AI, the magnitude of gains, and their distribution across economies. We ask these questions in general but also with a focus on the MENAP economies. While the effects of AI are potentially far-reaching, the benefits are neither guaranteed nor even. Frontier AI innovation is concentrated in a small number of economies, while countries benefiting through supply-chain participation or AI adoption—with outcomes shaped by their position in global trade and production networks and their AI preparedness. Geoeconomic fragmentation slows AI diffusion and reshapes its distribution by raising trade costs, restricting technology and data flows, fragmenting digital services, and reducing cross-border investment and collaboration. Yet proactive policy choices can turn this dynamic: economies that position themselves as connectors—maintaining trade and technology links across multiple partners—can potentially capture diverted flows and outperform even the no-fragmentation benchmark. For the MENAP economies, diversified links with all major technology hubs can cushion the effects of fragmentation and provide a structural foundation to emerge as net beneficiaries of AI diffusion, but realizing that potential requires reducing AI-related trade costs, improving AI preparedness, and building local AI-related capacity. |
| JEL: | F14 F17 F47 O33 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35597 |
| By: | Hugo Oriola; Jamel Saadaoui |
| Abstract: | International organization loans are often expected to reassure investors, yet market responses to projects and loans vary sharply across recipient countries. We argue that loan approvals function as noisy signals of policy credibility, and that geopolitical alignment with major powers shapes how financial markets interpret these signals--through channels whose sign depends jointly on the institutional basis of the lender's credibility and on which power the recipient is aligned with. Using a monthly dataset covering more than 100 countries, we examine how loan approvals by the Asian Development Bank (ADB) and the International Monetary Fund (IMF) affect financial conditions in non-permanent members of the UN Security Council. We find weaker, only marginally robust evidence that alignment with the US is associated with more favorable currency reactions to IMF lending, tentatively consistent with a shareholder-credibility channel; alignment with Russia is associated with less favorable currency reactions, consistent with a leniency channel, although this result is also only marginally robust to cluster-robust inference. We do not find a comparable effect for alignment with China. For the ADB, whose credibility rests less on conditionality than on continuity of financing, alignment with China or Russia is instead associated with more favorable currency reactions, consistent with a backstop channel. Stock prices and Treasury bill yields display markedly weaker and less consistent conditioning effects. |
| Keywords: | international organizations, United Nations, geopolitical preferences, catalytic effect, Asian Development Bank, International Monetary Fund |
| JEL: | D78 F30 F42 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-69 |
| By: | Kalina Manova; Thomas Sampson; Aaron Tang; Dennis Novy |
| Abstract: | US trade policy in 2025 was unprecedented in the frequency, complexity and volatility of tariff announcements. This paper presents evidence that the resulting policy environment reduced trade flows because of confusion over current tariff levels. We build a new US Tariff Announcement Database for 2025 from US presidential executive orders and proclamations. For each origin country, product and month, we calculate US statutory tariffs and propose novel indicators of tariff confusion: the number of relevant announcements, the number of possible tariff calculations arising, and bounds on possible tariff miscalculation. We show that both tariff increases and tariff confusion reduced US imports during 2025, with confusion more than doubling the impact of tariffs. Moreover, tariff confusion was (i) persistent, and more damaging at higher tariff levels; (ii) mediated through lower import quantities, with little effect on import prices; and (iii) less detrimental for relationship-specific goods and origin countries with stronger trust in foreigners. Our results highlight previously unexplored consequences of the manner in which trade policy changes are implemented. |
| Keywords: | Confusion, tariffs, trade policy uncertainty, trade war |
| JEL: | F13 F14 F15 F53 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26185 |
| By: | Desiraju, Naga Lavanya; Dalheimer, Bernhard; Pede, Valerien |
| Abstract: | Understanding how countries can insure themselves against global macroeconomic and geopolitical shocks is an important topic in international trade and open-economy macroeconomics. This paper examines whether diversification of import sources mitigates the domestic transmission of global supply and demand shocks. We combine monthly trade and price data for 25 major importing countries (2009–2024) from the World Bank, FAO, IMF, and UN Comtrade to construct a panel of domestic retail prices and import diversification indices. We construct a structural VAR and identify global demand and supply shocks using an Independent Component Analysis (ICA) approach based on distance covariance. Dynamic pass-through into domestic prices is then estimated using local projections, allowing us to quantify how exposure varies with import structure. Countries with low import diversification experience substantially larger price increases following demand shocks, whereas highly diversified countries exhibit smaller responses. Positive supply shocks translate into larger price declines in highly diversified countries, indicating that diversified import structures help transmit favorable global supply conditions into domestic markets. |
| Keywords: | International Relations/Trade |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404677 |
| By: | Marco Gallegati; Solomos Solomou; Kun Tian |
| Abstract: | In this paper we apply the wavelet approach and the GVAR methodology to investigate the effects of El Niño fluctuations on national inflation rates, global commodity prices and world oil prices. The focus of our analysis is on the inflation effects of “ENSO diversity”, measured as the central Pacific (CP) and eastern Pacific (EP) El Niño. Using quarterly data from c.1950 onward, we substantially extend the time span of existing studies. This allows us to observe a much larger number of ENSO cycles. The set of countries included in our study comprises countries directly affected by the El Niño, countries that are teleconnected with the El Niño variations and countries that are only indirectly affected by these processes via global economic linkages. The results from wavelet analysis display several key features. First, we observe an episodic relationship between ENSO variations and inflation for most countries, irrespective of whether they are directly impacted by ENSO or impacted via teleconnections. Second, the identification of CP and EP ENSO effects highlights the importance of ENSO diversity when analysing the inflationary effects of ENSO. Third, the periods of statistical significance encompass both El Niño and La Niña phases of the ENSO cycle. The GVAR framework used to estimate the magnitude of the effects of the ENSO cycle on national CPI inflation confirms that modelling the effects of ENSO diversity as captured by CP and EP ENSO measures matters for the identification of their complex nonlinear effects on national inflation rates. |
| Keywords: | El Niño, ENSO Cycle, ENSO diversity, CP-EP ENSO, Wavelet analysis, global shocks, GVAR models, inflation, global commodity prices |
| JEL: | E31 Q54 C32 Q02 F41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12896 |
| By: | Michael Chui; Leonardo Gambacorta |
| Abstract: | The conflict in the Middle East has raised energy and fertiliser prices, weakened growth and intensified fiscal pressures across Africa at a time when public debt and debt service burdens remain elevated. The shift towards domestic currency debt has reduced exchange rate risk for issuers and preserved market access, but higher interest rates and shorter maturities have increased debt service costs and rollover risks. A heavy reliance on banks and central banks for government financing can reinforce the sovereign-bank nexus, crowd out private credit and threaten financial stability. Developing deeper markets and a more diversified investor base are essential to address these challenges. |
| Date: | 2026–08–11 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:132 |
| By: | Schunk, Nathan; Baker, Justin; Cho, Chanheung; Ho, Thu |
| Abstract: | This paper examines fertilizer price dynamics within a global commodity market framework. Using a panel of 65 monthly commodity price series from 2000 to 2025, we document three empirical patterns: fertilizer prices exhibit event-driven volatility, price responses differ across nutrients, and fertilizer prices increasingly diverge from agricultural commodity prices during major shocks. To quantify these patterns, we estimate a dynamic factor model that decomposes fertilizer price movements into global, block-specific, and idiosyncratic components. The estimated global factor is closely associated with standard indicators of global economic activity, indicating that common macroeconomic conditions are reflected in fertilizer markets. However, the transmission of these shocks differs across nutrients. Nitrogen fertilizers are more closely linked to energy markets, phosphate fertilizers show larger idiosyncratic variation, and potash reflects both global and sectoral influences. These results suggest that fertilizer price dynamics reflect both common global forces and nutrient-specific factors. |
| Keywords: | Agribusiness |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404318 |
| By: | Seth G. Benzell; Laurence J. Kotlikoff; Victor Yifan Ye |
| Abstract: | This study deploys a multi-region, dynamic life-cycle, general equilibrium model to assess demography’s impact, through the course of this century, on global development. Our model’s 17 regions encompass more than 150 countries comprising 99% of the world’s population. Output is produced with three labor skill groups and internationally-mobile capital, with each country deciding annually whether to adopt its frontier automation technology. Our model features region-specific fiscal policy, TFP growth, and idiosyncratic mortality. Agents live for 100 years, first as children, then as workers, and then as retirees. Work and saving decisions are governed by CES preferences. Lifespan is uncertain, but there are no annuities apart from state pensions. Hence, bequests, while significant, are unintended. Our fertility, mortality, and net immigration rates are region- and age-specific and align fully with the UN’s projections. To illustrate demographics’ power to impact the global transition, we simulate our model under the UN’s markedly different demographic projections for 2017 and 2024. The 2024 forecast is particularly pessimistic about China’s fertility prospects. Both projections produce very substantial global aging, a major global capital glut producing very low long-run real capital returns. The latest forecast entails 10% lower global GDP in 2100 and far higher payroll tax rates to fund old-age benefits. Most important, it entails a major change in the course of economic hegemony with China’s 2100 global GDP share falling from 25.6% to 14.9% and the US share rising from 11.2% to 14.4%. Our results are sensitive. Should the US eliminate all future immigration, its 14.4% global 2100 GDP share would drop to 9.2%. And were global fertility to follow the UN’s low variant, 2100 world output would be one third, not one tenth lower. The level and division of global output is also highly sensitive to the speed at which AI expands frontier technologies. Accelerated AU/AI – 4x faster-than-recent growth in capital’s share through 2050 – or Transformative AU/AI – 10x faster capital-share growth – reinforce demographic forces, ensuring long-run US economic hegemony. Indeed, Transformative AI combined with 2024 demographics implies US and Chinese 2100 global GDP shares of 25.3% and 16.9%, respectively. And not withstanding its considerable technological catch up, the US retains, based on our calibration, a technological edge over China throughout the century. |
| JEL: | E10 E13 E60 F19 F47 H2 J1 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35618 |
| By: | Spanò, Guido; Figueres, Juan Manuel |
| Abstract: | This paper investigates the interest rate pass-through of monetary policy in the euro area by focusing on the role of banks’ funding structures. We estimate the interest rate pass-through for loans to non-financial corporations using bank-level balance sheet data. In doing so, we interact the response of lending rates with characteristics of the funding structure, and show that banks that rely more on bond issuance than on the money market tend to be less responsive to policy changes. Finally, we test the presence of the asset-liability-management channel, and find that banks combining longer-term liabilities (higher bond shares) with longer rate fixation periods for loans (higher share of loans with fixed rates) exhibit the most muted lending rate response to policy shocks. JEL Classification: C23, E44, E52, G21 |
| Keywords: | bank lending channel, banks’ funding structures, monetary policy pass-through |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263274 |
| By: | Fisnik Bajrami (Institute of Economic Studies, Charles University, Prague, Czech Republic); Ermal Lubishtani (University for Business and Technology, Prishtina, Kosovo) |
| Abstract: | One of the main expected benefits of official dollarization is its potential to promote trade by reducing exchange rate risk and transaction costs. This paper assesses the dollarization-trade relationship through a meta-regression analysis of 270 estimates from 14 empirical studies. The publication-bias diagnostics do not provide strong evidence that the reported effects are driven by selective reporting or small-study effects, while the average reported association remains positive. The results also show that the reported trade effect of dollarization is time-dependent. Reported effects are largest during the first 10 years after dollarization and decline as the post-dollarization horizon lengthens. This declining pattern remains evident across alternative specifications and robustness checks, although statistical precision weakens for the longest time horizon. |
| Keywords: | Official dollarization, trade, monetary integration, meta-regression analysis, publication bias |
| JEL: | F14 F33 E42 F15 C83 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_24 |
| By: | Wang, Wei; Cai, Yongyang |
| Abstract: | Trade policies are becoming increasingly persistent and play an important role in shaping global production, trade, and emissions patterns. Because such policies affect economic agents’ expectations about future market conditions, their impacts may extend beyond contemporaneous trade reallocation through capital accumulation and climate–economy feedback. This paper develops a forward-looking integrated assessment framework that incorporates sector-level bilateral trade to evaluate the dynamic effects of U.S. tariffs and the European Union’s Carbon Border Adjustment Mechanism (CBAM). The results show that endogenous capital accumulation substantially amplifies the effects of trade policies on welfare, emissions, and employment. U.S. tariffs primarily redistribute welfare toward the United States while having little effect on global emissions. In contrast, CBAM generates larger emissions reductions but concentrates both welfare losses and emissions-reduction burdens in developing and transition economies. We also find significant dynamic employment adjustments, with substantial differences between short-run and long-run responses across regions and sectors. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404469 |
| 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: | Deposits are the primary source of funding for commercial banks, but their role in the transmission of monetary policy remains relatively understudied, particularly in emerging and developing economies. This paper examines whether monetary policy affects both the growth of bank deposits and the spread between policy rates and deposit remuneration. Using a panel of more than 1, 600 banks across 52 countries between 1996 and 2021, we find that higher policy rates are associated with slower deposit growth and wider deposit spreads. These relationships remain robust after accounting for macroeconomic conditions, bank-specific characteristics, and the banking-sector structure. These results are consistent with the view that banks do not fully pass policy rate increases through to depositors, allowing funding spreads to widen during periods of monetary tightening. By providing broad cross-country evidence from emerging economies, this paper highlights the importance of deposit markets for monetary transmission and suggests that the liability side of bank balance sheets deserves greater attention in both research and policy discussions. |
| Keywords: | Monetary Policy Transmission; Deposit Channel; Bank Deposits; Emerging Markets |
| JEL: | E52 G21 E44 |
| Date: | 2026–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:col:000566:023352 |
| By: | Sam Foxall; Jeffrey Gao |
| Abstract: | Sovereign borrowing is rising, just as central banks are stepping back. Meanwhile, commercial bank holdings of sovereign bonds remain well below pre-global financial crisis levels. This leaves foreign investors and investment funds, often hedge funds, to absorb more of this growing supply. Their greater involvement supports liquidity and robust auction results, but it can also concentrate risk: in stressed markets, correlated deleveraging and fast outflows can translate volatility into higher funding costs, reinforcing the case for investor base diversification. |
| Keywords: | Financial markets and funds management; Funds management; Market functioning; Market structure; Financial system; Financial institutions and intermediation |
| JEL: | G18 G28 H63 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsap:26-29 |
| By: | Andrea Fracasso; Stefano Schiavo |
| Abstract: | Growing geopolitical tensions have renewed interest in trade-related vulnerabilities as a component of economic security. However, the lack of a well-defined conceptual framework around the concept of economic security implies the co-existence of different definitions, shifting boundaries and fuzzy policy prescriptions. Recent empirical work has developed product-level indicators of external dependence, typically combining information on import concentration, global supply concentration, and domestic substitutability. These methodologies are generally designed either for sovereign States or for the European Union treated as a single integrated area. This paper argues that they cannot be directly replicated to assess vulnerabilities at the level of individual EU Member States. The paper's methodological contribution shows that the EU's quasi-federal nature creates specific conceptual and measurement problems for Member State assessments, especially concerning the treatment of intra-EU sourcing in the construction of concentration and substitutability indicators. These choices affect the internal coherence of vulnerability metrics and reflect prior judgments about whether the relevant threat is economic coercion, broader supply disruption, or both. An empirical section applies one of the existing methodologies to highly disaggregated trade data to illustrate the impact of alternative treatments of intra-EU trade and compare different results. |
| Keywords: | conomic security, trade dependence, supply-chain risk, EU, coercion |
| JEL: | F14 F15 F52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12878 |
| By: | Gyöngyi Lóránth (University of Vienna & CEPR); Anatoli Segura (Banca d’Italia & CEPR); Jing Zeng (University of Bonn & CEPR) |
| Abstract: | We study the effects of aligning the incentives of national authorities through the common provision of deposit insurance in a model of cross-border banks with both endogenous risk-taking and within-group risk-sharing. Under national deposit insurance, local authorities inefficiently ring-fence resources owing from healthy to impaired subsidiaries. A single authority responsible for a common deposit insurance fund does not ring-fence. This encourages cross-border integration, but has an ambiguous impact on banks' risk-taking. Overall, common deposit insurance increases welfare when the fundamental risk in the economy is high but otherwise can lead to excessive cross-border integration and lower welfare. |
| Keywords: | Cross-border bank, common deposit insurance, intragroup support, ring-fencing, banking union |
| JEL: | D8 G11 G2 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:422 |
| By: | Alisherov, Foziljon; Djuraeva, Mukhayyo |
| Abstract: | This study tests several implications of weak-form market efficiency for the Uzbekistan Composite Index (UCI) and the official USD/UZS exchange rate. Corrected daily samples contain 2, 389 UCI returns from 30 August 2016 to 4 May 2026 and 4, 865 FX returns from 2 January 2013 to 5 May 2026. Weekly levels use the last available observation in Friday-ending weeks. The analysis combines descriptive and microstructure indicators, selected autocorrelations, Ljung-Box tests, sign runs tests, robust Lo-MacKinlay variance-ratio tests, unit-root checks, a 5 September 2017 reform split, a precisely defined no-jump robustness sample, and rolling windows. UCI evidence is mixed: robust variance-ratio tests fail to reject a random-walk null at all reported daily and weekly horizons, while the daily runs test and longer-lag Ljung-Box tests reject their distinct randomness nulls; weekly aggregation removes the runs-test rejection but not all serial dependence. Full-sample FX autocorrelations are small, yet runs and selected variance-ratio tests reject non-random adjustment. Pre-reform official-rate changes show pronounced dependence. Post-reform linear autocorrelation is weak when the liberalisation jump is included, but short-horizon dependence remains after that single return is excluded. The results support a partial, test-dependent, frequency-dependent, reform-dependent, and time-varying interpretation. They do not establish profitable trading strategies, and the FX findings describe official exchange-rate adjustment rather than a continuously traded, freely clearing FX market. |
| Keywords: | efficient market hypothesis, random walk, variance ratio test, runs test, thin trading, frontier markets, Uzbekistan, exchange rate liberalization |
| JEL: | C22 G14 G15 F31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:342597 |