Financial Development and Growth http://lists.repec.org/mailman/listinfo/nep-fdg Financial Development and Growth 2026-10-05 Innovate to Borrow: How Intangibles Shape Finance and Growth https://d.repec.org/n?u=RePEc:bge:wpaper:1597&r=&r=fdg We study a dynamic economy in which heterogeneous entrepreneurs invest in either generic or innovative technologies, the latter relying on intangible, firm-specific assets whose payoffs are realized through learning or experimentation (e.g., know-how, R&D). A key friction is that, to finance investment, entrepreneurs can pledge assets but not cash flows. We show that innovative technologies can relax financing constraints by increasing the value of continuation relative to default, thereby enabling borrowing against future cash flows. Technology choice is non-monotonic in productivity: low-productivity entrepreneurs innovate-to-experiment and delay investment, intermediate types adopt generic technologies, and high-productivity entrepreneurs innovate-to-scale and relax financial constraints. In equilibrium, financial frictions distort both the allocation of capital and the choice of technology, leading to insufficient experimentation. The model helps us understand how innovation is adopted across firms and economies and has novel policy implications. Vladimir Asriyan Alberto Martin Guillermo Ordoñez Victoria Vanasco borrowing capacity, experimentation, financial frictions, innovation, intangible capital, misallocation, technology choice 2026-09 Out with the new, in with the old? Supranational bank supervision and the composition of firm investment https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263286&r=&r=fdg Using exogenous variation generated by the creation of the Single Supervisory Mechanism (SSM) in the euro area, we find that relative to firms borrowing from banks subject to national supervision, firms borrowing from banks subject to supranational supervision reduce their share of intangible assets. This effect does not pre-date the supervisory reform and it does not obtain in non-SSM jurisdictions. The reallocation of investment away from intangible assets is stronger for small and young firms and appears to be driven by a short-term reduction in lending and a persistent increase in collateral standards. JEL Classification: D25, F30, G21, G28 Ampudia, Miguel Beck, Thorsten Popov, Alexander intangibles, international banking, investment, lending, supervision 2026-09 Regulating Entrepreneurship: The Case of Capital Requirements https://d.repec.org/n?u=RePEc:nbr:nberwo:35780&r=&r=fdg Governments have long imposed minimum equity requirements on new corporations. Opponents view them as barriers to entry while proponents argue that they protect stakeholders from financially unviable businesses. We study this quantity-quality trade-off using a Norwegian reform and comprehensive data linking entrepreneurs to their firms. A 70% reduction in required capital nearly doubled entrepreneurial entry, with no deterioration in survival, profitability, productivity, or interest-bearing leverage and no differences in founders’ ex-ante income, liquidity, or ability. These results suggest capital requirements restrict entrepreneurship without screening on quality or liquidity. Rather, we highlight returns-to-scale heterogeneity as an important determinant of the observed entry response. Annika Bacher Andreas Fagereng Marius A. K. Ring Ella Getz Wold 2026-09 Remittances and the Direction of Structural Transformation: Evidence from Pakistan* https://d.repec.org/n?u=RePEc:bri:uobdis:26/848&r=&r=fdg Foreign remittances now exceed 5% of GDP in nearly a third of countries. However, despite their growing importance, we know little about how these shape the direction of structural transformation. I exploit sub-national variation in remittance dependence across districts in Pakistan to consider how these affect local labour markets both through own-district exposure and through geographic spillovers. I find that moving from the 25th to the 75th percentile of own remittance dependence raises the construction labour share by 1.0 percentage point, about 9% of the mean. However, the estimate remains imprecise. In contrast, the effect due to geographic spillover is not only large but also robust across specifications. Moving from 25th to the 75th percentile of geographic exposure raises the home district’s construction share by 3.1 percentage points and decreases the retail share by 3.2 percentage points, pointing to reallocation within the non-tradables. The construction boom also tightens regional labour market, increasing wages across sectors, including manufacturing. This pattern is consistent with a local dutch-disease channel where a boom in non-tradables increases factor prices across both non-tradables and tradables, potentially affecting competitiveness of the tradables. Data on household expenditure and input-output linkages support a demand-led interpretation. Ahmed Pirzada 2026-01-30 Montée industrielle du Maroc et valorisation de la Bourse de Casablanca : une modélisation prospective par réseaux de neurones https://d.repec.org/n?u=RePEc:hal:journl:hal-05724522&r=&r=fdg Morocco's promotion to the top of the African Development Bank (AfDB) Africa Industrialisation Index in May 2026, ahead of South Africa, marks a structural turning point for the Moroccan economy. This paper offers a prospective analysis of the spillover effects of this industrial rise on the Casablanca Stock Exchange. Using a comparative panel of eight African and emerging stock exchanges over the period 2010–2025, extended to a semi-annual frequency to enlarge the training sample, we deploy artificial neural network modelling (multilayer perceptron and recurrent LSTM network) to project the trajectory of market capitalisation, the MASI index, and sectoral performance towards 2030. Explanatory variables incorporate the AfDB industrialisation index, manufacturing value added, industrial investment flows, and a set of international macro-financial indicators (interest rates, market liquidity, global financial conditions). Hyperparameter optimisation (grid search and time-series cross-validation), an explicit train/validation/test split, and overfitting controls are detailed to ensure the robustness of the approach. Our results suggest that a sustained rise in the industrialisation index would translate into a projected growth in market capitalisation of around 45 to 60 % by 2030, reported with confidence intervals and driven mainly by the industrial, automotive, and aerospace sectors. The predictive robustness of the LSTM model, confirmed against benchmark econometric models (OLS, ARIMA) and alternative machine-learning algorithms (Random Forest, XGBoost), validates the relevance of the connectionist approach for capturing the nonlinear dynamics between industrial transformation and stock-market valuation Rachid Maghniwi LSTM, African Development Bank, Casablanca Stock Exchange, neural networks, stock-market forecasting, spillover effects, industrialisation, effets d'entraînement industrialisation, prévision boursière, réseaux de neurones, Bourse de Casablanca, Banque africaine de développement, effets d'entraînement 2026-08-14 Comment expliquer la dynamique de l’investissement des entreprises ? Estimation d'une nouvelle équation pour la France https://d.repec.org/n?u=RePEc:hal:journl:hal-05753648&r=&r=fdg Cette étude revient sur les déterminants de l'investissement des entreprises non financières françaises au cours des 30 dernières années afin de mieux comprendre sa dynamique récente. Elle propose une nouvelle équation d'investissement destinée à être intégrée au modèle de prévision de l'OFCE, qui s'appuie sur l'information contenue dans le coût d'usage du capital, la valeur ajoutée, le taux de marge brut, un indicateur de tensions sur l'utilisation du capital, et un indicateur d'incertitude économique. Conditionnellement aux indicatrices utilisées pour capter l'effet des mesures exceptionnelles de soutien aux entreprises pendant la crise du Covid-19, les paramètres de l'équation sont stables quelle que soit la fin de l'échantillon, qu'il s'arrête en 2019 ou bien au quatrième trimestre 2023 (le dernier trimestre pour lequel nous disposons des Comptes nationaux définitifs). L'élasticité de l'investissement au coût d'usage du capital dans le long terme est cohérente avec celle de l'emploi au coût du travail. L'équation explique relativement bien la dynamique de l'investissement jusqu'en 2023 dans la mesure où l'investissement simulé est proche de l'investissement observé mais un écart émerge en 2024 et 2025. Compte tenu de l'évolution de ses déterminants, et en particulier du coût d'usage du capital réel qui oscille autour d'un niveau supérieur à celui observé avant la crise du Covid-19, l'investissement aurait dû diminuer alors qu'il est resté globalement stable. Sandra Daudignon investissement des entreprises, France 2026-06 Mobilizing Domestic Savings: A Finance Bill and Institutional Reform Agenda for Pakistan https://d.repec.org/n?u=RePEc:pid:pviewp:2026:63&r=&r=fdg Pakistan's budget strategy usually relies on taxation and borrowing. However, it does not emphasize a durable financing framework, which requires mobilizing domestic savings, redirecting informal savings toward formal instruments, and reducing public-sector dissaving. As such, a larger share of investment must be financed from domestic resources. Pakistan's gross domestic savings rate fell from 17.4% of GDP in 1992 to 6.4% in 2024, widening dependence on foreign savings. The Finance Bill FY2026-27 should introduce a targeted National Savings Mobilization Package built around capped tax incentives, approved long-term instruments, digital and Islamic savings products, pension reform, and credible real returns. Shahzada M. Naeem Nawaz Wajid Islam 2026 Explaining the recent dynamics of the saving rate in the euro area: evidence from the Consumer Expectations Survey https://d.repec.org/n?u=RePEc:bdi:opques:qef_1046_26&r=&r=fdg We examine the post-COVID relationship between household-level income uncertainty and consumption-saving behaviour, using granular data from the ECB Consumer Expectations Survey (CES). We find that higher uncertainty is associated with higher saving rates and lower nominal consumption, with stronger responses among lower-income and liquidity-constrained households. By decomposing uncertainty into downside and upside components, we show that most of the effect is driven by downside risk. At country level, aggregated income uncertainty provides some information beyond the traditional determinants of national saving rates, although its contribution to improving macro-model point forecast accuracy is limited. Guido Bulligan Paolo Farroni uncertainty, income risk, saving rate, household expectations, liquidity constraints, macroeconomic forecasting 2026-07 Perceived versus Realized Income Dynamics: Evidence from Subjective Expectations https://d.repec.org/n?u=RePEc:iza:izadps:dp18935&r=&r=fdg Household consumption and saving depend on perceived income risk, yet macroeconomic models typically discipline income processes using realized data. We show that these objects differ systematically. We develop a framework to recover flexible income processes from subjective expectations reported over fixed intervals, accounting for coarse elicitation and focal responses. Households perceive income as more persistent and less dispersed, with weaker state-dependent nonlinear dynamics than realized histories imply. These differences survive adjustments for reporting, measurement error, and horizon differences. In a life-cycle model, they affect precautionary saving and wealth accumulation; when households save according to perceived dynamics but face realized shocks, consumption insurance falls substantially. Basso, Henrique Bover, Olympia Galvez, Julio Hospido, Laura subjective expectations, income dynamics, nonlinear persistence, consumption, precautionary saving, life-cycle, panel data 2026-09 Many Too Many: excess savings and the transmission of macroeconomic shocks https://d.repec.org/n?u=RePEc:bdi:opques:qef_1031_26&r=&r=fdg We show that the stock of excess savings alters the propagation of the business cycle. It markedly weakens the transmission of monetary policy shocks to real economic activity and inflation; in contrast, in the event of a cost-push disturbance, excess savings cushion the impact on output while amplifying and prolonging the pass-through to inflation. These findings underscore the importance of incorporating balance-sheet conditions into the assessment and calibration of monetary policy. They also offer additional insights into the 2022-23 cyclical episode in the euro area: in an environment characterized by historically elevated excess savings, the surge in energy prices and the unprecedented pace of policy rate hikes resulted in resilient growth and stubbornly persistent high inflation. Andrea Foschi Stefano Pica Marianna Riggi excess savings, monetary policy, energy shocks, macroeconomic transmission 2026-07 Development Finance for Food and Nutrition Security: Re-examining the Nexus https://d.repec.org/n?u=RePEc:hal:journl:hal-05736905&r=&r=fdg This Policy Brief examines the evolving relationship between food and nutrition security (FNS) and development finance against a backdrop of worsening global FNS trends and the fast-approaching 2030 Agenda deadline. It focuses on key sources of development finance, namely remittances, foreign direct investment, official development assistance, and food aid, and brings together insights from the existing empirical literature. A central message of the Brief is that not all financial flows affect FNS in the same way. The composition of development finance matters, as different types of flows generate different outcomes depending on context. At the same time, governance quality plays a critical role in shaping these outcomes. Recent empirical evidence shows that institutional factors influence both the direction and the strength of the relationship between development finance and FNS, highlighting the importance of considering governance alongside the heterogeneity of financial flows in both research and policy discussions. Georges Mavrotas Development Finance, Food security, Food and nutrition security 2026-09-03 Growth in the Shaded Sun: The Role of International Development Finance and Corruption https://d.repec.org/n?u=RePEc:adl:wpaper:2026-03&r=&r=fdg I study how developing-country governments decide the amount, sources, and sectoral allocation of development finance (DF) as China has emerged alongside traditional donors. Using project-level data from nearly 110 countries (2000–2021), I document systematic patterns in DF allocation across countries, sectors, and providers that vary with corruption and monitoring intensity. I develop a growth model in which governments allocate DF while choosing how much investment to divert under provider-specific monitoring and financing conditions. Calibrating the model to 108 countries shows heterogeneous welfare implications of Chinese DF: about 15% of countries gain while roughly 55% experience welfare losses. Chansik Yoon Foreign aid;Growth;Development;Chinese lending; Corruption; Institutions; Public investment; Development assistance 2026-03 Borrowing in the Shadow of China https://d.repec.org/n?u=RePEc:nbr:nberwo:35767&r=&r=fdg China's rise as a major lender to emerging economies since the early 2000s has introduced a unique form of lender power: borrowers cannot default on the subsidized loans they receive, but may still face sudden rollover demands outside their control. We argue this distinctive structure—bilateral rollover risk without default risk—disciplines recipient countries' borrowing on international markets. In a quantitative long-term sovereign debt model, we show that such rollover-prone nondefaultable Chinese loans expose market debt to dilution risk: governments may need to tap international lenders when repayment to China comes due, and therefore choose to deleverage from private markets when Chinese inflows arrive. Market debt and bond yield dynamics in the data are consistent with this “disciplining effect.” We then use the model to study two geopolitical scenarios: a bloc-formation exercise in which China offers take-it-or-leave-it loans to induce the borrower's exit from international debt markets, and an optimal exposure-to-China problem under the risk of a permanent and sudden retrenchment of Chinese funding. Together, these results show how official finance à la China can simultaneously improve market borrowing conditions and become a new destabilizing force to the global sovereign debt architecture as geopolitical alliances shift. Illenin O. Kondo César Sosa-Padilla Zachary J. Swaziek 2026-09 High public debt, NBFIs and the risk of market dysfunction https://d.repec.org/n?u=RePEc:bis:bisblt:136&r=&r=fdg Near record-high government debt levels and the growing role of non-banks have reshaped government debt markets in recent years.High levels of government sector debt are expected to worsen future government debt market liquidity conditions in general, including by increasing the risk of market dysfunction. A large non-bank financial institution footprint heightens the risk of market dysfunction while also making very favourable liquidity conditions more likely. Mathias Drehmann Sonya Zhu 2026-09-29 Bonding Through Crises with NBFIs https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/197&r=&r=fdg We study how banking crises reshape nonbank financial institutions’ (NBFIs) role in corporate debt markets using primary-market syndicated loans and corporate bonds over 1990–2025. We find that NBFI cyclicality is function-specific: NBFIs contract syndicated loans relative to banks but expand corporate bond underwriting, especially through bank-affiliated NBFIs. Firms with stronger pre-crisis NBFI underwriting relationships are more likely to switch from loans to bonds, raise more bond financing, experience smaller declines in total borrowing, and exhibit stronger crisis outcomes. This reconciles competing views of nonbank cyclicality: NBFIs may amplify stress as loan-market risk bearers while preserving market access as bond underwriters. Bruno Albuquerque Melih Firat Banking crises; Nonbank lending; Corporate loans and bonds; Relationship lending 2026-09-18 New Early-Warning Indicators of Macro-Financial Risk: A Mixture-of-Experts Approach https://d.repec.org/n?u=RePEc:tin:wpaper:20260074&r=&r=fdg Predicting macro-financial crises in developing economies is a critical but difficult task, complicated by significant data challenges. Machine learning techniques have shown improved predictive performance relative to traditional parametric models, yet this often comes at the cost of lower model explainability, limiting their use for policy makers. To strike a balance between predictive performance and explainability, this paper proposes a Mixture-of-Experts framework that combines ensemble models and traditional logistic regression to generate country-level crisis risk scores which can be decomposed into sub-risks, such as fiscal, financial, and balance of payments, to aid understanding of the drivers of risk within and across countries. Leveraging a global panel dataset spanning from 1990 to 2025 for 161 countries, the Mixture-of-Experts framework is shown to meaningfully outperform standard crisis prediction models in the literature. This paper therefore offers a practical and flexible framework for technical audiences developing early-warning systems in the presence of data gaps. Francisco Blasques Nepomuk Dunz Erik Feyen Charl Jooste Siem Jan Koopman Gabriele Mingoli 2026-09-27 New developments and perspectives on financial crisis indicators: How can signal processing enrich existing financial crises indicators? https://d.repec.org/n?u=RePEc:hal:journl:hal-05761637&r=&r=fdg This survey provides a critical overview of crisis indicators, synthesizing established contributions and identifying unresolved debates. It encompasses expert-based and model-based approaches and textual analysis methods that lie at their intersection. The survey offers a global comparison of the key aspects of the different methods, and introduces a new class of multivariate nonlinear segmentation model of indicators, grounded in signal processing. This approach, which combines historical insights with advanced modeling techniques, enhances our understanding of crises. Patrice Abry Cécile Bastidon Pierre Borgnat Pablo Jensen Antoine Parent Barbara Pascal Financial mathematics and econophysics, Financial history, Crises, Interdependence Cliometrics, Contagion 2025-12-06 Beyond Financial Conditions: Measuring Structural Vulnerabilities in the U.S. Financial System https://d.repec.org/n?u=RePEc:fip:fedgfe:103791&r=&r=fdg We introduce the Financial Vulnerability Index (FVI), a novel indicator of financial vulnerabilities in the U.S. Unlike financial condition indices, which measure current credit market conditions and spike during periods of financial turmoil, the FVI displays the gradual build-up of structural financial weaknesses and declines as such episodes materialize. We demonstrate that the FVI exhibits properties consistent with theoretical mechanisms of financial vulnerabilities. When the index is high, adverse shocks are substantially amplified, generating larger declines in consumption and investment. We provide new empirical evidence that monetary tightening is associated with gradual declines in the FVI, with this effect substantially delayed, taking a few years to fully materialize. Moreover, monetary policy transmission to prices depends on the state of financial vulnerabilities, with significantly stronger effects when vulnerabilities are low. Michele Modugno Benjamin Roscoe Sarah Zoi 2026-09-21 Uncertain Climate Policy and the Role of the Financial Stress Transmission Channel https://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp26285&r=&r=fdg We investigate the transmission channels of climate policy uncertainty (CPU) to the U.S. capital market using a Bayesian Structural VAR estimated on monthly data from 1994 to 2023. By jointly modeling CPU alongside the VIX and the Financial Stress Index (FSI), we isolate the mechanisms through which climate-related regulatory uncertainty affects equity valuations. Three findings emerge. First, CPU shocks significantly depress the S&P 500 index and price–dividend ratios while raising financial stress. Second, unlike conventional uncertainty shocks– which produce demand-type disinflationary contractions– CPU innovations generate supply-driven recessions, characterized by rising goods prices alongside falling asset prices, consistent with transition-cost pressures. Third, counterfactual exercises that selectively mute financial channels reveal that systemic financial stress is the dominant propagation mechanism: shutting down the FSI channel renders equity-market responses statistically insignificant, whereas muting the VIX leaves them intact. The findings are robust across a range of identification and specification exercises, including the construction of economic confidence bands from 240 alternative recursive specifications. These results establish CPU as a structurally distinct driver for financial markets, whose transmission to valuations is critically mediated by credit and intermediation frictions rather than by forward-looking volatility. Massimo Guidolin, Serena Ionta Financial Stress, Financial Uncertainty, VIX, Stock Prices, Stock Valuations, Climate Policy Uncertainty, Climate Change. 2026 AI Intensity and Financial Market Responses to Economic Shocks: Evidence from US Industries https://d.repec.org/n?u=RePEc:ces:ceswps:_13000&r=&r=fdg This study investigates how the diffusion of Artificial Intelligence (AI) affects the transmission of macroeconomic shocks to asset prices. A new index of AI intensity for US industries is constructed by combining AI patents, the AI content of corporate disclosures, and the AI exposure of occupational mixes; this is then validated against survey evidence on AI. Panel local projection estimates indicate that AI-intensive industries earn significantly higher excess returns and command higher valuations in response to supply and technology shocks, but do not exhibit different responses to demand shocks. The response to the former type of shocks is economically large, robust across multiple independent supply-side identifications, and survives controlling for exposure to standard risk factors. It is driven by the industries that use AI rather than those that produce it, it is accompanied by a contemporaneous rise in valuations over the same horizon, and it is concentrated in high-volatility states. On the whole the results suggest that technological exposure is an important determinant of how aggregate shocks affect the cross-section of industries examined. Christina Anderl Guglielmo Maria Caporale AI intensity, panel local projections, stock returns, volatility, economic shocks 2026 How Digital Lending Shapes Bank Risk and Competition: Evidence from an Emerging Economy https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/198&r=&r=fdg This paper examines the effect of alternative digital lending—defined as digital credit provision by non‑bank financial intermediaries (NBFIs)—on bank and systemic risk taking and competition. The paper focuses on Sociedades Financieras Populares (SOFIPOs) which constitute a regulated and well‑documented NBFI segment allowing an empirical assessment of the relationship between digital non-bank lending expansion and bank outcomes. Using a quarterly sample of 53 Mexican banks and 8 of these non-banks for the period 2018Q1–2024Q4, we document that growth in alternative digital lending is associated with lower individual bank risk-taking and stronger competitive pressures, with the latter effect being stronger for small banks. Reflecting the moderate size of digital lenders in Mexico and the compositional reallocation between bank and non‑bank credit, overall systemic risk appears broadly unaltered by the entry of the new players. Enrique Bátiz-Zuk Anuar Bechara Fabrizio López-Gallo Corrado Macchiarelli Digital finance; alternative lending; non-bank financial intermediaries; bank risk‑taking; systemic risk; competition; financial inclusion; Mexico 2026-09-18 Bridging the wealth divide? Examining the role of Stocks and Shares ISAs in reducing wealth inequality in the UK. https://d.repec.org/n?u=RePEc:ehl:lserod:141101&r=&r=fdg This research examines whether Stocks and Shares Individual Savings Accounts (S&S ISAs) in the United Kingdom democratise wealth accumulation or reinforce existing socioeconomic disparities. Using longitudinal data from the Wealth and Asset Survey (2006-2020), the study employs multiple analytical approaches, with propensity score matching providing the most credible causal estimates. The findings reveal three key patterns: First, S&S ISA ownership is associated with approximately 27% higher wealth growth compared to similar non-owners. Second, adopting an S&S ISA generates substantial wealth benefits (227% for new adopters) that persist even after abandonment, with former ISA holders showing no significant disadvantage compared to never-owners. Third, contrary to expectations, S&S ISAs provide greater relative benefits for individuals without higher education, challenging assumptions that tax-efficient investment vehicles primarily benefit the already-advantaged. These results suggest that S&S ISAs can function as effective wealth-building tools with democratising potential if barriers to initial adoption among disadvantaged groups can be addressed. The study contributes to literature on wealth inequality and asset-based welfare by providing empirical evidence on the distributional effects of investment-based policy instruments within a liberal welfare regime. Rushworth, George wealth inequality;stocks and shares ISAs;asset-based welfare;financial inclusion;liberal welfare regime 2026-01 Inequality in the Bubble Economy: Who Gains, Who Loses? https://d.repec.org/n?u=RePEc:aim:wpaimx:2624&r=&r=fdg This study develops a decision-making model for asset portfolios involving heterogeneous individuals, divided into three wealth groups: poor individuals, who own a house and a mortgage; middle-wealth individuals, who own a house and hold deposits; and rich individuals, who own a house and Þnancial assets. The model shows that excessive growth of demand for housing or Þnancial assets generates bubbles on the price of these assets, inßuencing wealth inequality. Housing bubbles beneÞt middle-wealth individuals and may reduce overall inequality, while Þnancial asset bubbles primarily beneÞt the wealthy, exacerbating inequality. The analysis highlights the contrasting effects of housing and Þnancial asset bubbles on wealth distribution across these groups. The model is also calibrated to the US economy over the period 1989-2016. A Þnancial bubble accounts for almost all of the observed changes in the wealth distribution. Xavier Raurich Thomas Seegmuller Housing bubbles; Financial asset bubbles; Wealth inequality 2026-08-31 Trade Credit Constraints and Aggregate Dynamics https://d.repec.org/n?u=RePEc:adl:wpaper:2026-04&r=&r=fdg I study the aggregate implications of trade credit constraints faced by exporting firms in a small open economy general equilibrium model with heterogeneous producers. Exporters must finance fixed export costs with external credit, but borrowing capacity is limited by domestic financial development. Quantitative results show that, despite sizable firm-level distortions, trade credit constraints can have muted aggregate effects. Two general equilibrium mechanisms account for this result: tighter constraints reduce export participation but raise average exporter productivity through selection, and endogenous wage adjustment dampens the transmission of shocks to profits and export activity. The aggregate relevance of trade credit constraints increases when firm productivity is less dispersed and when labor supply is more elastic. Overall, the analysis clarifies how firm-level financial frictions interact with general equilibrium forces in shaping aggregate outcomes. Chansik Yoon Trade credit;Business cycles;Credit constraints;Aggregate dynamics 2026-03 Where It All Begins: Eurodollars and International Monetary Policy Transmission under Bretton Woods https://d.repec.org/n?u=RePEc:aim:wpaimx:2625&r=&r=fdg The origins of modern financial globalization are often traced to the emergence of the Eurodollar market in the 1960s, but its implications for monetary policy under Bretton Woods remain unclear. This paper revisits international monetary transmission between 1948 and 1971 using a new monthly series of exogenous U.S. monetary policy shocks based on unanticipated daily changes in the Fed discount rate. We show that U.S. monetary tightening strongly affected U.S. inflation, output, and unemployment, while attracting capital inflows primarily through borrowing Eurodollars from the foreign branches of U.S. banks. After the restoration of current account convertibility in 1958, U.S. monetary shocks also increased Eurodollar and foreign interest rates, pointing to growing international financial integration. However, they had no significant effects on foreign output or credit, suggesting that domestic financial regulation and market segmentation continued to insulate Japanese and European economies from international shocks despite the expansion of offshore dollar markets. Guillaume Bazot Eric Monnet Matthias Morys US monetary policy shocks; International monetary transmission; Trilemma; Financial globalization; Capital controls; Eurodollar market; Bretton Woods system 2026-09-01 Interest Rate Transmission in Decentralized Finance: Evidence from Aave Lending Protocol https://d.repec.org/n?u=RePEc:abo:neswpt:sp0003&r=&r=fdg This paper examines the transmission of US risk-free rates to interest rates in decentralized finance (DeFi) lending market for USD-pegged stablecoins. Although DeFi protocols operate without central banks, their connection to the traditional financial system remains an open question. We use a theoretical model of DeFi lending that incorporates arbitrage between traditional and crypto markets. The model predicts that interest rate transmission depends on DeFi-specific factors, including utilization rates, crypto market conditions and the persistence of lending rates. To test these predictions, we construct a novel dataset from Ethereum blockchain data covering USDT, USDC and DAI. Our empirical results show that risk-free rate has statistically significant predictive content for stablecoin lending rates. Higher risk-free rates are correlated with higher deposit rates, and this correlation operates through the utilization channel. However, this effect is largely mediated by crypto-native factors. These findings have important implications for financial stability monitoring and for understanding the transmission of interest rates through novel digital asset markets. Grigoriy Korolev Decentralized Finance, stablecoin, lending, interest rate. 2026-09