ABSTRACT. The green transition is about the switch from a carbon-intensive to a green equilibrium. Using both a static and a dynamic discrete-choice model with heterogenous consumers, peer effects in demand, and learning by doing in renewables production, we show that there are a multitude of brown and green transitions starting from the same given share of green goods. With global warming externalities internalised by pricing carbon, we show that in addition a temporary big renewable subsidy (a “big push”) is needed to shift the economy from the carbon-intensive to the green equilibrium. This must be done judiciously to balance the temporary costs of the subsidy against the permanent gains from avoiding global warming damages. Finally, we show that learning by doing makes a failed transition less likely.

ABSTRACT. This paper analyzes how Independent Fiscal Institutions (IFIs) affect the accuracy of fiscal forecasts in European Union (EU) member states and Latin American and Caribbean (LAC) countries. We focus on forecast \textit{deviations} in key macro-fiscal variables, i.e. GDP growth, public debt, budget deficit, total revenue, and total expenditure, and examine whether the presence of IFIs is associated with smaller errors, particularly in GDP growth forecasts that drive revenue and expenditure projections.

ABSTRACT. This paper investigates the impact of macroprudential policy on sovereign risk. As long as macroprudential policy improves financial stability, it lowers sovereign risk and enables governments to increase spending without raising taxes. Consequently, countries with tighter macroprudential policies have lower primary budget balances and accumulate government debt over time. However, this effect diminishes or reverses when there is excessive regulation or high levels of debt. These findings are somewhat paradoxical: macroprudential policy may lower private debt, while increasing public debt.

ABSTRACT. The rise in public debt following recent economic crises has reignited the debate on fiscal sustainability and consolidation strategies. This paper examines the impact of fiscal policy on GDP, considering the composition between public consumption and investment, the policy regime (monetary or fiscal dominance), and the degree of policy uncertainty. Using U.S. data, we estimate policy and variance regimes through a Markov Switching Taylor rule and after we identify fiscal shocks, distinguishing between public consumption and investment. To capture the heterogeneous effects of fiscal policy, we employ a nonlinear local projection model, estimated using both dummy models and smooth transition models. Our findings emphasize the importance of fiscal dominance and high variance in amplifying the effects of fiscal policy, particularly when analyzing shocks to total public spending and public consumption expenditure, as these shocks have a stronger impact on GDP under these conditions. However, we find that the effectiveness of public investment does not strongly depend on the policy regime and appears to be more impactful when variance is low. Furthermore, we explore the four possible combinations of monetary and fiscal dominance with high and low variance using a dummy model. Finally, we develop a DSGE model to rationalize these findings, showing that public investment plays a crucial role in mitigating the inflationary effects of fiscal expansion, particularly in monetary dominance. Additionally, we simulate regime transitions, demonstrating that expectations about policy changes significantly shape the macroeconomic response to fiscal shocks.

ABSTRACT. Concerns about fiscal sustainability and worsening balance sheet conditions of major banks triggered a doom loop between banks and sovereigns during the 2010-2013 sovereign debt crisis. Despite closer financial integration and additional institutional safeguards, the home bias is still high in most EU countries. Therefore, our paper aims to examine the effects of home bias on fiscal sustainability. We apply panel smooth transition regression models on a fiscal rule. We find that a high home bias does not reduce the reaction of governments to public debt, but only if the financial system is sufficiently developed. A developed banking system allows sovereigns to raise more public debt at acceptable conditions to support economic stabilisation. An increased presence of foreign banks has a benign effect on sustainability by reducing governments’ debt bias, but state-owned banks reduce it. We further test fiscal responses to public debt shocks with an interacted panel Vector Auto Regression model. Even though governments respond to public debt under a high home bias, they react only slowly and delay fiscal consolidations. Developing financial markets further through the completion of the Banking and Capital Markets Unions in the EU could help countries in the trade-off between economic stabilisation and debt sustainability, while bringing in more foreign banks might enforce stronger fiscal discipline.

ABSTRACT. The increasing urgency of the climate crisis necessitates massive energy efficiency enhancement. This study investigates the impact of environmental policy stringency on energy efficiency across 18 European OECD countries from 2000 to 2020, using quantile regression analysis. Our research question centers on how different environmental policy instruments affect the level of energy efficiency across various quantiles and economic sectors. The analysis reveals that environmental policy stringency significantly enhances energy efficiency, particularly in the 50th to 90th quantiles, indicating heterogeneous effects. Non-market based (NMB) policies have the most substantial impact on countries with lower improvements in energy efficiency, suggesting these should be prioritized in such contexts. Market based (MB) policies show more pronounced effects in countries with higher energy efficiency improvements. Our findings highlight the necessity of tailored policy interventions to maximize efficiency. Policymakers should prioritize NMB policies, such as mandatory emission limits and standards on some detrimental molecules. Additionally, encouraging MB mechanisms, such as high carbon pricing, expanded energy taxes can accelerate improvements where these are already effective. Continued efforts for Technology Support (TS) instruments are also crucial across all countries. Future research could expand the temporal and geographical scope to capture the full spectrum of environmental policy impacts on energy efficiency.

ABSTRACT. Empirical evidence and economic theory suggest multinational firms are more productive than their local counterparts. What explains the persistence of local firms and the recent surge in local content policies? Using a global database of corporate ownership changes for 35,567 commercial mines between 2000-2022, we test whether local firms have a comparative advantage in dealing with weak institutions, corruption, and conflict, which could attenuate or reverse the multinational advantage. We confirm that, on average, output declines by 8% after mines are taken over by local firms. Localized assets also exhibit higher air pollution, indicating lower operational quality. However, in states with weak governance, localization increases mine output by 8%. Local firms also generate more economic activity, urbanization, and non-agricultural employment around mines, indicating stronger local linkages. While multinational mining firms exhibit increasing returns to scale, local firms exhibit decreasing returns, suggesting they may grow based on their ability to navigate institutional weaknesses rather than their productivity. Results highlight the role of institutions in determining relative advantages of multinational versus local firms.

ABSTRACT. The European ecological footprint has maintained a constant growth over time. In this research, we aim to identify its determinants. To do so, we analyze the EU-27 footprint from 1970 to 2019 and relate it to 120 macroeconomic variables. We extract dynamic common factors and estimate regressions with selected variables and these factors using Principal Components and Partial Least Squares process. We find that, regardless of the method used, the economic cycle, the percentages of fuel and natural resource usage relative to GDP, and international trade (with its associated transportation) have the highest explanatory power over the per capita ecological footprint. Additionally, when modeling using only the oriented factors, we find that all three are significant, and the explanatory power of the model increases.

ABSTRACT. environmental sustainability has attracted increasing scholarly attention. Key frameworks, such as the Environmental Kuznets Curve (EKC), initially suggested that economic development leads to environmental degradation at early stages, followed by improvements at higher income levels. However, the EKC hypothesis has proven inconsistent across different environmental indicators and is widely debated. Similarly, the notion of "decoupling" reducing environmental pressures per unit of GDP offered hope for sustainable growth, yet recent evidence challenges its viability at the global scale. The present study explores the driving forces of the Ecological Footprint (EF), a comprehensive environmental pressure indicator in this complex and evolving context. Given the lack of a unified theory explaining EF dynamics, we analyze multiple determinants, including economic growth, green entrepreneurship, economic complexity, globalization, and climate trends. Using income as a proxy for economic growth, our empirical analysis reveals a consistently positive relationship between GDP and EF, underscoring the environmental costs of traditional growth pathways. However, results also highlight mitigating factors: economies with higher technological sophistication and renewable energy usage tend to exhibit lower EF, signaling opportunities for more sustainable growth models. Empirically, the study further employs BMA and quantile regression to assess how these relationships vary across different levels of environmental degradation. Findings indicate that the effectiveness of policy interventions depends heavily on a country's specific ecological and economic context. While green entrepreneurship and globalization can support sustainability under certain conditions, their impact is not uniform.

ABSTRACT. This paper examines whether a Counter-Cyclical Buffer (CCyB) indexed to carbon-intensive credits, i.e., a carbon-intensive CCyB, is consistent with the banking stability objectives of financial regulators when unregulated banks operate in credit markets. To do so, we assess the consistency of the carbon-intensive CCyB regulation through the lens of a general equilibrium model that encompasses brown and green firms, as well as traditional and shadow banks. We find that a carbon-intensive CCyB regulation is not the most suitable for financial regulators when there are no asymmetric leakages between green and brown loans for traditional and shadow banks. However, a strict emissions tax applied to the production of brown firms favors the adoption of a carbon-intensive CCyB regulation by financial regulators. Moreover, a carbon-intensive CCyB could be suitable when traditional banks are more involved in the green credit market than in the brown one, but its efficiency depends on the stringency of the green fiscal regulation. This highlights the need for regulators to carefully coordinate their green policies to avoid jeopardizing the stability of the banking system.

ABSTRACT. This paper examines the pricing dynamics of green and conventional sovereign bonds in the European market, focusing on yield and bid-ask spread differences. Our analysis shows that, consistent with prior research, green bonds exhibit slightly lower yields than their conventional counterparts, indicating a modest but significant impact of the green label on bond pricing. Furthermore, we find that green bonds tend to have narrower bid-ask spreads, particularly among higher-rated issuers, suggesting that green bonds are associated with greater market liquidity. These findings contribute to the literature by highlighting the financial implications of the green bond label, providing valuable insights for investors and policymakers regarding the market performance and liquidity of green bonds.

ABSTRACT. This paper develops a New Keynesian Environmental Dynamic Stochastic General Equilibrium (E-DSGE) model to analyze the role of government investment in facilitating the transition to a green economy. We extend the standard framework by incorporating two types of capital—polluting (brown) and non-polluting (green)—both used in production. Firms choose their capital mix while subject to carbon taxation, and the government directly invests in capital formation, favoring green and brown investments. The model includes adjustment costs for producing green capital, capturing the frictions associated with its deployment and the slow adaptation of firms to green alternatives. Our analysis explores the macroeconomic and environmental effects of fiscal policy under varying government investment preferences. We find that when the government invests solely in brown capital, the crowding-out effect on private investment leads to lower output, reduced consumption, and increased emissions. In contrast, when the government prioritizes green capital, economic growth accelerates while emissions decline, despite the presence of a private investment crowd-out effect. A mixed investment strategy, where the government allocates resources to both types of capital but still favors brown investment, yields results similar to the green-focused scenario but with more moderate effects.

ABSTRACT. Corporate financialization proved to change the way conduct their daily operations, namely the increasing engaging actively in financial markets. Also, Financialization appear to have negative impact on firm investment mainly caused by the rise of Shareholder Value Orientation (SVO) practices in developed countries. Despite the recognition of the primacy of negative impacts of SVO practices on investment, little analysis has been developed to understand how the mechanics of such practices impact investment. To fill this gap in the literature, this study proposes to study two pivotal dimensions of SVO: how ownership structure and conflict interests influence the management of financial resources and how it impacts investment. The results show distinct mechanics from which ownership structure and conflict interest operate financial variables. Namely ownership structure influences how dividend payments decisions are persecuted. Firms which a single shareholder holds more than 50% of the firm, are more likely to conduct a dividend payment policy harmful to investment. Given the shareholders' ability to align managers' interests with their own, such practice will have an impact on the way financial returns are managed. In companies where there is alignment of the interests of managers and shareholders, we identify these companies as those in which the manager is also a shareholder, financial returns have a negative impact on investment policy.

ABSTRACT. In many two-sided markets, transactions between buyers and sellers require ancillary products, like iOS developers require electronic payment technologies, or Amazon sellers require product storage. Beyond their primary services, gatekeepers expand into ancillary product markets and practice self-preferencing: leveraging their dominance in the primary market to favor sales in the competitive ancillary product market. Through a theoretical model, I find that when the gatekeeper finds self-preferencing profitable, sellers always benefit, while buyers may be harmed if they dislike the gatekeeper’s ancillary products. The findings align with the empirical patterns from a recent antitrust case against Google, where self-preferencing regulation backfired.

ABSTRACT. In global supply chains, firms may need to share their technological know-how with suppliers, exposing themselves to the risk of imitation in countries with weak protection of intellectual property rights (IPR). We argue that firms may slice up production as a means to protect their know-how: By sourcing fewer components from each supplier, they avoid sharing too much information about the production process with any individual supplier. We study this phenomenon using global micro data on firm-to-firm trade in automotive components. The data reveal a U-shaped relationship between the number of components sourced from the same supplier and IPR protection: Firms tend to concentrate on few suppliers in very weak IPR environments, slice up production across more suppliers in an intermediate range of IPR protection, and increasingly concentrate component production where IPR enforcement is strong. We offer a simple theoretical model that formalizes the slice-to-protect strategy and predicts that this strategy is most effective at intermediate levels of IPR protection, rationalizing the U-shaped pattern.

ABSTRACT. This paper examines how climate change and adaptation through irrigation have affected corn yield growth within the US Corn Belt since the 1960s. We combine corn yield and irrigation data from the USDA National Agricultural Statistics Service with ERA5-Land gridded temperature data. We adopt an augmented long-difference framework to i) assess the impact of extreme temperature trends from 1960 to 2023 on corn yield growth in Corn Belt counties since the 1960s and ii) estimate the potential of irrigation to mitigate this impact. Our findings reveal significant upward trends in extreme degree days (EDD) above 29 ◦C across more than half of Corn Belt counties. We highlight that the varying magnitudes of these trends, alongside differential adoption rates of irrigation between counties, have played a crucial role in explaining the disparities in long-term corn yield trends within the region. Specifically, we show that irrigation offsets about 80 % of the adverse impact of EDD on corn yields. Based on a counterfactual analysis, we find that current corn yields are about 6.5 % lower, on average, than they would be in a non-climate change scenario.

ABSTRACT. This paper investigates how terrain elevation shapes the impact of rising temperatures on winter wheat yields across the contiguous United States. Our findings reveal that climate conditions affect winter wheat yields differently depending on terrain elevation, with 350 meters identified as a critical threshold. By analysing a 40-year period of hourly temperatures, our estimations indicate that extreme temperatures benefit winter wheat yields during the initial developmental phase but pose risks in later stages, especially for low terrain elevation counties, which are more vulnerable to yield losses from extreme temperatures overall. Our results therefore suggest that higher future temperatures due to climate change could lead to a shift in wheat production areas across the contiguous United States, potentially resulting in a movement from low to high terrain elevation areas.

ABSTRACT. Adoption of crop insurance is a strategy for mitigating agricultural risks, posed by events such as unseasonal rainfall, droughts, and pest attacks, particularly for small farmers in developing countries whose livelihoods are threatened by these risks. It helps farmers transfer the risks to third parties and get protected against income loss due to adverse weather events. Using survey data collected from 397 farmers from Central India and with the help of endogenous switching regression model, this study examines how adoption of crop insurance affects farmers’ welfare. The findings reveal that crop insurance significantly improves farmers’ welfare, with insured households experiencing higher farm income and consumption expenditure. To be specific, we find that non-adopting farmers could have increased their per hectare farm income by ₹20.322 thousand and monthly consumption expenditure by ₹0.334 thousand had they chosen to adopt crop insurance. Similarly, farmers adopting crop insurance would have experienced a reduction of farm income by ₹5.947 thousand per hectare and ₹0.097 thousand in monthly per capita consumption if they had not adopted for crop insurance. The findings reveal that improving access to credit, addressing the information and awareness barrier could promote higher insurance adoption rate. Additionally, targeting smallholder farmers through formal extension services, ensuring equitable access to inputs in combination with informal risk mitigating methods could further enhance adoption of crop insurance and thereby help in attaining higher welfare levels.

ABSTRACT. Compared to the traditional single-level perspective used to explore the relationship between food insecurity and subjective well-being, this study investigates the cross-level moderating effect of the national food security environment on the relationship between individual food insecurity and subjective well-being, using a Hierarchical Linear Model. It also explores the underlying mediating mechanisms of environmental factors by incorporating individual relative deprivation as a mediating variable.

This study combines individual-level data from 47 countries, collected during the seventh wave of the World Values Survey, with country-level data from the Global Food Security Index (GFSI), to assess how food security environments—specifically two level-2 GFSI indexes, namely the Quality and Safety Index and the Sustainability and Adaptation Index—affect the relationship between food insecurity and subjective well-being at the individual level.

The results show that:(1) Individual food insecurity has a significant negative impact on subjective well-being, with individual relative deprivation playing a mediating role between food insecurity and subjective well-being;(2) High levels of food quality and safety at the national level strengthen the negative association between individual food insecurity and subjective well-being, and also indirectly influence subjective well-being by amplifying the relationship between individual food insecurity and relative deprivation;(3) The association between individual food insecurity and subjective well-being is weaker in countries with high levels of sustainability and adaptability compared to those with low levels.

We discuss these findings through the lens of Conservation of Resources Theory and Relative Deprivation Theory.

ABSTRACT. How can artificial intelligence (AI) reshape the future of economic growth in a world constrained by declining population dynamics? This paper ad- dresses this question by extending the semi-endogenous growth framework to incorporate AI as a distinct, non-rival input in the R&D process. Unlike prior studies that focus on AI as a tool for task automation or capital substitu- tion, we highlight its potential to complement human intelligence in idea pro- duction. Our model introduces ”semi-human intelligence,” combining human labor and AI through flexible production functions, including Cobb-Douglas and constant elasticity of substitution (CES) specifications. The results re- veal that while AI significantly enhances research productivity and raises per capita GDP, it cannot fully overcome the demographic constraints inherent in semi-endogenous growth models. Long-run growth remains tied to population expansion, underscoring the irreplaceable role of human creativity. This paper offers a fresh perspective on AI’s role in sustaining innovation and challenges overly optimistic views of AI-driven exponential growth. By highlighting the synergy between AI and human intelligence, it provides valuable insights for addressing global challenges in productivity and innovation.

ABSTRACT. This paper studies a dynamic trade model with two goods and two factors: capital and labor. The domestic household optimally accumulates capital, with fixed labor and non-homothetic preferences. In autarky, the steady state is unique and saddle-path stable. When trading with a foreign country that produces the consumption good using labor only, multiple steady states can arise if the consumption good becomes inferior. In such cases, one equilibrium features indeterminacy, while another remains saddle-path stable. A phase diagram illustrates the global dynamics under trade.

ABSTRACT. Based on a two-sector neoclassical growth model, this paper investigates the conditions for balanced growth with falling investment-goods prices. Uzawa (1961) growth theorem indicates that either purely labor-augmenting technical change or unitary elasticity of substitution between capital and labor is required for the balanced growth in the aggregative economy. Some research analyzes the conditions for the falling investment-goods prices on the balanced growth path in a one-sector model. However, a one-sector model can only address the general price level. Using a two-sector neoclassical growth model that consists of investments-goods sector and consumption-goods sector with heterogenous factor-augmenting technical changes, we first analyze what types of conditions are required to satisfy the balanced growth. Next, we empirically investigate the validity of these balanced growth conditions with the time series data from 1994 to 2021 in the US and Japan. Our analysis has two main results and one finding. First, the difference in labor-augmenting technical changes in each sector is compatible with the changes in investment goods prices. Specifically, the labor-augmenting technical progress in the investment-goods sector larger than that in the consumption-goods sector can produce the falling investment goods prices. Second, about capital-augmenting technical progress, the balanced growth path has a capital dis-augmenting technical change in the consumption-goods sector. Since this specified capital-using technical change implying that capital-output ratio is increasing in the growth process can also produce the falling investment goods prices. Finally, our finding shows that our results are empirically plausible with the data in the US and Japan.

ABSTRACT. This paper studies the macroeconomic consequences of common ownership in a growth model with industry dynamics. Common ownership occurs when financial investors hold stakes in companies that compete in the product market. The paper integrates three widely debated mechanisms through which common ownership affects corporate decisions: corporate governance, business stealing, and industry knowledge spillovers. It examines how these mechanisms influence product quality, firm entry, and firm size, and explores their aggregate consequences. In an economy with common ownership, the typical firm is less inclined to invest in quality expansion compared to an economy without common ownership, as the firm's majority shareholder holds stakes in rival firms. The dynamic interaction between common ownership, firm size, entry, and quality expansion gives rise to hump-shaped investment patterns. Quantitative analysis, calibrated to the U.S. economy, suggests that an increase in common ownership---measured by the magnitude assessed by Azar and Vives (2021) for the U.S. between 1985 and 2015---leads to a 1.76% decline in the quality of corporate governance. It also results in a long-run decrease in corporate investment relative to GDP by 0.09%, and a long-run decline in the economy's rate of growth by 0.046%. Although, in the short run, the payout-to-GDP ratio increases by 0.35%, it declines by 0.21% in the long run. The paper also studies the welfare consequences of these developments.

ABSTRACT. Understanding why the growth in wealth is even more unequally distributed than wealth itself remains a fundamental challenge in macro-finance. This pa- per introduces endogenous subsistence consumption as a novel micro-foundation for return heterogeneity and non-homothetic preferences as pivotal model as- sumptions generating the observed inequality in consumption, income, wealth, and capital income. To study whether the general-equilibrium effects of sub- sistence consumption reinforce a scale-dependence in wealth returns, I develop an analytical representation of endogenous asset returns in terms of the dis- tribution of households’ consumption-portfolio choices. This representation can replace implicit market-clearing conditions complicating numerical solu- tion methods for heterogeneous agent models with aggregate risk. By combin- ing martingale pricing with a mean-field approach, this provides new insights as well as a useful tool for the inquiry into mechanisms driving wealth inequality.

ABSTRACT. This paper provides empirical evidence that fluctuations in aggregate Research and Development (R&D) represent a significant source of risk for investors. This has been predicted by the "long-run risk" theoretical literature, to which this work provides empirical support. The analysis pivots around a definition of R&D intensity that is grounded on few and flexible economic conditions from the endogenous growth literature, where deviations from the equilibrium level of R&D are tracked by the Error Correction Term of the cointegration between R&D, Total Factor Productivity and Labor Force. For USA, this process proves to be stationary, which allows to reliably demonstrate its high forecasting power of productivity and consumption growth as well. As it also results being highly persistent, excess R&D intensity is argued to identify the innovation long-run risk component, which is hypothesized to drive the persistent component shared by productivity and consumption growth. A key prediction would be that R&D intensity serves as a significant risk factor in the cross-section of assets, which is empirically verified, with it being associated with a significant positive risk premium in the cross-section of stocks. The empirical identification strategy of a long-run risk component in this work also constitutes a novelty, as it does not leverage new data nor improvements in statistical methodologies, but relies on economic conditions only.

ABSTRACT. This paper builds on the growth-at-risk framework to study the distribution of fu- ture investment growth conditional on geopolitical risk. Using US data, we find that raising geopolitical tensions are associated with an increase in downside risk to invest- ment growth. Furthermore, looking at the time evolution of the predicted quantiles we observe huge increases in downside risk, uncertainty and negative skewness to the investment growth distribution during historical episodes of elevated geopolitical tensions.

ABSTRACT. Although information technology has revolutionized trading, to achieve a multitude of benefits such as increased efficiency and responsiveness, it has also brought about an adverse by-effect: the flash-crashes. Despite their omnipresence in high-speed trading environments, there are no fully reliable monitoring methods capable of forecasting or averting effectively these types of crashes. This paper aims to bridge this gap by establishing a set of network metrics good at discerning market configurations prone to flash-crashes resulting from speed-based information asymmetries. To this purpose, we use an agent-based model to analyse crucial aspects of their dynamics that traditional analytical models struggle to capture, notably in identifying structural breaks in the topology of the market viewed as a large exchange network.

ABSTRACT. This paper explores how news and noise in fiscal policy affect macroeconomic outcomes, with a focus on the anticipation effects that government announcements create and the possible links with credibility. This work is motivated by the recent collapse of the French government in December 2024, which highlights the importance of policy stability and unrealized policies in shaping economic expectations. We develop a New Keynesian model that incorporates both news and noise shocks related to government spending and taxation on consumption and labor. Our framework accounts for household heterogeneity and rational expectations, enabling agents to distinguish between credible signals and uncertain announcements. Our findings reveal that when noise levels in fiscal policy are low, economic agents respond quickly and strongly, adjusting their consumption, investment, and labor supply decisions well before policy changes are implemented. However, this also leads to a lower level of welfare if the policy is indeed implemented. Conversely, when noise increases, these anticipation effects are reduced, leading agents to adopt a "wait-and-see" approach. Additionally, we aim to explore the potential application of these concepts to the notion of trust, for which the impact on macroeconomic aggregates has mainly been studied in empirical studies. Finally, our paper provides policy recommendations that emphasize the importance of transparent communication strategies in order to mitigate the negative effects of noise in fiscal policy.

ABSTRACT. We model the Stability and Growth Pact (SGP) according to the efficiency criterion of managing tax revenues stated in the Pact. We emphasize the role of uncertainty due to the political decisions as unexpected public expenditure. Then, we find the tax revenue requested by the SGP with a functional analysis approach based on a Riccati equation specifically tailored for this stochastic setting, which helps understanding the stability properties of the benchmark model descending from the SGP.We compute, with a logistic regression, the probability of failure to comply with the Stability and Growth Pact for the European countries by comparing the benchmark tax revenue requested by the SGP with that one socially sustainable. We find that the stochastic processes of long-term debt and tax revenue are linked by a long-run cointegration equilibrium.

ABSTRACT. This study investigates the relevance of education spending vis-a-vis spending in diverse social policy domains for human capital availability. Panel data covering ten domains of social expenditure for 28 OECD countries between 1980 and 2018 were used to estimate the associations between government spending on education, old age, survivors, incapacity, health, family, unemployment, active labour market policies, housing and other social policy welfare programs, and human capital using fixed effects with the Newey-West and the Driscoll and Kraay corrected standard errors procedures. Controlling for other influences and government education expenditures, the results show that spending in unemployment benefits contribute to human capital, but other welfare programs including ALMP, family benefits and old-age and survivors’ pensions may also contribute to human capital availability. These results suggest that governments must pay attention to spending in other areas besides education to improve human capital and that conceiving social spending as part of education policy may constitute a promising approach to fostering human capital formation.

ABSTRACT. This paper is about estimating the impact of disclosure on environmental performance of firms using the CDP survey. It makes several contributions. First, we present three channels that may explain why disclosure may induce a better environmental performance and for each of them we explain why the quality of disclosing should matter or not. Second, we are the first to propose an empirical study based on the CDP survey data that allows for the assessment of the quality disclosure in enhancing environmental performance. To do that, we develop an automatic data-extraction methodology to evaluate the responses of the CDP survey in order to built quality disclosures indicators. Third, we show empirically that good quality implies a better performance but that low quality also does despite in a weaker way. We argue that this is a clue of possible causal link from disclosure to performance.

ABSTRACT. This study analyzes the mechanisms behind the overexposure of poor households to environmental nuisances, with particular emphasis on the sorting mechanism namely the coming to the nuisance phenomenon. Using an exposure prole based on polluting sites, and taking into account spatial heterogeneity due to population density, we assess whether environmental degradation leads to a sorting process within the population of poor households. Our ndings show that environmental degradation triggers sorting processes in urban and peri-urban areas, characterized by a higher growth rate of poor households and a lower growth rate of non-poor households in newly exposed areas. This pattern suggests the presence of a coming to the nuisance phenomenon among poor households in these newly polluted areas.

ABSTRACT. This paper examines the impacts of climate change litigation outcomes on greenhouse gas emissions using data collected for a cross-section of countries over the period from 1990 to 2023. The empirical analysis is based on a model that comes from the decomposition literature, estimated using panel data and instrumental variables methods. The results show that once the first litigation has been decided, emissions decrease in the whole sample, including high-income and middle-income countries. The results hold and the estimated decrease is slightly higher when litigation fillings are used as instrumental variables. The robustness checks, which consist of adding proxies for environmental regulations and estimating subsamples, confirm the main results. These outcomes have important policy implications for global warming issues.

ABSTRACT. This paper examines the role of foreign exchange reserves in the conduct of monetary policy in the Central African Economic and Monetary Community (CEMAC), a monetary union characterized by a fixed exchange rate regime pegged to the euro. Based on the New Keynesian framework, we propose an original macroeconomic model that includes two internal and external stabilization objectives for the Bank of Central African States (BEAC). The model also incorporates the region’s dependence on commodity exports, which exposes it to significant external shocks. We discuss how two instruments, the central bank interest rate and foreign exchange reserves, can be managed to satisfy the central bank’s stabilization objectives. Foreign exchange reserves are the main instrument for the external stabilization objective. This provides some flexibility for the central bank to use the interest rate as an instrument for the internal stabilization objective. It is also shown that, while foreign exchange reserves exceed the target level, the excess can be used for investment to support economic growth.

ABSTRACT. The purpose of the study is twofold. On the one hand we investigated the determinants of CBDC related knowledge among the Romanian central bankers. On the other hand, we assessed the perceived impact of CBDC on financial stability. More precisely, we have designed a survey analysis focused on Romanian central bankers, to first see to what extent the personal features, the information sources, the interest to use and the CBDC related benefits and risks, influence respondents’ perceptions on their level of knowledge about CBDC. Second, we have investigated to what extent the interest in using CBDC, the associated benefits and risks, and trust in the central bank, impacts the level of financial stability, once CBDC is fully launched. Our survey analysis is based on a questionnaire with 274 valid responses. The cross-sectional regression analysis revealed that age and level of education have no significant impact on the level of perceived knowledge about CBDC. On the contrary, respondents in a management position, involved in monetary policy and financial stability division, or activating in the NBR headquarters declared to have deeper knowledge about CBDC. In addition, we report that interest in using CBDC, as well as the credibility of central bank, is associated with a positive impact of CBDC on financial stability.

ABSTRACT. This study explores the impact of digitalization on business cycle synchronization within the European Union (EU-27 member states) from 2013 to 2022, using the Granger non-causality test developed by Juodis et al. (2021). To this end, a corrected version of the business cycle synchronization coefficient proposed by Cerqueira and Martins (2009) is used. The pandemic implications are also considered. The findings reveal a bidirectional relationship between digitalization and business cycle synchronization. Specifically, digitalization - particularly when led by public sector - tends to reduce business cycle synchronization across EU economies. This effect is more pronounced in the Eurozone and in highly digitalized economies, suggesting that asymmetric digital transformation can exacerbate macroeconomic divergence. Additionally, whereby business cycle synchronization also influences the pace and orientation of digitalization. These findings highlight a growing tension between national digital advancement and regional economic integration. As a result, a set of policy recommendations aimed at fostering digitally driven convergence is proposed, including harmonized public digital infrastructure, coordinated private sector incentives, and EU-wide digital convergence metrics. The study contributes to the literature on economic integration by demonstrating that the digital transition, while beneficial in many respects, poses new challenges to macroeconomic cohesion in the EU. The pandemic period further seems to complicate these dynamics, introducing sectoral and economic shocks that disrupted the relationship.

ABSTRACT. Vaccines represent a major achievement in public health, crucial for eradicating diseases and improving life expectancy. However, vaccine hesitancy, driven by risk aversion, misinformation, and cognitive biases, threatens immunization campaigns and poses challenges for policymakers aiming to optimize public health outcomes. Existing literature identifies multiple determinants of vaccine hesitancy. Some studies emphasize risk perception and cognitive biases, such as omission bias—where individuals fear vaccine side effects more than disease risks—and coincidence bias, attributing adverse events to vaccination. Others highlight the role of misinformation, low-quality information, and social norms in shaping attitudes toward vaccines. Additionally, demographic factors, including age, gender, education, and income, significantly influence hesitancy. This study explores vaccine hesitancy toward COVID-19 vaccines using an original dataset integrating individual (age, education, income, gender, internet use) and contextual factors (healthcare system type). Findings suggest that countries with a National Health Service experience lower mistrust and higher vaccination rates, as public healthcare spending positively correlates with vaccine trust. Gender differences also emerge: while women express greater concerns about vaccine safety, they are more likely to comply with vaccination due to social pressures. Furthermore, higher education and income levels are associated with lower hesitancy. The paper is structured as follows: Section 2 presents the background; Section 3 reviews the literature; Section 4 describes the data and methodology; Section 5 discusses results; Section 6 concludes.

ABSTRACT. We investigate the economic impact of “La Notte della Taranta”, the largest Italian festival and one of the most significant European cultural events, by surveying the spending patterns of over 20,000 attendees across seventeen consecutive editions (2007-2024). We uncover that tourists’ motivation significantly influences expenditure, with partially motivated tourists spending more than both non-motivated and greatly motivated ones. However, for the latter category, spending at the destination is boosted by various tourist traits: being a first-time visitor, having high instantaneous social capital, and originating from Northern regions.

ABSTRACT. In the real world, groups rarely operate independently; instead, they interact within a wider system that is influenced by external authorities such as government authorities, business leaders, and other figures of power. These external authorities can shape, either directly or indirectly, group dynamics and decision-making. In particular, this influence becomes marked in contexts where laws and enforcement mechanisms alone are insufficient to foster cooperation, making it essential to understand the psychological component associated with them especially in the face of global challenges such as climate change and public health crises.

While extensive research has investigated the role of leadership in cooperative behaviour, there has been less consideration of how authorities influence cooperation. This research experimentally investigates how different authorities' sources of power influence the behaviour of individuals in a public bad game through investment recommendations. Specifically, we examine whether authorities elected through more democratic mechanisms generate more followed recommendations than those selected through alternative processes. By analysing the interaction between the institutional framework and cooperative behaviour, this work offers new insights into the psychological and institutional drivers of compliance beyond traditional regulatory approaches.

ABSTRACT. The economic and psychological literature on second-hand consumption has identified specific drivers and barriers on the part of consumers. Those drivers/barriers are related to concerns for one’s image, such as how one sees oneself (self-image), how one perceives to be seen by others (social image), and how one perceives that others see themselves when consuming second-hand items (second-order self-image). In this paper, we investigate how one’s self-image, social image, and second-order self-image affect intention to engage in second-hand consumption through a vignette experiment involving a large, nationally representative sample of the Italian population (N = 10,496). We also study how the relative importance of these considerations varies across product types and their attributes (condition and price). We find that perceptions of being financially savvy, socially approved, environmentally conscious, and not feeling disgusted when engaging in second-hand consumption are all relevant factors, even though their relevance in affecting the consumption choice is different depending on whether they affect the individual’s self-image, social image or second-order self-image.

ABSTRACT. We investigate the effectiveness of the MF fiscal stimulus in a small open economy in which the fiscal theory of price level (FTPL) is premised, different from Okano and Eguchi (2024, IMFER). In normal times, we find that the effectiveness of the MF fiscal stimulus decreases as openness increases. The negative relationship between inflation and the real money balance derived from the FTPL, hampers the effect, strengthening the MF fiscal stimulus in a small open economy. This result contradicts that of Okano and Eguchi (forthcoming, IMFER). However, in a liquidity trap, an adverse demand shock induces a huge money injection, overwhelming the negative relationship. Thus, in a small open economy, the effectiveness of MF fiscal stimulus is larger than in a closed economy. This finding is consistent with that of Okano and Eguchi (2024, IMFER).

ABSTRACT. We study the effects of macroprudential policies on income and wealth inequalities in 19 countries of the Eurozone during the 2000-2023 period. We further investigate the impact of heterogeneity in the portfolio composition on this relationship. A panel regression relates inequality measures to macroprudential indicators. Then, SVAR models are estimated to obtain impulse response functions following a shock in the loan to value ratio to assess the main channel of transmission (real estate price or credit). The impacts of macroprudential policies as well as how this policy is transmitted to the rest of the economy is found to be different whether a country has a high or low share of wealthy hand-to-mouth households (households that possess illiquid assets but little to no liquidity).

ABSTRACT. We develop a model that takes into account how the structure of corporate debt affects the monetary shocks transmission. We endogenise the choice of bonds and loans of firms in a dynamic setting, building on Bernanke-Gertler-Gilchrist (1999) and show that the corporate structure of firms is not irrelevant. Our analysis is designed to address the question of financial fragmentation in the euro area. We assume that banks have an informational advantage over households in determining the quality of firms’ projects, which determines a lower cost of bank finance compared to market finance in a steady state, given institutional factors and the size of the market. Over time, shocks to the cost of finance for banks or liquidity shocks feed back into the dynamics of firms’ net worth,investment and output. In our framework, monetary policy can have asymmetric effects. On the one hand, higher banks’ refinancing costs due to more stringent monetary policies have a greater impact on those firms that cannot easily substitute loans with bonds. Firms with easier access to the bond market have a competitive advantage over firms that can only rely on bank financing. On the other hand, shocks that increase the liquidity in the bond markets, such as unconventional monetary policies, affect firms with a more diversified corporate debt structure. From this perspective, heterogeneities in the development of bond markets in European economies can have important macroeconomic implications. Completing the Capital Market Union is thus a priority for building resilience in the European economic space.

ABSTRACT. The rise in women’s participation in the labour market has resulted in only a minor shift in the division of household labour, with (working) women predominantly bearing the responsibility for housework. This paper focuses on whether we should expect a rebalancing or a reinforcement of gender disparities in time allocation after retirement. This issue transcends gender equality concerns, serving as a crucial element in fostering healthy ageing and ensuring the sustainability of public spending in the current demographic shift. We employ a regression discontinuity design (RDD), using retirement eligibility as an exogenous instrument for retirement status, to identify the causal effect of retirement on the allocation of time between paid work, unpaid work, and leisure for both genders. Our results indicate that women are less willing than men to retire as soon as they become eligible and that the increase in leisure activities after retirement is stronger for women than for men. This represents a novel and particularly intriguing finding for women, with significant policy implications. Specifically, allowing women to retire earlier, even assuming compliance, would simply reduce their pension benefits, thus limiting their ability to participate effectively in health-promoting activities during their extended leisure time.

ABSTRACT. This study examines the role model effects of female professors on female students’ academic performance. We leverage student-professor matched data from STEM Bachelor’s programs at Sapienza University, the largest university in Europe, covering the period from 2017 to 2022. We exploit a quasi-experimental design based on the quasi-random assignment of students to professors of different genders, due to the sections composition of large classes based only on lastname initials. Our findings show that the presence of female role models significantly benefits female students, both by narrowing the performance gap with male peers at the exam level and by improving long-term academic outcomes, such as meeting progression benchmarks and increasing persistence in the program. Importantly, we find no evidence of negative effects on male students’ performance. From a policy perspective, fostering the presence of female instructors in first-year courses may enhance female students’ performance, while also enhancing a less gendered perception of STEM fields among male students.

ABSTRACT. As Western populations age, more adult children face parental health challenges. Care- giving responsibilities towards parents are becoming crucial concerns for families, healthcare systems, and societies. While this care is essential for elderly well-being, it also demands significant time, energy and emotional resources. Yet, the impact of care provision on caregivers’ lives remains understudied. This study examines how unexpected parental health crises affect young adults’ decisions to form partnerships and have children. Using Dutch administrative data, we track individuals aged 15-35 whose parents suffered sudden, non-fatal health events. We compare family formation outcomes across groups experiencing parental health shocks at different ages using a staggered difference-in-differences approach. Our analysis explores mechanisms related to time allocation and mental health impacts, potentially creating cycles where delayed fertility leads to older parenthood and earlier caregiving duties in the next generations.

ABSTRACT. In this paper, I show how a custody law reform in the Netherlands - which encouraged joint physical custody after separation - impacted the labour market outcomes of divorced parents with young children. Women's hourly wages and monthly earnings decrease by about 2\% while there is no change in employment or hours worked. The likely mechanism for the relatively lower wages and earnings in reduced geographic mobility. Building on these insights, I then estimate a discrete choice model in which parents trade off location choice (and with that, labour earnings,) with child welfare. Counterfactual exercises suggest that increased opportunities for remote working would mitigate the post-divorce wage and earnings decline and increase the share of children growing up in joint physical custody.

ABSTRACT. The transformation and selection of economic predictors should be an integral part of the forecasting process. We introduce the Transform-Sparsify-Forecast (TSF) framework, which treats the selection of the optimal transformations as a crucial component of the forecasting framework, incorporates multiple transformations of the predictor variables, and selects the predictors dynamically. Using the FRED-MD dataset, we demonstrate that TSF consistently improves the forecasting accuracy in high-dimensional settings across five classes of econometric and machine learning models, especially during periods of economic turbulence and at short horizons. In a case study for inflation forecasting, we highlight the importance of simultaneously including multiple transformations of key predictors, such as oil prices, to capture nonlinear inflationary pressures.

ABSTRACT. A growing empirical literature on how to measure uncertainty has emerged following the 2007-2008 financial crisis, proposing various uncertainty measures for the United States. Some empirical works tried to decompose uncertainty shocks according to their nature as financial and macroeconomic. However, some measures seem to be more correlated than they should be. This paper aims to provide new macroeconomic and financial uncertainty indexes that are less correlated than indexes developed in the literature. Our methodology follows a two-step approach. First, we identify macroeconomic and financial uncertainty shocks in an SVAR model using narrative and sign restrictions for identification. Second, we apply historical decomposition to construct the new indexes. The results indicate that these new macroeconomic and financial uncertainty measures are more distinct from each other compared to the macroeconomic and financial uncertainty indexes proposed in the literature.

ABSTRACT. We propose the Conditional Growth-at-Risk (CoGaR) measure, which extends the Growth-at-Risk (GaR) framework from a quantile-on-level approach, where the levels of macro-financial variables are considered covariates, to a quantile-on-quantile approach, which instead uses their conditional quantiles. To estimate CoGaR, we first introduce a new model based on a system of quantile regressions and then propose a Bayesian approach to make joint inferences on the CoGaR and the associated predictor-specific quantile levels. This procedure allows us to jointly perform model selection and parameter estimation while quantifying the uncertainty. A Monte Carlo study showed posterior concentration to the true quantile levels and good accuracy in finite samples. In the first application to 11 advanced economies, CoGaR estimates reveal that the conditional quantiles of key variables, such as the Financial Conditions Index, inflation, and credit-to- GDP growth, shift toward the corresponding distribution’s tail and exert a strong influence on GDP tail risk. An additional application focusing on Nordic countries provides evidence that the conditional quantile of temperature anomalies located in the right tail of the distribution amplifies their growth at risk.

ABSTRACT. The study investigates systemic financial risk in global markets, attributing it to geopolitical instability, climate risks, and economic uncertainties. Utilizing a state-of-the-art machine learning heterogeneous panel regression framework capable of capturing cross-sectional dependencies and nonlinear patterns, we examine financial stress across multiple economies, including China, the U.S., the U.K., and ten EU nations. Through extensive out-of-sample rolling window analysis, we show that while geopolitical uncertainty enhances short-term predictions, long-term risk forecasting is better achieved using financial and economic data. The study underscores the limitations of conventional regression models in capturing financial risk dynamics and suggests that machine learning-based panel regressions provide a more nuanced and accurate forecasting tool. The findings bear significant policy implications, highlighting the necessity for regulatory bodies to reassess risk frameworks and the role of climate-related disclosures in financial markets.