ABSTRACT. The paper analyses the impact of trade policies and geopolitical factors on the degree of economic openness and the development of global business, employing fixed-effects panel models on a sample comprising the 27 EU member states and their principal trading partners, for the periods 1996–2023 and 2007–2023 respectively. Trade freedom is quantified through the Trade Freedom Index (Heritage Foundation), geopolitical risk through the Fragile States Index (Fund for Peace), and the development of global business through foreign direct investment flows. The results partially confirm the existing literature: consistent with Wacziarg and Welch (2008) and Fontaine (2021), trade freedom has a positive effect on economic openness in EU member states; however, unlike those studies, the effect becomes negative in the extended sample. The negative impact of state fragility on trade openness converges with the conclusions of Yan and Piao (2025). In contrast, contrary to Sambharya and Rasheed (2015) and Dellis and Sondermann (2017), geopolitical risk does not statistically significantly influence FDI, suggesting that cost advantages or access to natural resources may compensate for instability. A substitution effect between international trade and FDI is also identified, while economic growth and institutional integrity prove to be robust determinants of foreign direct investment.

ABSTRACT. This paper reexamines the trade creation effects of migration using a large sample of 180 countries from 1995 to 2023. We estimate a structural gravity model of bilateral trade augmented with migration stocks, investigating whether immigration to OECD countries relates to the extensive and intensive margins of trade. To address potential endogeneity, we apply a two-step control function approach based on a first-stage gravity model of migration that exploits bilateral and time variation in migration regularization policies across OECD countries. Results obtained using PPML estimators show robust pro-trade effects of migration through the extensive margin, with non-linearities and heterogeneity across product types. The findings show that migration primarily fosters exports of new, differentiated products, while effects on the intensive margin are weaker for different types of goods. These results stress the role of migrant networks as facilitators of new trade relationships and highlight policy implications for migration and trade integration.

ABSTRACT. This paper argues that innovation can be facilitated by policies promoting inflows of foreign direct investment. It examines the relationship between national investment promotion efforts targeting particular sectors and the number of patent applications (or patents granted) for innovations involving at least one local inventor filed at the US Patent and Trademark Office in the technology class belonging to the targeted sector. The difference-in-differences results suggest that innovation increases in sectors explicitly targeted by investment promotion agencies. This relationship is stronger for more R&D-intensive industries belonging to the targeted sector. Focusing on an interaction between an industry characteristic and the policy instrument allows to control for country-sector-year fixed effects that absorb all the unobservables that may determine the choice of targeted sectors in a given year in a given country.

ABSTRACT. International trade in waste and scrap has expanded rapidly, yet it remains underexplored in quantitative trade economics. This paper analyzes the determinants of global waste flows across five major material categories (plastics, paper, glass, iron & steel, and aluminum) using a gravity model enriched with bilateral tariffs, nontariff measures, and economic-integration indicators. Leveraging high-resolution HS6 bilateral customs data, we compare trade elasticities between waste and non-waste products within the same sectors to assess whether waste flows follow systematically different patterns and whether such differences are material-specific. The results reveal three distinct archetypes: information-sensitive materials (plastics, aluminum), where technical standards function as certification mechanisms that facilitate trade; complementarity-driven materials (paper), which display inverted tariff elasticities; and commodity-like materials (glass, iron/steel), whose trade responds conventionally to policy and geographic frictions. The results highlight the need for material-specific trade policies and green-transition strategies, as the scope for localized recycling differs systematically across material archetypes

ABSTRACT. Emerging and developing countries depend on external financing to implement macroeconomic policies in response to successive global shocks. This reliance on external borrowing influences the dynamics of the real exchange rate. In this study, we investigate whether the real exchange rate responds to external public debt in developing countries between 1975 and 2023, using empirical approaches that handle the cross-country differences in panel. The contribution to the literature is twofold. First, we find an inverted U-shape relationship between the real exchange rate and the external public debt: limited levels of external debt are associated with real exchange rate appreciation, while higher levels lead to real currency depreciation. Second, we estimate a country-specific external debt threshold that minimizes the changes in the real exchange rate, employing the Bayesian iterative empirical procedure.

ABSTRACT. By investigating the determinants of inbound portfolio investments (PIs) to 15 emerging countries over the past decade, this study finds that the global financial cycle was an important determinant of PIs and shows the elusiveness of the dominance of global factors (GFs) over domestic factors (DFs) in the sense that VIX, the unique effective GF, was not strong enough to be more impactful than the effective DFs whilst having greater explanatory power than them. This elusiveness can be said of each of four two-year subsample periods, although the pattern of relevance, the statistical significance, and the marginal impact of effective GFs on PIs were not stable across these periods. The effectiveness of domestic short-term interest rates (DIR) as a DF challenges the view that domestic monetary policy has only feeble independence. DFs related to three environmental (E) and social (S) issues – carbon dioxide emissions, human development, and worker protection – were associated with PIs as well. The first two of these ES-related DFs were more impactful on PIs than VIX and DIR over the full sample period, and the relative dominance of positive versus negative screening was likely to differ by indicator of ES-related DFs. Worker protection is the only regressor that was effective in all three cases where not only PIs but also the two components (stocks and bonds) of PIs are analyzed. The relevance and impact of ES-related DFs on PIs were mainly attributable to bond investments.

ABSTRACT. The rising share of skilled workers represents one of the major structural transformations in European Union economies. Yet, persistent differences in labor productivity between advanced Western European countries and catching-up economies of Central-Eastern Europe remain. This paper examines how changes in workforce structure translate into productivity growth across these two groups, with particular attention to the role of intangible capital and institutional quality. The analysis is based on an extended neoclassical production function and works with the aggregated occupational structure of the labor force according to the ISCO classification. The empirical framework relies on panel data for 22 EU countries over the period 2011–2021, which are divided into two groups: Western European economies and Central-Eastern European economies. Productivity and intangible capital data are drawn from the EU KLEMS database, while institutional quality is proxied by the Worldwide Governance Indicators. Intangible capital is decomposed into training, organizational capital, and R&D. The results indicate pronounced asymmetries in the mechanisms linking skills and productivity. In Western European economies, the relationship between individual skill groups and productivity is stronger when combined with firms’ investments in intangible capital, suggesting a tighter link between skills, technologies, and production organization. In contrast, in Central-Eastern Europe, this relationship is less stable, and its effect is weaker and more dependent on firm-level investment and the quality of the institutional environment. The findings suggest that skills alone are insufficient to ensure productivity growth; their effectiveness depends on the broader technological and institutional environment in which they are embedded.

ABSTRACT. The goal of this paper is to check for the existence of an ``original sin redux" transmission channel from geopolitical risks to inflation in Emerging Market Economies (EMEs). Based on a dataset of 18 EMEs over the 2005-2022 period, we show that stronger geopolitical risk increases inflation and that this effect is amplified by the share of sovereign debt holding held by foreign investors in local rather than in foreign currency. This result confirms the idea that the shift of currency risk from sovereign borrowers to international investors makes the latter particularly sensitive to country-specific geopolitical events, thus leading to higher inflation in EMEs.

ABSTRACT. Geopolitical tensions abound, even since the end of the Cold War, as globalization has shifted the power balance between old and new hegemons like the US, the EU and China. Contrary to the belief that globalization would promote peace, we argue that multilateral dependencies can increase the likelihood of conflict by making countries more vulnerable as financial integration entwines economic and political destinies. We propose a 3-player model of sovereign debt holdings to show how multilateral financial integration might exacerbate political conflict when political negotiation is possible, and multilateral organisations are absent. We find evidence that political relations between the US, EU, and China are unlikely to be strained by tensions on sovereign bond markets, as there are limited interdependencies, but find sovereign risk moves with geopolitical risk in line with the model’s predictions.

ABSTRACT. The purpose of this paper is to analyze the economic shocks in the Romanian economy through a Bayesian approach, the development and estimation of a New-Keynesian Macroeconomic dynamic stochastic general equilibrium (DSGE) model, and a Bayesian Autoregressive (BVAR) model. Our findings go accordingly to Taylor’s Rule, which in turn may explain the increases in the interest rate and inflation rate, leading to a fall in production and a decrease in inflation pressure. Inflationary pressures are also explained by the shocks in demand, supply, and monetary supply, assuming Romania is a closed economy. The BVAR model for the Romanian economy, in accordance with the theoretical foundations, allowed to calculate the impulse-response functions and to conclude the effectiveness of the monetary policy that can be explained by the Mundell-Fleming model.

ABSTRACT. This paper examines whether pre-existing management capital buffers shaped banks’ credit supply responses to the energy price shock following Russian invasion of Ukraine. Using a comprehensive euro area bank–firm panel dataset, we estimate a difference-in-differences framework exploiting variation in firm-level energy exposure and cross-bank heterogeneity in pre-shock capital headroom. We find that banks with larger capital buffers were significantly more likely to sustain lending to energy-exposed firms after the shock. A one-percentage-point increase in the management buffer is associated with approximately 4.4\% higher new lending to energy-intensive firms. The stabilising role of capital headroom is most pronounced along the flow margin and in loan pricing: well-capitalised banks reduced new-loan interest rates by around 27 basis points relative to lower-buffer banks. The results are robust to controlling for cross-country differences in fiscal support measures introduced in the aftermath of the shock. These findings indicate that discretionary capital headroom functions as an economically relevant shock absorber during adverse, sector-specific disturbances.

ABSTRACT. Do EU sanctions force financial institutions to divest from targeted jurisdictions? This paper shows that they do not. Sanctions alter the strategic behavior of European financial institutions, but not in the rapid and externally enforced manner policymakers anticipate. Using an Interactive Fixed-Effects counterfactual framework and a multidimensional view of corporate strategy, we find that sanctions escalation affects institutions that have already internalized prior restrictions, in ways that leads to defensive adaptation rather than sustained exit. The speed and scope of adjustment differ across institutions and strategic margins. These findings indicate that uniform sanctions design fails to account for heterogeneity in strategic capacity and balance-sheet constraints. Based on these findings, we propose a four-phase policy framework that combines shock-smoothing divestment paths, exposure-based sanctions frameworks, risk-based prudential supervision of sanctions exposure, and incentive-aligned compliance mechanisms. This paper provides evidence against a static enforcement view of sanctions.

ABSTRACT. This paper examines the impact of natural disasters on fiscal and external sustainability across 134 economies from 1980 to 2023. We adopt a two-step approach: first, we estimate country-specific, timevarying sustainability coefficients; second, we assess their determinants using Weighted Least Squares panel regressions with fixed effects. To complement the long-run analysis, we employ local projections to capture the short-term dynamics following disaster-related mortality, vulnerability, and resilience shocks. Results show that natural disasters weaken fiscal sustainability, particularly in emerging and vulnerable economies. Vulnerability exacerbates fiscal and external fragility, while resilience mitigates adverse effects on public accounts. Local projections reveal that fiscal sustainability deteriorates significantly in the medium term after disaster shocks, whereas external sustainability responses are more muted and heterogeneous. Together, these findings highlight the importance of combining longand short-run approaches to understand how climate shocks propagate through macroeconomic channels and to inform adaptive, risk-sensitive fiscal policy frameworks.

ABSTRACT. he literature established that a sovereign bond’s “convenience yield” premium diminishes when that country issues more debt. But how is this convenience yield affected when another country issues sovereign debt? Using high-frequency identification and debt management offices’ communication, we find that an increase in German or French debt reduces convenience yields across the eurozone. Spillovers to low-risk countries are one-for-one while those to riskier countries are smaller. To rationalize these findings, we develop a model with heterogeneous credit risk. Safe sovereign bonds are close substitutes to hedge against idiosyncratic risk, explaining large spillovers, while risky bonds are poor substitutes.

ABSTRACT. We estimate a panel time-varying parameter (TVP) state-space model of fiscal behavior for 18 advanced economies to reassess sovereign debt sustainability under financial integration and global uncertainty. The empirical framework embeds the conventional primary balance response within an augmented intertemporal constraint that incorporates debt revenue, the interest–growth differential, and the interaction between debt and global uncertainty. We reject constant-parameter fiscal rules and uncover highly persistent yet mean-reverting fiscal regimes with substantial cross-country heterogeneity. Global uncertainty systematically amplifies fiscal responses, indicating that governments internalize rollover risk in their reaction functions. Fiscal sustainability thus emerges as a dynamic and state-contingent process shaped jointly by policy effort and macro-financial conditions.

ABSTRACT. We study the impact of fiscal consolidations on bank profitability and stability using a comprehensive dataset covering 194 countries from 2000 to 2020. Consolidations improve bank stability but reduce profitability: asset quality and capital buffers strengthen, while operational income declines. These effects are heterogeneous: profitability losses are mostly concentrated in advanced economies, whereas stability gains are stronger in emerging markets. Fiscal consolidations make banks safer or riskier depending on their size, type, and timing: expenditure-based consolidations during expansions tend to strengthen bank stability, while tax-based or procyclical adjustments often erode bank profitability and increase risk.

ABSTRACT. Climate change poses increasing risks to human health by intensifying temperature anomalies and air pollution. Despite strong adaptive capacity, OECD countries continue to experience substantial heat-related mortality. Using panel data for 38 OECD countries from 1990 − 2022, we examine how climate change and environmental quality jointly shape population mortality rates. Fixed-effects estimates show that temperature anomalies significantly increase mortality, with PM2.5 exposure amplifying this effect. Stronger governance, greater renewable energy use, and improved healthcare capacity reduce vulnerability, while coal dependence and financial instability heighten risk. Policymakers should implement integrated climate-health strategies to reduce temperature- and pollution-related mortality.

ABSTRACT. Urban traffic is widely recognized as a major contributor to air pollution in densely populated areas. To address this issue, many cities have implemented traffic restriction zones to reduce pollutant concentrations. Milan’s Area C, introduced in January 2012, is a prominent example of such an initiative. This study investigates the causal impact of Area C on air quality by applying advanced statistical learning techniques, specifically nuclear norm-based matrix completion and interactive fixed-effects models. These methods enable robust counterfactual analysis while relaxing traditional econometric assumptions, such as parallel trends. Using monthly pollution data from 2008 to 2019 across Lombardy, and incorporating meteorological variables to control for confounding influences, we find a statistically significant reduction in PM10 concentrations within Area C following the policy’s implementation. However, no consistent effect is observed for nitrogen oxides (NOx), suggesting that additional or alternative interventions may be required to address gaseous pollutants. Our findings underscore the effectiveness of targeted traffic restrictions in reducing particulate pollution and highlight the value of statistical learning methods for environmental policy evaluation.

ABSTRACT. Carbon Capture and Storage (CCS) technologies, whether from fossil fuels or bioenergy (BECCS), are considered by both international organizations (IEA, 2022; IEAGHG, 2021) and the IPCC (2005) as key tools for achieving economic decarbonization by 2050. These technologies involve the sequestration and storage of CO2 underground, as well as its use by industrial or agricultural activities (CCUS). Despite their advantages, the large-scale deployment of these CCS/BECCS/CCUS technologies has proven difficult and delayed. This presentation will provide an overview of the state of the art in the global development of these technologies and outline the obstacles and opportunities for their advancement. To present the economic challenges involved in CCS/BECCS/CCUS technologies, we will need first to asses the extent which the CCS deployment has reached in the last years, and the scale which it will require to meet in order to become a useful tool for the economy decarbonation. l We will then specify the challenges related to the emergence of BECSS and CCUS, whose development is embryonic and encompasses a large number of different technologies. More generally, BECCS should initially be considered a complement to CCS, which can benefit from technological advances as well as the storage and transport infrastructure it will enable the development of, and a longer-term substitute given its potential to lead to negative CO2 emissions

ABSTRACT. This study examines household energy use and factors influencing energy choice for cooking, among tribal communities in one of the hill regions of Manipur, India. Based on primary data collected from 208 households, the findings reveal that 66% of households engage themselves in mixed fuel usage for cooking, while 21% and 13% respectively use only modern fuel and traditional fuels. Using multinomial logistic regression, this study identifies the significant determinants of energy choice, such as the location of the household, awareness of government schemes, cultural practices, household size, and household income. The study finds that although there has been access to electricity for the households, adoption of clean cooking fuels is low due to a host of reasons including economic conditions and cultural practices. These results underscore the need for policy interventions to facilitate income-generating activities and implement culturally sensitive policies. An integrated approach is necessary to address both supply- and demand-side issues and achieve a sustainable energy transition in these areas.

ABSTRACT. The lecture will re-examine the notion that flexible rates insulate countries from external disturbances in light of theory and new evidence for the euro area and 20 of its neighbors. In this sample, countries with floating rates (“floats”) let their currencies depreciate in response to EA monetary policy shocks (and business cycle) shocks, while “pegs” raise interest rates. Yet at business cycle frequency, these depreciations do not translate into insulation: floats contract just as much as pegs. State-of-the-art HANK open-economy models provide insight on the channels that may explain declining insulation in economies that become progressively more open to trade. The talk will conclude with a brief reconsideration of insulation in the face of tariff shocks.

ABSTRACT. We examine the relationship between inflation and fiscal sustainability with a two-step approach. In the first step, we estimate a country-specific time-varying measure of fiscal sustainability using the fiscal reaction function. In the second step, we examine how various measures of inflation affect the estimate of fiscal sustainability found previously. Our findings indicate that higher inflation rates contribute positively to the measure of fiscal sustainability, specifically through core inflation causing an improvement in fiscal sustainability, while the effect of energy inflation is conversely found to be negligible or even negative.

ABSTRACT. This paper examines how firms’ financing structure shapes monetary policy transmission in a general-equilibrium model with financial frictions. Firms endogenously choose between bank loans and bonds. Banks acquire borrower-specific information through delegated monitoring, while households purchasing corporate bonds rely on bank-produced information intermediated through underwriting and placement services. This generates a structural cost wedge whereby loan rates may lie below bond yields for large firms with dual market access. Conventional monetary tightening raises banks’ funding costs, disproportionately affecting bank-dependent firms, whereas bond-market liquidity shocks associated with unconventional policy primarily benefit firms with more diversified debt structures. In a monetary union, cross-country differences in financial structure amplify these asymmetric responses and produce heterogeneous real effects. These results indicate that: (i) the development of financial markets in the Euro Area is crucial for strengthening macroeconomic resilience; (ii) efforts towards the completion of the Capital Markets Union are key to attenuating the heterogeneous effects of monetary policy transmission.

ABSTRACT. When expenditures are indivisible, consumers must choose between discrete alternatives that deviate from their optimal consumption plan. We show in a two-period model that they not only care about the absolute deviation from the optimal plan but also about how asymmetric the deviation is. Consumers who are averse to negatively skewed deviations, a preference order linked to the third derivative of utility, tend to postpone the purchase of the indivisible good.

ABSTRACT. Does the composition of government spending matter for fiscal multipliers when financial markets are imperfect and households are heterogeneous? We address this question both empirically and structurally. Using state-dependent local projections on U.S. quarterly data, we show that government investment multipliers are substantially more sensitive to credit conditions than government consumption multipliers. We then develop a structural explanation in a medium-scale DSGE model that combines the financial intermediary framework of Sims and Wu (2021) with two-agent (TANK) household heterogeneity and a distinction between government investment and consumption. The model yields three main results. First, government investment and consumption produce nearly identical impact multipliers, but government investment generates substantially larger cumulative multipliers as public capital accumulation creates a supply-side channel that government consumption lacks. Second, the interaction between financial frictions and fiscal transmission is non-monotonic: moderate frictions amplify fiscal stimulus by raising the value of intermediary net worth, while severe frictions suppress impact multipliers but raise cumulative multipliers through a balance-sheet relaxation channel— an effect that is substantially stronger for government investment than for government consumption. Third, higher shares of rule-of-thumb households raise impact multipliers but reduce cumulative multipliers, as the stronger demand stimulus intensifies crowding-out through both the interest rate and the financial intermediary channels. These results are robust to alternative monetary-fiscal policy rule combinations.

ABSTRACT. Strategic decisions, such as workforce reduction measures, have significant implications not only for employees, but also for other stakeholders. The relationship between downsizing and payout policy raises questions about how firms balance competing claims during corporate restructuring. Using a sample of listed European countries for the pre-Covid period, we investigate how firms’ downsizing measures relate to dividend payout decisions and how this link is shaped by socially responsible actions. We find evidence that downsizing negatively correlates with subsequent payouts, suggesting that firms that implement workforce reduction measures are more likely to decrease or maintain dividends rather than increase them. Furthermore, a series of ESG indicators moderates this relationship: firms with stronger ESG performance that engage in downsizing are less likely to cut dividends or leave them unchanged relative to increasing them. The positive moderating effect of ESG performance on the dividend payout – downsizing relationship suggests that firms with stronger governance and stakeholder commitment tend to implement more strategic and efficient workforce reduction measures that preserve their financial capacity and ability to maintain or increase dividends.

ABSTRACT. This paper investigates the association between cultural values and dividend policy, with a focus on egalitarianism and hierarchy from Schwartz’s framework. Using data on 9,760 listed firms from 64 countries during 2012–2020, we analyse the impact of these cultural values on dividend payout ratio and dividend yield, controlling for firm and country-level determinants. We document a negative effect of egalitarianism on payouts, consistent with stakeholder-oriented behaviour. By the contrary, we find a positive effect of hierarchy, reflecting stronger preferences for cash distributions in stratified societies. As a new contribution, we construct a variable capturing the difference between egalitarianism and hierarchy, which also shows that net egalitarian orientations reduce dividend payouts. The COVID-19 shock, as proxy for the pandemic crises, led to significant dividend reductions, with cultural context moderating these effects: egalitarian societies reduced payouts further, while hierarchical ones maintained them more often.

ABSTRACT. The aim of this paper is to investigate the impact of environmental, social and governance (ESG) practices on bank profitability, providing an extensive empirical analysis at the international level. In a global context marked by increasing pressures on corporate sustainability, understanding the interaction between non-financial and financial performance becomes essential for decision-makers, investors and financial institutions. The study uses a sample of 233 banks, distributed in 43 countries, during the years 2003-2020, in order to assess how the aggregate ESG score, and its subcomponents influence the return on equity (ROE), considered as the dependent variable. By applying multivariate regression models, controlling for specific factors at the bank, banking system and macroeconomic context levels, the research highlights a positive relationship between the ESG score and financial profitability. This result suggests that the integration of ESG criteria can bring significant economic benefits in the long term, by increasing efficiency and attracting favourable financial opportunities, thus strengthening profitability. It is observed that environmental and social factors positively influence profitability, while the governance component does not have a significant direct effect. The conclusions indicate that although sustainability remains an essential object in modern banking strategies, its adoption may initially bring challenges in terms of financial efficiency, but in the long term it can contribute to increasing the stability and profitability of institutions. Therefore, a balanced approach is needed that harmonizes economic objectives with social and environmental ones, with a view to long-term sustainable growth.

ABSTRACT. In the evolving digital landscape, search engines significantly shape consumers’ experiences and investors’ decision-making. This study addresses the fragmented research on search engine visibility (SEV) and its implications for firm value. In this context, our study innovates by exploring the individual and interactive effects of organic and paid SEV on firm value, considering as well the moderating effect of firm size. We analyse a panel of 52 listed service firms over a period of 259 weeks using an ARDL (PMG) model estimation. Our findings suggest that only the joint deployment of organic and paid visibility reveals the impact of SEV on firm value, highlighting complementarity among visibility sources and the importance of integrated search strategies. Specifically, organic SEV exhibits a negative effect on firm value, which is attenuated and reversed by paid SEV. We also observe that firm size strengthens the negative effect of organic SEV. Hence, firms should not treat SEV as an exclusively operational outcome, but must recognise its strategic role and tangible firm valuation effects. By integrating insights from the marketing-finance interface, our study advances the understanding of how SEV can be effectively managed to enhance investor perceptions and organisational performance in the contemporary online environment.

JEL codes: G32; M31; M37 Keywords: search engine visibility, organic search, paid search, online information search, firm value

ABSTRACT. The present study examines the impact of Romania’s 2025 presidential elections on sovereign bond spread dynamics by analysing both price adjustments and the uncertainty perceived by financial investors. The empirical strategy combines an event study methodology with a GARCH(1,1) volatility model, allowing for the identification of abnormal spread movements around the two electoral rounds and the assessment of changes in conditional volatility associated with political information shocks. Using daily data for the Romanian - German 10-year government bond spread, the event study results reveal significant abnormal movements following the first electoral round, indicating an immediate reassessment of sovereign risk. In contrast, the second round generates weaker and less persistent price effects, suggesting that major adjustments occurred prior to the final electoral outcome. The GARCH analysis complements these findings by highlighting strong volatility persistence and a pronounced volatility clustering process. Electoral dummy variables included in both the mean and variance equations show that the first round is associated with a temporary increase in conditional volatility, consistent with an uncertainty shock, whereas the second-round leads to a statistically significant decline in volatility, signalling a reduction in uncertainty and market stabilization. Robustness tests based on a Student-t specification confirm the stability of the main conclusions. Overall, the findings suggest that presidential elections affect sovereign bond markets through both repricing and uncertainty channels, with the resolution of political uncertainty playing a key role in restoring market stability.

ABSTRACT. In this paper, we propose two approaches for estimating the probability of default (Bayesian Model Averaging and Stochastic Variable Search Selection) applied to three types of loan portfolios (non-financial companies, mortgages, and consumer credit). We employ two definitions of the dependent variable (a direct-variable approach and a systematic risk factor approach) using data from the Romanian banking sector over the period 2007–2024. The primary objective of this study is to assess whether incorporating a single systematic risk factor into a transition matrix captures at least the same magnitude of default probability as the direct-variable approach. The results indicate that the single-factor framework does not underestimate the probability of default.

ABSTRACT. We analyze solvency and liquidity implications of Credit Default Swaps (CDS) in banking networks. We emphasize that one can neither isolate them, nor just analyze them in parallel, but needs to consider their complex interplay. By calibrating our model to the largest banks in the Euro area, we are able to run a large-scale stress test and isolate the effect of different network configurations, as well as different overall coverages of CDS, on systemic risk. An increase in CDS notional always leads to an increase in liquidity risk. The impact on solvency risk is conditional on the topology of the network. We provide a robust network configuration for which an increase in CDS notional leads to a decrease in solvency risk.

ABSTRACT. This paper uses data from separately managed accounts to show how economic policy uncertainty drives adviser asset allocation. We find that during periods of high uncertainty, investment advisers actively increase their allocation toward riskier assets. This risk-taking behavior is consistent across both domestic and foreign portfolio managers, provided they maintain at least $25 million in assets under management.

ABSTRACT. Despite substantial financial support through EU cohesion policy, persistent regional disparities and development traps continue to characterize many NUTS 2 regions across the European Union. This paper investigates whether cohesion policy effectively contributes to overcoming regional development traps and identifies the key determinants that influence regions’ ability to escape long term stagnation. Using a panel dataset covering 225 NUTS 2 regions over the period 2014–2023, we apply panel regression analysis complemented by qualitative insights from expert interviews and regional policy stakeholders. The results reveal significant differences between regions trapped in stagnation and those experiencing sustained growth. While cohesion fund allocation contributes to regional development, its impact is conditional on structural and institutional factors, particularly institutional quality and innovation capacity. The findings suggest that a uniform, one-size-fits-all approach limits the effectiveness of cohesion policy in structurally weak regions. This paper contributes to the literature by combining quantitative and qualitative evidence to better understand the mechanisms behind regional development traps and by providing policy-relevant recommendations aimed at strengthening place-based and institution-sensitive interventions within EU cohesion policy.

ABSTRACT. Summer energy poverty, defined as households' inability to maintain comfortable indoor temperatures during extreme heat, is a growing concern in Europe. Originally associated with insufficient heating, energy poverty now also encompasses cooling needs due to climate change and increasing heat exposure. Utilizing data from the 2023 EU Statistics on Income and Living Conditions (EU-SILC), this study examines the underlying factors, focusing on four Southern European countries: Greece, Italy, Spain, and Portugal. The research adopts a multidimensional approach by examining socioeconomic, demographic, housing, and climate-related factors. Descriptive data reveal notable differences between countries, with Portugal and Greece exhibiting the highest levels of cooling deprivation. The econometric findings emphasize income as a key protective factor, with higher income levels markedly decreasing the likelihood of summer energy poverty in all countries. Additionally, education and home renovations help reduce vulnerability, whereas overcrowding and poor health increase the risk. Climate considerations, such as cooling requirements, are relevant in some cases but do not fully account for the differences. Overall, the study indicates that summer energy poverty is primarily caused by economic constraints and structural housing inequalities, rather than climate factors alone. These results highlight the importance of incorporating cooling solutions into energy-poverty strategies and promoting inclusive policies that enhance building efficiency and support vulnerable populations. As heat waves grow more intense, addressing summer energy poverty will become an increasingly vital challenge in Southern Europe.

ABSTRACT. This paper examines convergence dynamics among 27 European countries for selected economic Sustainable Development Goals (SDGs 7, 8, and 9) over 2009–2024. Using panel data analysis, σ-convergence is assessed via cross-country dispersion, while β-convergence is estimated using fixed effects and a dynamic panel approach based on the Generalized Method of Moments (GMM). The framework extends traditional GDP-based analysis to include indicators of energy efficiency, innovation capacity, and labour market performance. Results reveal heterogeneous σ-convergence, with strong alignment in GDP per capita, patent applications, R&D expenditures, and labour market indicators, while investments and energy productivity show more volatile trajectories. β-convergence analysis indicates clear catch-up dynamics across all examined variables (GDP per capita, patent applications, R&D expenditures, Employment and Long-term unemployment, Investments and Energy productivity). Conditional β-convergence confirms that lower-income countries grow faster after accounting for structural and innovation-related factors, while System GMM estimations support the robustness of these patterns. Overall, these findings suggest that sustainability-oriented policies can support economic growth and competitiveness, while sector-specific disparities highlight the need for tailored national strategies. Integrating SDG-related objectives into development plans can foster inclusive growth, structural modernization, and stronger economic cohesion across Europe, providing actionable guidance for policymakers.

ABSTRACT. Anticipating corporate greenhouse gas (GHG) emissions has tremendous potential to help decision-making in sustainable finance. Traditional projections rely on global estimates, but lack the information given by their specific decarbonization strategies. Yet, many companies have announced intended emission reductions over different time horizons. This paper presents a methodology to integrate these pledges into firm-level emission projections by aligning them with global climate scenarios. By doing so, this method provides a clearer view of future emissions in the economy. To account for the extent to which firm GHG trajectories support or contradict their ambitions, we introduce a "carbon credibility" metric that reflects the recent evolution of their emissions relative to their stated targets. This measure serves both as an early indicator of target feasibility and as an adjustment factor for forward-looking projections. Including the credibility of nearly 300 companies in the STOXX 600 index results in almost a 5% increase in projected cumulative GHG emissions up to 2050. Credibility values indicate that half of the sectors in the panel fall short of the efforts required to align with their decarbonization ambition. These results imply higher expected climate risks and call for enhanced corporate actions.

ABSTRACT. Based on the premise that consumers’ conceptualisation and interpretation of internal reference price differ especially at the point of purchase, we evaluate the impact of price framing on consumer behaviour. We carried out studies where expected prices and price frames were manipulated across monetary outcomes of gains and losses. To the best of our knowledge, this is the first study to investigate expected price as a reference price construct from a mental accounting perspective. The results provide empirical support for the proposition that to the extent that consumers’ form expectations about retailer’s prices, their ensuing perception of changes in the product prices are context dependent but interestingly, only in the cases when integration and not segregation was the predicted outcome. We find that expected prices amplify frame manipulation only when the mental accounting principle is integration.

ABSTRACT. This paper assesses the degree of economic integration in the Euro Area (EA-12) relative to the United States (US-51) by analyzing the distribution of business cycle correlations from 1999 to 2024. Moving beyond aggregate averages, I employ rolling-window correlations and non-parametric Kolmogorov-Smirnov tests to evaluate structural asymmetries in Real GDP, Real GDP per capita, and inflation. I find that while the Euro Area exhibits periods of high output synchronization, it lacks the labor mobility adjustment mechanism evident in the US. My results show that US per capita income shocks are structurally de-correlated through migration, whereas Euro Area member states face persistent income divergences that worsened significantly during the 2010--2015 sovereign debt crisis. Furthermore, the distribution of inflation correlations in the Euro Area displays "fat tails" and extreme volatility during supply shocks, indicating deep structural asymmetries that a single monetary policy cannot address without fiscal integration.

ABSTRACT. Stablecoins are designed to maintain a stable value through redeemability at par and the holding of external reserves, yet their cross-border issuance increasingly exposes financial stability vulnerabilities. This article examines the risks arising from multi-issuer stablecoin arrangements, whereby a single, fungible stablecoin is issued by multiple legally distinct entities across different jurisdictions. Focusing on the EU Markets in Crypto-Assets Regulation (MiCAR), the analysis shows how such structures—currently employed by major issuers such as Circle — facilitate regulatory arbitrage, amplify liquidity and redemption risks, and undermine the effectiveness of EU prudential supervision. In particular, it highlights how the fungibility of tokens issued under divergent regimes may concentrate redemption pressures on EU issuers, strain reserve adequacy and create contagion risks for the EU banking sector. Legal and operational frictions, including the potential ring-fencing of reserves held outside the Union, further exacerbate these vulnerabilities, particularly under stressed market conditions. While MiCAR equips competent authorities with certain supervisory tools, data limitations surrounding the classification of significant issuers constrain their effective use. The article argues that MiCAR inadequately addresses the systemic implications of cross-border multi-issuer stablecoins and proposes targeted reforms. These include a centralised supervisory regime for participating EU issuers under the European Banking Authority, complemented by a stringent equivalence framework for third-country partners which would limit multi-issuance to jurisdictions with comparable regulatory standards. The article concludes that enhanced cross-border supervisory cooperation and coordinated crisis management frameworks are essential to ensure the resilience of stablecoin markets and to safeguard financial stability within the Union.

ABSTRACT. This paper examines the time–frequency transmission of financial stress across eleven Eurozone countries over 2001–2013 using wavelet coherence. Treating Germany as a benchmark economy, the paper document heterogeneous co-movements that intensify during the Global Financial Crisis and the European Sovereign Debt Crisis. Coherence is generally strongest and most persistent in money-market stress, while banking and bond stress linkages are more localized and crisis-specific, with weaker synchronization for some peripheral economies. Robustness checks using local Gaussian correlations support nonlinear and asymmetric dependence, reinforcing the value of a time–frequency approach for systemic risk monitoring and policy coordination. Overall, the study contributes a segment-level, time–frequency mapping of Eurozone stress spillovers that goes beyond static connectedness measures and can inform real-time systemic risk monitoring and coordinated macro-financial policy.

ABSTRACT. Trade and industrial policies restricting critical inputs can inadvertently promote foreign downstream industries via a directed technological response. We provide evidence for this mechanism by examining rare earth elements (REEs) – critical manufacturing inputs with highly concentrated production and low substitutability. We show that China’s REE export restrictions in 2010 induced a surge in global innovation increasing REE input-efficiency and exports in REE-intensive industries. A quantitative trade model with Heckscher-Ohlin-based comparative advantage, directed technological change and input-output linkages rationalizes how input-supply restrictions induce REE-enhancing innovation and expand REE-intensive industries abroad. This directed technological response substantially mitigates foreign welfare losses.

ABSTRACT. This paper contributes to the literature on real estate market dynamics by analysing housing price behaviour in Spain’s two largest cities (Madrid and Barcelona) over the period from May 2007 to December 2024. Drawing on monthly data from a leading Spanish real estate platform, we examine both static and dynamic spillovers in housing sale prices across urban districts, identifying local propagators and receivers of real estate price stress. The results show significant and asymmetric spillover effects in housing sales prices across urban districts. Madrid displays a highly integrated market, with intense and persistent price transmission driven by a core–periphery structure. In contrast, Barcelona exhibits lower connectedness and more localised spillovers concentrated in central districts. Spillover intensity varies over time, increasing during periods of economic stress, while recent dynamics reflect renewed integration linked to supply constraints and urban development. The study leverages empirical insights to inform targeted policy measures, thereby fostering urban housing systems better equipped to withstand future pressures and promote social inclusion.

ABSTRACT. This paper contributes to the literature on housing market dynamics by offering a policy-oriented analysis of rental and sales price behaviour in Spain’s two largest cities, Madrid and Barcelona, between May 2007 and December 2024. Using monthly data from Idealista.com, we detect episodes of explosive price dynamics, identify their key determinants, and examine contagion effects across cities and market segments. Our findings reveal that rental markets often act as precursors to broader housing price surges, underscoring their strategic importance for policy intervention. Among the key drivers, hotel-based tourism appears to exert a stabilising effect on housing prices, while rising interest rates reduce the likelihood of explosive episodes. In contrast, population growth significantly increases the risk of price acceleration, and unemployment tends to mitigate it. These results have direct implications for housing policy, suggesting that rental markets should be prioritised in regulatory frameworks and that urban planning strategies, such as improving interurban transportation and regulating short-term rentals, can help mitigate housing market volatility. By linking empirical evidence to actionable policy recommendations, this study aims to support the development of resilient, inclusive, and forward-looking housing systems.

ABSTRACT. “Rising interest rates lead to a gradual decline in housing prices.”, a widely held belief; this paper challenges that conventional wisdom both theoretically and empirically by showing that sustained monetary tightening activates a novel transmission mechanism, i.e., the housing deposit channel, which gives rise to a double-dip in housing prices: an initial decline upon impact, followed by a temporary rebound, and a subsequent second dip in the longer run. A general equilibrium model formalizes the theory behind this mechanism, and empirically, lag-augmented local projection estimation techniques, supported by extensive robustness checks, demonstrate that the patterns observed in the US data align with the theoretical model’s predictions. Our study investigates the effects of monetary policy on the housing market and reciprocally, how the housing market influences the efficacy of monetary policy, particularly in achieving inflation targeting objectives.

ABSTRACT. Artificial intelligence (AI) is widely regarded as a general purpose technology with the capacity to foster innovation and contribute to productivity growth. Although AI is being adopted by a growing number of firms and the literature is expanding on its effects on productivity, the implications of AI for productivity dynamics remain largely unexplored. Therefore, the study examines the relationship between AI adoption and labor productivity growth volatility in Romania. Using firm-level data from the Eurostat Community Survey on ICT Usage and E-commerce in Enterprises for the period 2017–2022, the analysis estimates OLS models including additional control variables, such as firm characteristics and non-AI digital adoption measures. To reduce concerns about selection, Coarsened Exact Matching is applied and the model is re-estimated using weighted OLS on the matched sample. The results provide no evidence of a statistically significant relationship between the adoption of AI and volatility in labor productivity growth once observable firm characteristics and other digital factors are taken into account. The findings remain stable across specifications and provide no evidence that the effect of AI adoption varies by firm size or digital intensity. These results suggest that AI adoption is not linked to changes in productivity growth volatility at the firm level in Romania in the sample studied.

ABSTRACT. Innovation is widely recognized as a key driver of long-term economic growth, and its convergence is considered essential for broader cohesion within the European Union (EU). Yet, despite substantial research and innovation (R&I) funding, innovation levels across the EU remain unevenly distributed. This paper examines innovation convergence and the role of EU R&I funding in shaping these dynamics. Using Phillips and Sul’s club convergence methodology on innovation output data (patents per capita) from 2000 to 2022, no evidence of absolute convergence among EU regions emerges. Instead, two distinct innovation clubs persist, with disparities showing no signs of diminishing. Similar club structures are evident in EU R&I funding, specifically within the EU Framework Programmes (FPs) and the European Cohesion Policy (ECP). The results of bivariate probit models further indicate that membership in leading EU FP clubs increases the likelihood of innovation leadership, while membership in leading ECP clubs reduces it. These findings suggest that current EU R&I instruments may inadvertently reinforce the existing innovation divide, highlighting the need for more inclusive capacity-building approaches and stronger institutional environments.

ABSTRACT. In this paper we investigate the effects of low skilled immigration on labor markets. We argue that the arrival of low-skilled immigrants changes the skill composition of the workforce and leads firms to adapt their training and screening strategies to enhance the productivity of these workers. The findings challenge traditional views by showing that the skill premium may not increase despite a decline in the supply of skilled labor, and that the relative frictional unemployment rate for skilled workers may decrease. The model allows for a detailed examination of welfare changes across different skill levels, employment statuses, and industries. Ultimately, the research concludes that immigration, even when primarily involving unskilled workers, can generate net positive welfare outcomes. Evidence from region-sector and firm-level data in Italy, covering the period from 2008 to 2013, supports these conclusions.

ABSTRACT. The aim of this research is to identify the optimal circumstances for a macroeconomic government intervention directed towards transitioning to a green economy. We propose a simple endogenous growth model that accounts for the negative externality of pollution and the benefits of green public investments. The model is used to analyze the role of public fiscal and budgetary policy in promoting productive green public spending financed by taxes on brown activities. Our results reveal that the efficiency of macroeconomic government intervention in stimulating green economic growth is limited by the state of development of the green private sector. In predominantly brown economies, the optimal tax level would have to be small to avoid economic losses, making the green transition slow and inefficient. When the weight of the green sector in the economy is greater, the government’s intervention through brown sector taxation and productive green public spending is more efficient. In such cases, the government’s intervention should first focus on supporting the development of the green private sector, creating the appropriate environment for an efficient macroeconomic intervention.

ABSTRACT. This paper studies whether climate-related adjustments to the Basel III output floor can reconcile prudential discipline with environmental objectives. We develop an environmental general equilibrium framework with endogenous default risk and regulatory risk weights to compare a standard output floor with alternative climate-oriented designs. We show that while the standard output floor stabilizes banks' capital adequacy and Risk-Weighted Assets (RWA) density over the cycle, it delivers no significant environmental benefits. Climate-oriented output floors deliver only limited environmental improvements and introduce a trade-off with prudential discipline when the green floor is deactivated, highlighting the difficulty of jointly achieving prudential and environmental objectives through capital regulation.

ABSTRACT. This paper presents a novel analysis of the impact of environmental regulations aimed at reducing emissions in international trade in goods. Using a panel dataset of OECD, BRIC and other developing countries spanning from 2007 to 2018, we estimate a gravity model of trade using a Poisson pseudo-maximum likelihood estimator with high-dimensional fixed effects, controlling for potential confounding factors. Our empirical analysis integrates emissions intensity data with detailed international trade information at the industry level, considering both market-based and non-market-based environmental policies. We estimate models for aggregate and disaggregated trade flows, distinguishing between dirty and neutral industries, and among heterogenous countries. Our findings indicate that stricter environmental regulations tend to increase imports of goods, particularly those within highly polluting industries imported by high-income countries.

ABSTRACT. The primary aim of this article is to explore the relationship between monetary policy and financial imbalances in 12 emerging countries, using credit to the private non-financial sector as a percentage of GDP as an indicator of financial imbalances. Considering the specific context of emerging countries, which are highly sensitive to external factors such as U.S. monetary policy, we identify local monetary policy shocks that are independent of U.S. monetary policy and empirically show that tightening interest rates reduces credit growth. However, we contrast this result by demonstrating that this effect can be weakened by the “financial channel of the exchange rate”. In this context, we further investigate the relevance of an additional tool that may work through the same channel. Specifically, we examine the role of FX interventions using an instrumental approach, considering the motives for international reserves accumulation as an instrument. Our results, obtained through local projections, show that FX interventions mitigate both exchange rate fluctuations and credit growth, suggesting complementarity with monetary policy.

ABSTRACT. In recent decades Uruguay has promoted policies for sustainable development in line with international efforts to promote low-carbon economic development, and has set targets for its Nationally Determined Contribution to the Paris Agreement of the United Nations Convention on Climate Change. In this framework, and in the context of the role that the manufacturing industry has played in the increase of global and local emissions dioxide of carbon (CO2) we analyze the link between exports, foreign ownership, and environmental performance. Both, the effect of foreign firms and exports on the environment remain controversial issues and no definite conclusions have been obtained so far. We use a panel of Uruguayan firms for the period 2007-2016. We analyze the intensity of CO2 emissions (proxied by the intensity of energy usage) of multinational and exporting firms with respect to their peers with national capital, and those oriented to the domestic market (the control groups) We use impact evaluation techniques, particularly matching and double differences (MDID) and with staggered treatment timing (event study analyses). Our preliminary results suggest that foreign ownership and exporting firms do not show a higher intensity of energy usage/emissions for both types of firms compared to their control ones. These analyses provide elements for the definition of internalization and environmental policies. It is expected that as a result of the study, robust empirical evidence will be extracted to support the design of public policies aimed at reducing CO2 emissions.

ABSTRACT. This study explores the impact of trade integration under AfCFTA on both agricultural trade and welfare in Africa. It employs a gravity analysis that spans both general and partial equilibrium effects. We study the effects of the implementation of the African Continental Free Trade Area's (AfCFTA) tariff and Non-Tariff Measures (NTMs) modalities on agricultural trade and welfare for African countries. Specifically, we examine how tariff elimination and NTMs reduction affect agricultural products. Our findings indicate that tariffs and NTMs both affect agricultural imports into Africa, but NTMs have a more significant and negative impact. Based on general equilibrium (GE) analysis, simultaneously eliminating tariffs and streamlining NTMs in agricultural products is expected to increase exports by an average of 43.38%. Imports see an even larger rise, with an average increase of 97.46%. Welfare improves with an average increase of 1.91%. This suggests that addressing both tariffs and NTMs simultaneously leads to greater economic benefits in Africa. This highlights the potential advantages of trade integration and the implementation of the AfCFTA. However, not all countries benefit equally, with a few experiencing a slight decrease in trade. This indicates the necessity for targeted policies to support export sectors in these African countries.

ABSTRACT. Recent decades have witnessed rising temperatures and increasing rainfall variability, intensifying climatic risks to agricultural production. While a large empirical literature documents the average effects of temperature and precipitation on crop yields, much less is known about how these impacts are distributed across yield distribution and whether such distributional effects vary across crops. This paper examines both mean and distributional impacts of climate variability on the yields of maize, paddy, and soybean using a long district-level panel for Madhya Pradesh, India. Our panel fixed effect and method of moment quantile regression results indicate pronounced crop-specific and distributional heterogeneity. At the mean, maize and paddy yields exhibit strong sensitivity to climate variability, particularly to increases in maximum temperature, while soybean yields are comparatively more resilient. Distributional estimates reveal that climate damages are concentrated in the lower tail of the yield distribution, with low-yield districts experiencing substantially larger losses than high-yield districts. Although the direction of climate effects is broadly similar across crops, the magnitude of distributional damages is considerably larger for maize and paddy than for soybean. These findings demonstrate that mean climate effects mask important distributional risks and crop-specific vulnerabilities, underscoring the need for climate adaptation and risk-management strategies that account for heterogeneity across crops and across the yield distribution.

ABSTRACT. One of the most important obstacles to increasing agricultural production yields worldwide, especially in developing economies is the continued degradation of soils due to climate change. In response to this threat, one of the strategies advocated is biochar technology, which is one of the emerging sustainable and climate-friendly soil amendments. This article reviews a brief description of biochar, the advantages and disadvantages of its use, and the prospects for developing its potential impact on agricultural productivity in developing countries. Biochar is mainly useful for soil carbon sequestration, increasing and maintaining soil fertility, environmental management, and as a renewable energy source. However, it can have secondary effects including negative impacts on human health, pollution, and water quality. Furthermore, the positive results of biochar use suggest a prospect for ensuring the feasibility of biochar technology in policy decisions as a sustainable alternative to agricultural land management in the combat against climate change. As recommendations, a combination of improved seed varieties, and SWC (Soil and Water Conservation) techniques with the application of Biochar will be a perfect innovation for an intelligent adaptation practice to the destructive action of climate change in agriculture.

ABSTRACT. This study analyses weekly UK beef prices from September 2019 to May 2025 for carcass categories and differentiated retail cuts using a time-varying parameter VAR (TVP-VAR) connectedness framework with structural-break controls. Results indicate a persistent producer-to-retail leadership structure, with upstream price discovery concentrated in prime carcass categories. At the carcass level, steers are the dominant net transmitter, with price movements leading heifers and young bulls, while connectedness rises during disruption periods. Average connectedness is moderate in beef carcasses (TCI = 42.66%), indicating substantial cross-category spillovers and a tightly linked wholesale market. In contrast, retail cuts are markedly more segmented (TCI = 17.74%), implying that retail prices are largely cut-specific outside shock episodes. Supporting evidence from the short-run and long-run tests indicates uneven adjustment across product tiers, consistent with segmentation between premium and value cuts within the retail tier. Overall, the findings imply that risk management and pricing strategies are most effectively targeted at prime carcass categories where leadership is strongest, while the retail tier exhibits weaker integration. The results support the case for improved price transparency and monitoring across the beef supply chain, and for closer coordination between carcass grading/pricing and retail procurement to strengthen pass-through and reduce vulnerability during shocks.