ABSTRACT Employing a balance sheet perspective, we examine how the transmission of macroeconomic shocks varies between economies with and without a central bank digital currency (CBDC). We develop a dynamic stochastic general equilibrium model that integrates the balance sheets of core economic sectors. The introduction of a CBDC displaces deposit holdings, thereby expanding the central bank's balance sheet. Commercial banks reallocate assets toward government bonds and reduce lending to enterprises, resulting in tighter credit conditions and heightened investment volatility. Numerical simulations suggest that CBDC issuance amplifies economic fluctuations across all exogenous shocks. Although price‐based policy frameworks operate primarily through commercial bank balance sheets, quantity‐based frameworks function through household balance sheets. The welfare effects of CBDC issuance are contingent upon the specific type of shock and the prevailing policy regime.
The study examines how private firms choose between high- and low- marginal-cost regions in mixed oligopoly markets where public or semipublic firms operate in both regions. Findings show that large cost differences lead private firms to choose low-cost regions, while in the case of small differences, their choice depend on the degree of privatization. A welfare analysis shows that private firms' choices may not align with socially optimal locations when cost differences and privatization levels are moderate.
We use firm-level survey data from Uruguay that elicit full subjective probability distributions over future inflation to study how perceived tail risks and uncertainty shape inflation expectations in a persistent-inflation environment. Firms assign non-negligible probability mass to high-inflation outcomes, revealing persistent upside risks in their beliefs even when average inflation moderates. We construct a transparent firm-level measure of uncertainty based on the dispersion of each firm's implied probability distribution and document substantial heterogeneity across firms and over time. Higher uncertainty is systematically associated with higher 12-month-ahead inflation expectations, even after controlling for lagged inflation. This result is not a mechanical artifact of distributional skewness and holds across alternative measures of dispersion. These findings highlight the information content of probabilistic survey questions and the importance of accounting for tail beliefs when analyzing the formation of expectations in high-inflation environments.
Introducing susceptible-infected-recovered epidemiology dynamics into a labor search model, this paper investigates the impact of infectious diseases and related policies, such as lockdowns and vaccinations, on people's health and related macroeconomic performance. We find that the spread of infectious disease has a negative impact, whereas vaccination policy can improve the situation. Although the lockdown policy is good for public health, it is harmful to economic productivity. When considering heterogeneous labor with inexperienced workers, this paper finds that firms are less willing to hire inexperienced workers, and the employment situation of inexperienced workers will be worse.
This study examines the impact of the digital economy on migrant entrepreneurship, with a focus on gender differences. The theoretical framework suggests that the digital economy supports migrant entrepreneurship by lowering entry barriers, expanding market access, increasing flexibility, and enhancing knowledge and skills. In addition, it may particularly benefit female migrants by challenging traditional gender roles in household labor and easing work-family conflicts. Using individual-level data from the China Migrants Dynamic Survey (CMDS) and city-level digital economy indices, the empirical analysis finds a strong positive relationship between the digital economy and migrant entrepreneurship. The results also indicate that the digital economy has a greater positive effect on female migrants than on their male counterparts.
ABSTRACT Environmental economics research lacks scientifically rigorous strategies for using government financial policies to improve environmental performance. China's green finance reform, launched in 2016, constitutes a highly valuable quasi‐natural experiment. As the world's first national policy aimed at guiding private financial capital towards environmentally sustainable areas, this reform provides a valuable research opportunity to systematically assess the real‐world benefits of green finance and address the question. This study employs the DID approach to assess the impact of the reform on pollution intensity among Chinese listed companies. The results show that atmospheric pollution emission intensity among high‐pollution enterprises was significantly reduced following the green finance policy. However, the rebound effect of energy subsequently emerged, partially offsetting the energy‐saving benefits brought about by the enhancement of energy effectiveness. Simultaneously, it is found that the quality of environmentally friendly innovation stimulated by green finance policies is poor, and insufficient attention is paid to posttreatment and renewable energy utilization, resulting in these innovations failing to achieve the expected emission reduction targets. Finally, given stricter environmental regulations, private sector firms tend to pursue green transformation more actively than state‐owned firms, making the influence of environmental finance policies on non‐state‐owned firms more substantial.
ABSTRACT We examine the role of prime numbers in conscious selection, the mental process by which players select numbers non‐randomly on a lotto ticket. Using three estimators of the popularity of numbers, we show that the tendency to overselect prime numbers significantly reduces individual gains. We use 10 years of public data from the Belgian National Lottery to demonstrate our main result and to test the robustness of our findings against several confounding factors such as the tendency to play birthday dates and the preference for “lucky” numbers. Evidence from two independent survey data sets corroborates our main finding.
Driven by the recent revival of the debate about the role of money in explaining inflation, this paper provides new insights into the dynamic relationship between money growth and inflation in the United States. The relationship is investigated using the wavelet methodology over 1960-2024. The paper reveals three noticeable findings. First, money growth and inflation were never in phase over the whole period investigated, thereby questioning purely quantity theoretic viewpoints related to monetary policy. The second finding is the absence of any co-movement between money growth and inflation at very high and, as a novelty, low frequencies over the investigable timespan. This suggests that the recent resurgence of inflation should be attributed to the interaction of many different factors on the demand and supply sides of the economy, including the large monetary expansion during the pandemic. Third, we highlight different episodes where inflation negatively drives money growth in the short to medium run, in line with the Federal Reserve monetary policy operating procedure and the implications of the DSGE model.
We examine how market size and firm heterogeneity shape environmental regulation effects. Stricter regulation reduces the supply of skilled labor, with stronger impacts in smaller economies. We develop a spatial model with heterogeneous firms where emissions create negative externalities. Regulation affects firm entry through productivity cutoffs and skilled labor allocation. Simulations show market size critical conditions outcomes: larger markets experience smaller productivity cutoff increases, while smaller economies face tighter regulatory binding and larger firm contractions. Firm heterogeneity further mediates these effects-more even productivity distributions mitigate impacts, while greater richness amplifies them by introducing low-productivity firms disproportionately eliminated by regulation.
By applying fixed-effects model to China's A-share listed heavily polluting enterprises from 2008 to 2022, this study investigates the impact of climate policy uncertainty (CPU) on corporate environmental performance (EP). We find that CPU significantly reduces EP of heavily polluting enterprises through technical innovation, financing constraint, and resource allocation mechanisms. Heterogeneity analysis reveals that CPU has stronger inhibitory effects on EP for state-owned enterprises, capital-intensive enterprises, and enterprises with low digital transformation. Additionally, shocks from climate policy risks are more pronounced than those from climate physical risks. These findings provide fresh insights for scientifically addressing CPU and effectively incentivizing heavily polluting enterprises to improve EP.
This article examines the distributional implications of financial inclusion for welfare overall and by gender in Cameroon using 2017 FinScope data. The article employs the endogenous switching regression to evaluate the impact of financial inclusion on welfare at the mean and blends the inverse probability weighting with unconditional quantile regression for percentile-specific analysis. Results indicate that men have a higher probability of being financially included compared to women. We further observe that financially included individuals are expected to make welfare gains of about 11.6% with the impact higher among women compared to men. The unconditional quantile treatment effect analysis shows positive treatment effects across all percentiles, with men experiencing higher welfare impacts at lower and middle percentiles, whereas the impact is higher for women at the upper tail of the distribution. These results endorse policies fostering innovation in both public and private sectors to expand financial services, particularly for those vulnerable to poverty.
During the financial crisis of 2008, the US economy experienced a sharp contraction in mortgage credit supply. Previous research indicates that voters responded to the 2007-2008 financial crisis by punishing the incumbent party in the presidential election of 2008. To further investigate the electoral consequences of the crisis, we use an individual-level data set comprising millions of loan application outcomes to study the impact of mortgage credit contractions on the 2008 House and Gubernatorial elections. We employ a two-stage approach to estimate the effect of mortgage market conditions on election outcomes. In the first stage, we construct a measure of the change in mortgage credit supply from 2004 to 2008, controlling for demand-side factors. In the second stage, we estimate the effect of this change on the change in the challenger party's vote share. Our results indicate no statistically significant impact of mortgage credit contractions on House or Gubernatorial election outcomes. This finding suggests that voters primarily hold the president accountable for changes in mortgage credit conditions, while lower level officials are not perceived as responsible for these shifts.
This article examines the effectiveness of short-term interest rate indicators in predicting consumer consumption in the United States amidst a changing monetary policy landscape marked by unconventional monetary policies, such as near-zero interest rates and quantitative easing. The study explores whether the shadow short rate (SSR), derived from the shadow rate term structure model, can serve as a more robust and informative predictor by capturing the effects of unconventional policies. The analysis also incorporates monetary policy uncertainty (MPU) as an additional factor to account for its potential influence on consumption behavior. Utilizing the permanent income model as a theoretical framework, the study employs a nonlinear least squares model for the analysis. It analyses quarterly data from the United States from 1990 to 2019. The findings indicate that short-term interest rate indicators are less effective in predicting consumer consumption in the current economic environment, where unconventional monetary policies have influenced the relationship between interest rates and consumer consumption. In contrast, the SSR demonstrates a more consistent performance in predicting consumer consumption in the United States. The MPU coefficient is positive but statistically insignificant, suggesting limited direct impact in this context.
Recent demographic projections point to lower fertility rates, and in most countries below the reproduction level. This is widely perceived to add further burdens to already strained public finances due to increasing longevity and aging populations. The public finance implications of changes in fertility are analyzed considering intergenerational linkages arising via age dependencies in expenditures due to childcare and education for the young, and healthcare and pensions for the old, being largely financed by taxes levied on the working-age population. Evidence is shown that support to both the young and the old is quantitatively important in most countries, and this makes the response of public finances to fertility generally ambiguous. A decline in fertility triggers a dynamic process as the youth dependency falls on impact followed by a later increase in the old-age dependency ratio. The former improves and the latter deteriorates public finances, and hence an important budget dynamics is released, and the long-run budget effects are in general ambiguous. It is shown how the structure of the intergenerational compact matters for these responses, and hence the effects are generally country specific. A quantitative analysis for Denmark shows that lower fertility improves fiscal sustainability.
This paper investigates the impact of entrepreneurship on local governance quality as well as the impact of local governance quality and entrepreneurship on the shadow economy for a panel dataset of 63 provinces in Vietnam over the period of 2006-2021. Results point out the important roles of entrepreneurship and local governance in reducing the shadow economy. Remarkably, entrepreneurship reduces the shadow economy not only directly but also indirectly through the improvement of local governance. More interestingly, the indirect effect is even stronger than the direct effect. We also acknowledge and test the reverse path-better governance fosters entrepreneurship-and document heterogeneity across the six governance dimensions, with corruption control and administrative procedures exerting the strongest effects on the shadow economy. These findings highlight the importance of fostering entrepreneurial activities and strengthening governance structures at the local level to create a more transparent and formal economic environment.
This paper examines student admissions to higher education based on past performance, focusing on two measures: high school GPA and national exam scores. GPA is teacher-assigned and based on repeated assessments, while these exams are externally graded, one-off standardized tests. Using a nationwide dataset, we investigate how the relevance of these measures to the student's first-year performance in a higher educational program, and how it varies with that program's selectivity. Negative-binomial models show that a one-standard-deviation increase in GPA adds 5.9 first-year ECTS (European Credit Transfer System), versus 1.8 for the exam. In the most selective programs, the difference in the effects is larger, partly because (i) score dispersion within elite cohorts is smaller and (ii) selective programs require a higher number of subject-specific exams. We interpret these findings for potential revisions to admission policies, emphasising that high school GPA should not be regarded as the sole criterion for consideration.
Despite near-universal account ownership, India's financial inclusion gender gap has shifted from access to usage. Using Global Findex 2021 data from 3000 respondents and employing Fairlie's nonlinear decomposition alongside a path-independent detailed decomposition, we document significant gender gaps in card ownership, digital access, card use, and mobile money, but not in account ownership or borrowing. Education, employment, income, and locality are the dominant endowment-side drivers. However, a substantial unexplained component persists across digital indicators, revealing that equally endowed women convert socioeconomic characteristics into financial outcomes at lower rates than men. Closing this gap demands addressing structural barriers beyond human capital.
In this study, we test the empirical validity of the real interest rate parity hypothesis for 15 Latin American countries over the period 2005-2023. To this end, we employ a battery of panel unit root tests to examine stochastic properties of the real interest rate differentials (RIDs) of the countries under consideration. The panel unit root tests that allow for both the cross-sectional dependence and the nonlinearities in the adjustment process do not reject the null of unit root for the most of these countries, suggesting that the real interest rate parity hypothesis does not hold for these countries. On the other hand, the panel unit root test that allows for smooth structural changes produces results consistent with the real interest rate parity hypothesis for 12 out of 15 Latin American countries. These findings imply that various shocks, including political, economic, and financial upheavals, can cause significant structural shifts in the RIDs of Latin American countries.
The use of mobile money services appears to be an important means of improving household living conditions. This paper assesses the impact of mobile money on households' poverty in Benin, using FinScope Benin data, 2018. The data involve 6415 households both in urban and rural area. A linear probability model with an instrumental variable (LPM-IV) is adopted to control for endogeneity bias due to a bi-causal relationship between mobile money and poverty. An extended probit regression model was also used for robustness check. The results robustly revealed that the use of mobile money has a positive impact on household poverty reduction through improving financial inclusion for financially excluded population and increasing households' abilities to cope with shocks. The impact of mobile money on household poverty appears not to affect vulnerable groups in the same way. Indeed, the use of mobile money favors household in urban area compared to those in rural area. However, women, non-educated and employed, benefited less compared to men, educated and unemployed. Overall, these findings have important policy implications. Policy interventions should help household gain access to mobile money services to reduce poverty.
The study investigates the unprecedented nature of the housing crisis since 2006, utilizing the high-dimensional dynamic factor model (DFM). The weakened capacities of old housing common factors in explaining state and Metropolitan Statistical Areas (MSA)-level housing markets in the post-crisis period provide supportive evidence for the unprecedented housing crisis. However, there is no evidence for instability in the disaggregate housing price and volume cycles, and the results indicate that the housing markets are hit by larger versions of old housing shocks as the crisis prevails nationwide. The predicted factors have superior performances in capturing housing prices than housing volumes in the post-crisis period, and they fail to track large post-2006 fluctuations in prices and their timings for some states and MSAs. The study sheds light on the challenge of monetary policies to stabilize the local housing markets, difficulties of risk management during the 2006-2009 crisis, and some investment diversification opportunities across disaggregate housing markets during 2011-2014.
