The quality of political signals, reflecting policy clarity and credibility, remains a distinct but underexplored dimension of uncertainty in international studies. We investigate the influence of the quality of political signals (Q-index) in the United States (US) on the equity markets of 32 advanced and emerging economies using the Global Vector Autoregressive (GVAR) model, which also accounts for the macroeconomic conditions of the shock-recipient markets. We show an immediate negative impact on equity markets, with a response of about 0.15% to a one-standard-deviation shock to the US Q-index. However, we find clear asymmetry after decomposing the index into high- and low-quality regimes: low-quality shocks on average raise foreign equity prices by up to 0.12% but act slowly, whereas high-quality shocks reduce equity prices by a comparable magnitude but transmit more quickly. Both effects operate through the exchange-rate channel. Additional evidence involving the Global Economic Policy Uncertainty (GEPU) index reveals a contrasting pattern: GEPU shocks affect real equity prices directly and instantaneously, without exchange-rate mediation, highlighting the distinct transmission channel through which political signal quality operates. Our findings suggest that monetary authorities in trade-linked economies should monitor US political communication quality as a leading indicator of exchange-rate and equity-market pressure.
This study develops a comprehensive conceptual framework to understand how firms operating in sanctioned countries, particularly foreign multinational corporations (MNCs) in China, can effectively respond to political risks and uncertainties. Drawing on the resource dependence theory and the concept of bargaining power, this framework categorises firms into four distinct groups based on their level of resource dependence and bargaining power. This study identifies specific response strategies for each group grounded in the global value chain (GVC) literature, including GVC upgrading, geographical diversification, and switching governance modes, apart from divestment from the host country. These strategies are contingent on firms' ownership advantages, as defined in the Ownership-Location-Internalisation (OLI) paradigm, and on their level of dependence on the host country. Our findings highlight the resilience of firms that, despite geopolitical tensions, continue operating in China through strategic adjustments, demonstrating varying levels of flexibility and adaptability in managing the adverse effects of sanctions. This research contributes to the international business literature by offering insights into the complex interplay between geopolitical risks, firm strategies, and GVCs. It also provides valuable implications for policymakers and MNCs, guiding them in balancing economic interests with political realities in an increasingly complex global environment.
This paper examines the impact of government loan guarantees (GLGs) on the credit access and performance of small and medium-sized enterprises (SMEs) in China. Utilising a difference-in-differences approach, we find that GLGs significantly bolster SMEs' access to credit by augmenting their long-term loans, whereas their effect on short-term loans is not significant. However, the implementation of GLGs leads to a decrease in SMEs' profitability and research and development investment. These effects are particularly pronounced for SMEs experiencing severe financing constraints and for those in the private sector.
We investigate how internal uncertainty triggered by top executive turnover (TET) disrupts firms' digital transformation. We find that firms with frequent TET are less likely to engage in digital transformation. The underlying mechanism is that top executives adjust long- and short-term risk-taking strategies and alter the direction of earnings management, thereby delaying digital transformation. Top management team characteristics, such as gender, financial expertise, and international experience, along with corporate governance arrangements, significantly shape the relationship between TET and firms' digital transformation. This effect diminishes over time and becomes less pronounced when the analysis is restricted to general manager turnover.
China has significantly increased its presence across Africa over the past decades. This engagement is commonly considered to build soft power through 'project diplomacy', i.e. influencing public perceptions through infrastructure construction. We evaluate whether the attributes of a project shape public opinion. We hypothesise that a project that employs local labour and management, has minimal costly impacts, and secures positive endorsements by informed actors should receive favourable evaluations, thereby improving perceptions of China; a project without these positive attributes should produce the opposite effect. We evaluate these hypotheses with a vignette survey experiment among over 3,200 Malawian citizens. We find significant effects of a project's attributes on its approval and the beliefs it brings to local communities. However, these same attributes have limited effects on the perceptions of Chinese development efforts and no effect at all on the wider views of China's role in Africa. Our results thus reveal important but nuanced impacts of Chinese project attributes on African public opinion.
This study investigates the educational gender gap in India and its relationship to educational homogamy. Using nationally representative data, we compare educational outcomes between boys and girls within the same household, while flexibly accounting for differences across age groups and states. We find a robust positive association between educational homogamy and gender equality: higher educational homogamy is linked to a narrowing educational gender gap, a result that holds even after controlling for local socio-economic conditions that might otherwise confound the association. The results suggest that marriage market dynamics shape parental investment in children's education - particularly in India, where parents play a central role in both schooling and marital choices. These findings highlight how marriage market incentives may reduce gender disparities in education: when educational homogamy between spouses rises, parents may be incentivised to seek higher levels of education for their daughters to improve their marriage prospects.
This paper develops and applies a novel stochastic simulation methodology to evaluate the effectiveness of alternative fiscal rules in guiding policy decisions and promoting long-term fiscal sustainability. The proposed framework integrates macro-fiscal uncertainty into a forward-looking simulation environment, allowing for the systematic assessment of fiscal outcomes under various rule configurations and economic shocks. By explicitly accounting for stochastic variations in revenues, expenditures, and debt dynamics, the methodology provides a robust tool for examining the trade-offs between fiscal flexibility and credibility. The results highlight the critical importance of embedding fiscal rules within a comprehensive fiscal responsibility law, complemented by the establishment of an independent fiscal council to strengthen transparency, accountability, and policy credibility. Empirical findings derived from the Caribbean experience underscore that well-designed and consistently enforced fiscal rules can significantly enhance fiscal discipline, reduce procyclicality, and improve debt sustainability. The analytical approach and policy lessons presented in this study offer valuable guidance for policymakers in the Caribbean and other developing regions seeking to reinforce fiscal governance and institutional resilience.
China has the largest elderly population and is one of the fastest-growing economies in the world. Despite decades of economic growth, it is now facing a huge demographic challenge, i.e. rapid population ageing accompanied by negative population growth, which will have a long-term impact on the Chinese path to modernisation. Chinese modernisation is the modernisation of a large population, and of common prosperity for all. The well-being of the elderly population must be taken seriously. Since 2020, China has launched a proactive national strategy in response to population ageing to ensure that basic elderly care is accessible to the entire elderly population. This article analyses the characteristics of population ageing in China and the resultant challenges to social governance, social security, elderly services, liveable environments, and comprehensive development. It then introduces China's distinctive and innovative responses to these problems, which manifest a joint governance model involving the active role of multiple stakeholders. Finally, it proposes some specific measures for addressing population ageing in the future to ensure both social stability and sustainable economic development.
This study explores the impact of global uncertainty on the international trade of information and communication technology (ICT) across ten leading technology-driven economies over the period from 1996 to 2022. By employing robust econometric methodologies, including the models of cross-sectional autoregressive distributed lag and fully modified ordinary least squares, we capture both short- and long-run effects of global uncertainty on ICT trade flows. The findings reveal a significant negative long-run relationship between global uncertainty and the exports of both ICT goods and services, suggesting that persistent global uncertainty hampers the trade performance of the ICT sector. Additionally, macroeconomic variables, including the cross-border capital inflow, control of corruption, and GDP, exert diverse influences on ICT exports, though their effects vary across the models. This study offers valuable policy implications, urging governments in innovative economies to enhance institutional frameworks and governance to buffer against global uncertainty. The novelty of this research lies in its cross-country comparative approach, which provides novel insights into the intersection of global uncertainty and ICT trade within the context of innovation-driven nations, shedding light on how these economies navigate uncertainty while maintaining their competitive edge in the global ICT sector.
Insurance companies' investment in equities has attracted considerable scholarly attention in recent years. Insurance funds focus on the future performance of enterprises, while innovation is the driving force behind the enterprises long-term development. However, there is little evidence in the existing literature on whether insurance funds' shareholding can affect firm innovation. Using the data on China's listed companies over the period of 2007-2018, this article empirically examines the correlation between insurance funds' shareholding and firm innovation. Results show that companies with insurance funds' shareholding have more research and development investment and patent output compared to those without. The more shares insurance funds hold, the more companies invest in innovation, although in the short term. Further analyses show that firms are less innovative after insurance funds cancel shares. In addition, the positive association between insurance funds' shareholding and firm innovation is more pronounced for firms with a lower management shareholding ratio, which means that insurance funds' shareholding can reduce managerial myopia. Mechanism tests show that: first, insurance funds' shareholding promotes firm innovation by reducing corporate financialisation; second, insurance funds' shareholding promotes firm innovation by alleviating financing constraints; and finally, the competing explanation that improving internal control can serve as a mechanism through which insurance funds' shareholding affects firm innovation fails the test. This article contributes to a better understanding of how insurance funds' shareholding influences corporate innovation.
Since 2008, China's urban labour market has undergone a series of economic and institutional adjustments, such as the strengthening of labour protection policies, a transition in economic structure, and the relaxation of family planning policies, creating a new context for the gender wage gap. This paper examines the gender wage gap in urban China from 2007 to 2018, and finds that this gap narrowed significantly from 2007 to 2013, but widened again from 2013 to 2018. Our baseline model estimates the gender wage gap at 23.4% in 2007, 21.1% in 2013, and 25.8% in 2018. Using the Heckman two-stage regression to control for the impact of 'pre-market' sample selection in market participation decision-making, and using the endogenous switching model to control for the impact of 'within-market' selection in marriage and childbirth decisions, the paper finds the persistent U-shaped trend in gender wage gap across the observation years, while the gap in other estimation models was larger for 2007 and 2018. Marriage and childbearing are important drivers of the gender wage gap. A key finding is that following the relaxation of the one-child policy, the 'motherhood penalty' intensified. In 2018, the young and highly educated women faced the most severe wage penalties associated with childbirth, highlighting the unintended consequences of the new policy when corresponding social support was inadequate.
The rapid development of artificial intelligence (AI) has generated transformative opportunities alongside significant ethical, societal, and regulatory challenges. In this paper, we analyse this issue by considering the different approaches and regulatory frameworks of three main actors: the European Union (EU), the United States (US), and China. The analysis shows how they are adopting different strategies: the EU proposes a stringent, risk-based framework to ensure accountability and transparency; the US, traditionally favouring minimal intervention, is moving towards more structured regulation out of ethical and security concerns; and China has integrated AI as a core component of its national strategy, aligning AI development with state objectives and social stability. These varied regulatory approaches shape global policies, influence international relations, and underscore the need for a new international pact that protects fundamental rights, mitigates the digital divide, and embeds sustainability at the core of AI-driven industrial development.
We investigate the effect of population ageing on income inequality in China, with particular attention to the role of public pension systems. We find that the size and distribution of pensions matter in understanding how ageing affects inequality. When using disposable income as the income indicator, the impact of population ageing on income inequality is found to be minimal. However, when pre-pension income is analysed, population ageing exacerbates income inequality, accounting for around 17% of the rise in income inequality from 2002 to 2018. Therefore, the current pension system counterbalances the negative impact of population ageing on income inequality. This is mainly because pensions raise the average income of the elderly and reduce inequality within this group, particularly in urban areas. Nevertheless, due to the substantial disparity in pension benefits between different pension schemes, there exists a significant gap in pension income between urban and rural areas. This gap leads to a more pronounced urban-rural income inequality among the elderly after they receive pensions.
Open-ended funds (OEFs) have increasingly invested in dollar bonds issued by corporates in emerging Asia (EMA). While this enables EMA corporates to tap more dollar funding, the resultant build-up of dollar leverage has made these corporates more vulnerable to refinancing risk should there be a sudden fall in OEFs' bond demand. We find that 16% of EMA dollar corporate bonds were held by OEFs immediately before the March 2020 episode. In times of market stress, OEFs' liquidation of these bonds could lead to a surge in dollar funding costs and disrupt the ability of corporates in the region to obtain dollar funding. The impact is significantly larger for corporates subject to higher debt burdens. In response, these debt-ridden corporates become more likely to fill the funding gap by bank credit, exposing creditor banks to higher credit risk. The findings point to rising interconnectedness between OEFs and banks through their common exposures to EMA corporate bonds. This could be one channel through which a shock on dollar funding tightening can be magnified, resulting in spillover effects and adding vulnerabilities to the region's financial systems. This warrants policies that strengthen OEFs' liquidity management and closer monitoring of the asset quality of corporate loan portfolios of banks.
In a democracy, political parties perform the important role of aggregating the preferences of voters for policies, that is, parties observe the conflicting views of voters about the role of the government in the economy and aggregate these preferences into a policy that serves the parties' electoral goals. This process of preference aggregation along with electoral competition might lead to desirable properties in the design of government spending. However, if candidates and parties do not share the same views about the role of the government in the economy, political parties could be captured by candidates who seek to impose their preferences over the parties' views for policies. In this case, the role of preference aggregation of parties in a democracy is replaced by the personal agenda of candidates. In this article, we develop an analysis of economic consequences of the capture of political parties and identify four possible equilibriums with poor welfare properties. We show that the capture of political parties might lead to distortionary extreme policies with high (and in other instances low) spending in focalised and pure public goods.
We evaluate the effect of small-value digital travel coupons issued by third-party platforms on tourism consumption in China. Using the unique data from China's top online tourism platform, we verify that travel coupons from third-party platforms play an important role in driving consumption in the tourism industry, which is consistent with the effect of consumption coupons issued by governments. Considering that tourism consumption varies in different regions, sub-industries, and seasons, we also analyse the heterogeneous effect of digital travel coupons on tourism consumption. Finally, we investigate how travel coupons affect digital credit consumption and find that using coupons stimulates not only travel consumption but also credit demand and consumption. Our findings can help governments and third-party platforms improve the targeting accuracy and efficiency of coupon strategies.
