This paper examines the effects of the ongoing global structural shift towards services on the energy mix of economies. Unlike much of the existing literature, the analysis separately examines fossil fuels and sustainable energy, as well as among total final, industrial, residential, and transport energy consumption and intensities. The analysis utilizes a dataset covering up to 110 countries from 1999 to 2020, to capture price effects CPI was used as a proxy for energy prices, and a dynamic panel estimation method was employed to address endogeneity. We find that the structural shift towards services has a significant negative effect on the level and intensity of fossil fuel energy use. In fact, the size of the manufacturing sector significantly augments the level and the intensity of fossil fuel energy use, while the size of the services sector tends to decrease them. Moreover, the share of services significantly increases the sustainable energy consumption, especially in residential and transport activities. Therefore, our findings suggest that manufacturing is fossil fuel-intensive, while services are sustainable energy-intensive. The digital and financial service industry should adopt sustainable energy for sustainable infrastructure.
This study provides a long-run historical perspective on commodity price bubbles. We apply recursive right-tailed unit root tests, which address heteroskedasticity and multiplicity issues, to monthly data on 31 commodities spanning from 1900 to 2024 to identify and date-stamp speculative price bubbles. Our results show that price bubbles are not isolated events but recurring features of commodity markets, exhibiting distinct patterns across different historical periods. Notably, the first half of the 20th century was characterised by prolonged and frequent bubble episodes across numerous commodities, including base metals, precious metals, fossil fuels, and soft commodities. The post-1950 period, in contrast, saw shorter and less frequent bubbles. This historical shift suggests that market structures, regulatory developments, and increasing global financial integration may have influenced the nature of speculative activities in the commodity markets over time. However, despite these structural changes, we document that the drivers of commodity price bubbles, such as macroeconomic, financial, and policy/geopolitical uncertainty, have remained persistent across different historical eras.
In a non-corrupt political system, public revenues are generally characterized by transparency, fairness, accountability, and a commitment to serving the public interest. Under democratic conditions, political competition can incentivize public officials to distribute extractive rents more equitably. This article examines the de jure government take in a competitive political system for 19 gold-producing countries in Africa, using local projection methods combined with fixed-effects regressions. The empirical findings reveal that non-corrupt democracies tend to require a relatively lower government take in mining projects. As long as corruption remains low, democracies will demand a lesser take, but when corruption becomes pervasive, the demanded take is higher. Our findings are robust to various econometric specifications, including the use of inverse probability weighted regression adjustment (IPWRA) to address endogeneity issues, alternative specifications, and the inclusion of additional control variables such as government effectiveness, rule of law, and cultural fractionalization. Moreover, the results hold across different measures of political, legislative, and executive competition, as well as the economic and financial characteristics of the mines.
This research examines the impact of U.S. monetary policy shocks on E.U. agricultural prices. Utilizing monthly prices of beef, milk, wheat, barley, pork, and poultry for twenty-one E.U. countries, we estimate the impact of U.S. monetary policy shocks on these six agricultural prices in a Panel Vector Autoregression with Exogenous Variables framework. We find that a contractionary monetary policy shock in the U.S. has heterogeneous effects across the storable and non-storable commodity prices in the E.U. Specifically, a contractionary monetary policy shock in the U.S. reduces E.U. wheat and barley prices and increases beef, milk, pork, and poultry prices. The effects, though modest in absolute size, are comparable to one-third to two-thirds of a typical monthly price change. The estimated impulse response functions of dynamic multipliers reveal that these six commodity prices return to equilibrium within two to five months.
This paper examines how risk, risk aversion, and market correlation shape trade patterns and gains from trade in a duopoly model with demand uncertainty. We show that trade flows reflect not only traditional determinants, but also the risk content and risk-aversion content of trade, as countries implicitly exchange risk and risk-bearing capacity. While more risk-averse countries tend to import, higher demand risk can induce exports as firms use foreign markets to diversify exposure. The model identifies diversification and implicit risk-sharing as sources of gains from trade and introduces net gains from trade to isolate the role of uncertainty. Comparing two information structures – ex ante decisions versus partial ex post adjustment – yields a measure of the value of partial information and shows that trade and information act as partial substitutes. Information raises welfare but can reduce measured gains from trade by increasing the autarky benchmark.
Intangible capital plays a pivotal role in shaping the trajectories of modern economies, particularly through its impact on growth, trade patterns, and structural transformations. This study is the first to treat intangible capital as a source of comparative advantage in determining a country’s international trade patterns, in the spirit of the Heckscher–Ohlin–Vanek (HOV) model. Applying the gravity model approach to a dataset of 21 OECD countries, the results reveal that countries relatively abundant in intangible capital tend to export more from sectors that make intensive use of such capital. Additionally, we find high-skilled labour has a similar impact, underscoring the importance of human capital in managing the complexity of modern production processes. Government policies should focus on intangible capital investments, alongside tangible capital, including provision of digital infrastructure, as well as training of high-skilled labour, in order to foster the expansion of intangible capital and increase countries’ engagement in new patterns of trade, such as service trade.
When emerging-market inflation falls to advanced-economy levels, has anything fundamental changed in how firms set prices—or is the calm headline masking the same volatile forces underneath? Identical inflation rates can conceal very different pricing structures, yet aggregate measures cannot tell them apart. We address this question for Peru—a commodity-dependent small open economy that went from hyperinflation to advanced-economy price stability—by decomposing inflation into the upward and downward pricing pressures that net out to the headline rate. To do so, we extend the Quineche and Zapata (2026) decomposition to the fragmented CPI databases typical of emerging markets, applying it to 1996–2024 using up to 188 sub-indices across four base-year periods. The 2002 adoption of inflation targeting coincides with a turning point: both pressures fall by roughly half, their volatility compresses, and their asymmetry stabilizes—a change in pricing behavior, not just in the aggregate outcome. We then use TVP-VAR-SV models to show that contractionary monetary policy transmits asymmetrically, operating mainly through a persistent rise in deflationary pressure. Both pressures rise on impact, but inflationary pressure rises by more, producing the familiar short-run price puzzle before disinflation sets in. This transmission has itself evolved under inflation targeting: the short-run price increase weakens, while the restraint of price increases strengthens.
Migration is a strategy for coping with food insecurity. Although it may reduce local production, it generates remittances that can improve food security. This study examines the existence of non-linear threshold effects of governance quality related to remittances on multidimensional food security in MENA countries for the period 2000–2023. A dynamic threshold model based on panel data, inspired by Kremer et al. (2013), is employed to determine the optimal level of governance at which remittances contribute to improved food security. The results show the existence of institutional thresholds of 1.1, 1.4 and 1.7 for food accessibility, utilization and sustainability. Beyond these thresholds, remittances significantly improve food security by enhancing access to food, nutritional quality and the stability of food supplies. However, the effect of remittances on food availability remains limited when the governance index reaches the threshold of 0.76. This result is mainly explained by a greater orientation of remittances towards the consumption of imported products at the expense of local production, which increases dependence on food imports.
This paper examines the effects of climate risks on participation in global value chains (GVCs). Using data from the EORA MRIO database for 173 countries over the period 1995-2018, we investigate how both the physical risk associated with climate change and the transition risk arising from shifts in environmental policies may affect total, forward, and backward GVC participation. We further explore whether these effects differ across country groups and regions to account for heterogeneity in structural and regional characteristics. We assess the robustness of our findings using alternative measures of both the dependent variable (GVC participation) and the key explanatory variables capturing physical and transition climate risks. The results indicate that physical climate risks are consistently associated with lower GVC participation, particularly through forward linkages, whereas transition-related measures are positively associated with GVC participation. These findings are consistent with the Porter Hypothesis, suggesting that stronger environmental commitments can support technological upgrading and countries' integration into GVCs. We further show that the effects of climate risks are highly heterogeneous, varying across levels of economic development, oil dependency, institutional quality, and geographical regions. Moreover, stronger environmental commitments appear to attenuate the adverse effects of physical climate risks on GVC participation, particularly in countries with stronger institutions. These findings underscore the importance of integrating climate, trade, and industrial policies while accounting for countries’ structural characteristics and institutional capacities.
This paper examines the trade effects of the early-2025 US tariff increase and its implications for the global geoeconomic fragmentation. To assess these effects, we employ a New Quantitative Trade model calibrated to 45 countries and 56 industries. We compare scenarios based on official tariff announcements and actual changes in effective US tariff rates for detailed product categories. We decompose changes in key macroeconomic variables into contributions of tariff hikes, exemptions, and retaliatory measures. The tariff shock acts like a negative supply shock for the United States and like a demand shock for its major trading partners. Our findings indicate that tariff-driven trade adjustments deepen global geoeconomic fragmentation. We document the decoupling of the United States from the Western bloc, both in terms of weaker trade and GVC links, alongside increasing downstream dependence of US allies (e.g. Canada and the EU) on Chinese imports.
Employing comprehensive data on Energy Technology RD&D Budgets for 31 IEA-member countries for the period 1990-2020, the study empirically examines the roles of green technology innovation investment in renewable energy consumption (REC) under global geopolitical risk (GPR) and diverse macroeconomic episodes. The empirical findings show that global GPR depresses REC, while green innovation investment is persistently favorable to clean energy consumption outcomes. As heightened WUI induces economies to depress investment for precautionary motives, the findings present mixed joint effects of GPR and green innovation finance on clean energy consumption. IEA-member countries have maintained increasing green finance investment with long-term green value, transmitted to sound financial conditions of the wider economy under geopolitical and world uncertainty episodes. The empirical investigations remain robust, using linear dynamic panel-data estimations with GMM-type instruments, treatment regressions with multiple fixed effects, fixed-effects (FE) panel data models, and logistic regressions, among additional econometric tests. Our findings offer critical contributions to future studies on the long-term value of green finance and innovation under macroeconomic risks toward sustainable development goals (SDGs). Our study offers important policy implications for sustainable finance for inclusive growth under uncertainty, that green energy transition plays an inevitable role in stabilizing macroeconomic conditions.
Geopolitical tensions have intensified in recent decades, yet empirical evidence on how geopolitical risk shapes bilateral trade in low-carbon technologies remains limited. Existing studies mainly focus on energy transition outcomes or domestic deployment, leaving the export channel and its heterogeneous responses understudied. Accordingly, this paper examines the relationship between geopolitical risk and bilateral low-carbon technology exports while accounting for distributional heterogeneity and the moderating role of environmental expenditure. To this end, we use a bilateral country-pair panel covering 42 economies over the period 1998-2020 and estimate gravity-based models using Method of Moments Quantile Regression (MM-QR). The results show that higher geopolitical risk is associated with lower exports, with effects that are weak at the lower tail of the distribution but become larger and strongly significant at higher quantiles. Moreover, environmental expenditure mitigates the adverse impact of geopolitical risk, although this buffering effect weakens toward the upper tail. This study provides new bilateral trade evidence on the role of geopolitical risk in low-carbon technology markets and adds a quantile-based perspective on heterogeneous effects and policy buffering mechanisms.
Financial inclusion is widely recognized as a crucial development objective, yet its implications for financial stability remain theoretically ambiguous and empirically unsettled. This paper examines the two-way relationship between financial inclusion and financial stability in Africa. To do so, we use a dataset covering 52 banks in the West African Economic and Monetary Union (WAEMU) over the period 2002-2019. By combining heterogeneous panel causality tests with a panel vector autoregressive (PVAR) framework, we provide a dynamic assessment of the inclusion-stability nexus at the microeconomic level. The findings reveal an asymmetric relationship: financial inclusion increases banks' credit risk exposure - as captured by rising loan loss provisions - while leaving overall solvency broadly unaffected. This risk channel operates primarily through the extensive margin - the number of accounts and ATMs - rather than through aggregate deposit volumes. Heterogeneity analyses further show that the effects are more pronounced for smaller and undercapitalized banks, highlighting the conditional nature of the relationship. Conversely, we find no robust evidence that financial stability significantly drives financial inclusion. Overall, the findings suggest that broadening access to formal banking services through account ownership and payment infrastructure raises provisioning needs without systematically undermining bank solvency, calling for risk-sensitive inclusion policies accompanied by adequate capital buffers.
We study the causal effect of environmental vulnerability on sovereign default risk. We identify this effect using a double machine learning estimator that isolates exogenous variation in environmental exposure while flexibly controlling for institutional and macroeconomic confounders. Using a panel of 143 countries from 1995 to 2022, we find that countries classified as highly environmentally vulnerable face a 9 percent higher probability of default compared to otherwise similar peers. This effect is substantially larger than previous correlational estimates and highlights the importance of separating environmental risk from institutional quality. Our findings suggest that climate vulnerability independently contributes to sovereign fragility, with implications for debt sustainability, market access, and climate-finance strategies.
This paper analyzes the macroeconomic consequences of public procurement inefficiency using a panel of 102 countries (2000-2022), combining Data Envelopment Analysis (DEA) with a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. We find that the most efficient countries are predominantly high-income economies. High-income countries could expand outputs by roughly 32% while holding procurement spending constant, whereas in upper-middle, lower-middle, and low-income countries the potential rises to 54%, 75%, and 108%, respectively. These results are robust to bootstrap correction, income-group and sectoral sensitivity checks, and alternative DEA specifications, including pooled estimation, input-oriented models, and changes in the frontier structure. We connect the empirical findings to the DSGE by mapping the DEA scores into a procurement cost-overrun wedge, through which observed procurement spending is converted into effective public inputs. For a representative middle-income economy, counterfactual simulations show that reducing procurement cost overruns over the medium term raises real GDP growth by 0.07 pp, improves the primary balance by 0.2 pp of GDP, and lowers public debt by 1.3 pp of GDP. Combining this reform with stronger competition in the publicinput market more than doubles the growth effect and reduces debt by 4.9 pp of GDP.
This study first examines the response of employment to an aggregate productivity shock in a panel of fifteen African countries using a panel VAR (PVAR) model. We then classify these countries into three income groups-(1) upper-middle-income, (2) lower-middle-income, and (3) low-income-based on their mean or median income over the period 1991-2019, and investigate whether the employment response differs across these categories. For the full sample of fifteen countries, we find no statistically significant positive or negative response of employment to a positive productivity shock. This result also holds when the analysis is conducted separately for each of the three income groups. We further find that, among all the shocks included in the model, only a positive money supply shock leads to an increase in employment. However, once the sample is disaggregated into the three income groups, this result remains robust only for the low-income countries. Finally, the results for the full sample indicate that a positive output shock (i.e., a shock to GDP) leads to a statistically significant decline in inflation, as expected, while having no statistically significant effect on employment. When the three income groups are analyzed separately, the disinflationary effect of output shocks is found to be robust only among low-income countries.
In this paper we analyze the effect to take into account the outliers on the forecasting accuracy and the risk management in the natural gas spot and futures markets. We apply two (semi-parametric and free-model) outlier-detection procedures, and compare the daily out-of-sample performance of GARCH-type models and GAS models estimated on raw returns with GARCH-type models estimated on outlier-cleaned returns in terms of volatility forecasting and risk measures. The results show that both natural gas markets exhibit a number of outliers, principally due to abnormal weather relative to seasonal norms, extreme climatic events and storage levels, and the spot returns are more affected by large changes than the futures returns. We do not observe significant difference in forecasting performance between the different models estimated on the raw and cleaned returns. We find that the VaR backtests are not rejected for the spot and futures returns, except for some volatility models for the spot returns, whereas the ES backtests are rejected for both returns.
This paper examines how a developing country can benefit from trade liberalization. We develop a two-period model, comprising an autarky phase and a globalization phase, and a two-country framework, featuring a developing country and a developed country (representing the rest of the world). Our findings indicate that globalization may disadvantage a developing country when its total factor productivity (TFP) is significantly lower than that of the developed country. However, we demonstrate that the developing country can still achieve gains from trade openness by allocating part of its capital to innovation during the autarky period, thereby enhancing its TFP.
This paper examines the relationship between Financial Technology (FinTech) development and banking efficiency in 28 Sub-Saharan African (SSA) countries over the period 2007-2018. Using a two-way fixed effects framework, supplemented by dynamic, timing-based, and falsification checks to mitigate endogeneity concerns, it shows that FinTech development is positively associated with banking efficiency. FinTech is associated with improvements in the composite banking-efficiency index, and this association is reflected primarily in narrower lending-deposit spreads, stronger non-interest income generation, and higher returns on assets and equity. The findings remain stable across alternative econometric approaches, measurement choices, and finite-horizon persistence checks. Overall, the paper suggests that FinTech can strengthen financial intermediation in structurally constrained banking systems and that policy frameworks fostering complementarity between FinTech providers and incumbent banks may support efficiency gains and broader financial sector development in the region.
In today's highly integrated global economy, global value chains (GVCs) are reshaping not only economic activity but also corporate responsibility. This paper examines how firms' participation in GVCs influences their environmental, social, and governance (ESG) performance, using firm-level data from over 222,000 firms across 159 countries in the World Bank Enterprise Survey. We construct multidimensional ESG indices through a principal component analysis approach and analyze both direct and indirect effects of GVC integration while accounting for firm heterogeneity and potential endogeneity. Our findings show that GVC engagement significantly enhances ESG outcomes, particularly in the environmental and governance dimensions, with larger, older, publicly-owned and manufacturing-sector firms benefiting the most. Female-managed firms, however, appear to face persistent structural barriers. Moreover, firms in developed countries and regions benefit most. Mediation analysis identifies innovation, business strategy, and access to finance as key indirect channels through which GVCs enhance ESG compliance. Robustness checks confirm that deeper integration yields greater sustainability gains, and the results are robust to endogeneity issues.
