This paper examines whether foreign exchange reserve management can complement the policy rate in a fixed exchange-rate monetary union. We develop a small open-economy New Keynesian model with an explicit reserve accumulation block and discipline it using CEMAC annual data for 1991–2023 through data-informed calibration and Bayesian estimation. We compare three policy regimes : an augmented Taylor rule reacting to reserve deviations, a regime combining this rule with direct foreign exchange reserve intervention, and a passive reserve-management benchmark. The model simulations show that, within the policy-rule configuration considered, combining the augmented Taylor rule with active reserve intervention yields the lowest central-bank stabilization loss across the shocks examined. This ranking remains robust to alternative loss-function weights. The contribution of the paper is to formalize reserve operations as a complementary monetary policy instrument in a fixed exchange-rate monetary union where the policy rate alone must address both internal and external stabilization objectives. The results suggest that reserve management can strengthen macroeconomic stabilization when it is integrated into a transparent and rule-based monetary policy framework.
Existing research has largely examined the separate effects of geopolitical risk (GPR) and oil price uncertainty (OPU), leaving insufficiently explored whether oil-market uncertainty conditions the relationship between geopolitical risk and global supply-chain pressure. This study addresses this gap using monthly data from January 2004 to June 2026 and an autoregressive distributed lag framework, complemented by alternative uncertainty specifications, OPU regimes, out-of-sample forecasting, and local projections. Its main innovation is to explicitly model OPU as a conditioning factor in the GPR–global supply-chain pressure relationship while distinguishing short-run adjustments from long-run dynamics. The findings reveal a positive short-run and negative long-run association between geopolitical risk and global supply-chain pressure. Importantly, the GPR–OPU interaction is statistically significant, with different short- and long-run dynamics. Additional analyses suggest heterogeneity across uncertainty environments, although formal regime differences remain inconclusive. Incorporating OPU does not improve out-of-sample forecasting accuracy. These findings extend the literature by demonstrating the explanatory relevance of oil-market uncertainty in shaping geopolitical-risk transmission, while distinguishing this contribution from its limited predictive value.
Africa generates 3.8 percent of global greenhouse gas emissions, yet its exporters of steel, aluminium, cement, fertilisers, and inorganic chemicals face EU Carbon Border Adjustment Mechanism (CBAM) compliance requirements calibrated to industrial economies. This paper estimates CBAM's distributional impact on 53 African exporters using BACI bilateral trade data (226 destinations, 2018-2024, 815,982 observations), with a continuous CBAM Exposure Index (CEI) measuring each country's EU export share in CBAM-covered sectors over a 2019-2021 baseline. Identification relies on a PPML triple-difference gravity model with placebo, permutation, Double Machine Learning, and Synthetic Control checks. During the transitional phase, high-exposure exporters grew EU CBAM-sector exports faster, not slower (coefficient 7.718, p < 0.001), a front-loading surplus consistent with anticipatory, transitional-phase adjustment rather than a direct measure of the compliance burden under full enforcement. Countries pairing high CEI with carbon-intensive grids face a compounded disadvantage, since the four-way equity inversion interaction is significantly negative under the preferred clean-energy index (−3.696, p = 0.029; −3.373, p = 0.07 under the composite index). A significantly stronger relative response toward the EU and Latin America, versus Rest-of-World destinations, is detectable (+4.623 and + 7.828, both p < 0.001), alongside significantly weaker relative responses toward China and India; only the EU pattern also holds in absolute, own-destination terms, while the Latin America estimate is not statistically significant in absolute terms and is read as suggestive rather than confirmed reorientation. The results support targeted CBAM revenue recycling, differentiated LDC treatment under Article 46, and concessional clean-energy investment for the most exposed economies.
This paper examines firms’ inflation expectations in an economy characterized by persistent inflation and recurrent fiscal imbalances. Using a novel survey of Uruguayan firms, we document three empirical regularities. First, firms closely track inflation developments, accurately perceive recent inflation outcomes, and their reported inflation expectations are systematically associated with subsequent pricing decisions. Second, their short-run inflation forecasts are accurate and perform comparably to those of professional forecasters. Third, despite this attention and forecasting accuracy, expectations remain weakly anchored: medium- and long-run beliefs fail to converge to the central bank’s inflation target and instead continue to respond to broader macroeconomic information.We further show that fiscal conditions help explain inflation forecast errors, particularly among professional forecasters, even after conditioning on other macroeconomic variables. For firms, by contrast, the predictive content of fiscal conditions is absorbed by other macroeconomic fundamentals once the full set of controls is included. This asymmetry suggests that fiscal information is incorporated differently across forecasters. More broadly, our results show that attention, economically meaningful expectations, and forecast accuracy do not guarantee well-anchored inflation expectations, and that the macroeconomic information relevant for inflation forecasting is broader than commonly emphasized in the literature.
