Using a historical fiscal dataset for a group of 11 economies over the period 1880-2022, we examine debt sustainability and fiscal policy cyclicality and assess the factors influencing fiscal behaviour. We find that positive and statistically significant responses of primary balances to debt emerge in specific historical episodes and particular macroeconomic regime conditions, including the interwar era and the period from the 1990s up to the global financial crisis, while several regime settings such as low real interest rate environments, high inflation episodes and below the average growth regimes exhibit weak, insignificant, or even negative response to rising debt. We also document a transition from acyclical to countercyclical fiscal policy in the post-war era. These findings are robust to alternative estimation techniques and to specifications that incorporate the interest-growth differential. A country-level analysis reveals substantial heterogeneity, with economically meaningful deviations concentrated in specific historical episodes rather than reflecting persistent patterns. Finally, we identify economic development, democratic institutions, country size, bankruptcies, and interest rate fluctuations as key determinants of fiscal policy outcomes.
Global value chains are increasingly exposed to geopolitical tensions, policy uncertainty, and institutional weaknesses, making supply-chain trade more fragile. Existing studies largely view supply chain finance (SCF) as a tool for easing liquidity constraints, while its role under political and institutional risk remains underexplored. This study examines how SCF-proxied by factoring activity in source countries-affects participation in supply-chain trade, measured by domestic value added embodied in gross exports. Using a gravity framework combined with a Rajan-Zingales identification strategy and a dataset of about 1.76 million country-pair-industry observations across 75 countries from 1995 to 2020, we find that SCF significantly promotes supply-chain trade, especially in industries with higher technological dependence on external liquidity. Crucially, the effect is stronger when destination countries face greater political risk, investment risk, or economic uncertainty. This pattern suggests that factoring not only eases cash-flow constraints but also enables exporters to transfer payment and country risk to financial intermediaries. Even during systemic financial crises, SCF plays a stabilizing role. Overall, the findings highlight SCF as a key mechanism for enhancing resilience in global value chains, rather than merely a source of working capital.
This study evaluated the correlation between Climate-Related Extreme Events (CREE), firm value, and stock price crash risk, examining whether CREE affects firm value and crash risk. We analysed 142 companies listed on the Tehran Stock Exchange over 11 years (2012-2022) using the Generalized Least Squares (GLS) method with fixed effects. The findings show a significant negative correlation between CREE and firm value in the year following CREE, and a significant positive relationship between CREE and stock price crash risk. This research addresses an underexplored dimension in the literature by focusing on the direct, quantifiable impacts of climate-induced natural disasters (floods, droughts, earthquakes) on stock market behaviour in a sanctions-affected, climate-vulnerable emerging economy (Iran). Unlike most prior studies emphasizing ESG performance or carbon emissions, this paper provides contextualized empirical evidence from a unique institutional setting characterized by state-led economic structures, limited access to international financial markets, and high exposure to extreme weather events. The findings offer insights for similar contexts, particularly other emerging economies facing climate vulnerability and sanctions (e.g., Russia, Venezuela), while cautioning against direct generalization to developed or institutionally dissimilar emerging markets. The geographical focus on a Middle Eastern emerging market with distinct structural characteristics (sanctions, state ownership concentration, limited climate disclosure mandates) contributes novel contextual evidence to the climate-finance literature, complementing prior research on developed Western economies. However, given Iran's unique institutional features, our findings should be interpreted as contextualized evidence rather than universally generalizable conclusions. The results suggest that CREE can decrease firm value and increase stock price crash risk, an important finding given that investors reward companies addressing environmental concerns with higher stock prices.
This paper examines how household digitalization affects financial asset allocation in the digital economy era. Using data from the 2017 and 2019 China Household Finance Survey (CHFS), we construct a household digitalization index based on digital access and usage. Employing a fixed effects model, we find that digitalization significantly increases both the share and variety of risky financial assets while reducing the share of risk-free assets in household portfolios. These results suggest that digitalization leads to greater portfolio diversification, particularly toward riskier investments. Mechanism analysis indicates that digitalization operates through improved financial literacy, relaxed liquidity constraints, and expanded income sources. Our findings provide micro-level evidence that the development of the digital economy can enhance the efficiency of household financial asset allocation.
We use the Residual Income Valuation Model to obtain fundamental values for sample stocks in six Eurozone markets. We then estimate the deviation between the fundamental values and actual stock prices. Subsequently, we examine whether these deviations can be systematically explained by business cycle trends, trends in local economic sentiment, global market-related uncertainty and developments in global energy prices. We find that market volatility, proxied by the CBOE Volatility Index (VIX), is an important factor, along with energy prices. Findings are similar when a second proxy for price deviations, based on Cochrane's (1994) methodology, is employed. Impulse Response Functions indicate that a shock increase in VIX tends to reduce the deviation between fundamental and actual stock prices in sample markets. We argue that the VIX serves as a contrarian indicator of market overconfidence, such that higher VIX levels are associated with lower investor overconfidence and, consequently, with smaller price deviations from their fundamental values. Conversely, lower VIX levels (i.e., heightened overconfidence) are associated with larger price deviations.
