This study investigates the cross-border propagation of foreign interest rate shocks in an era of deepening financial globalization and evaluates stabilization policies within the IMF’s Integrated Policy Framework. We find that advanced economies implement counter-cyclical monetary policy, whereas emerging markets are often forced into pro-cyclical rate hikes due to inflationary pressures. Augmenting monetary policy with foreign exchange intervention (FXI) or capital flow management (CFM) enhances stabilization, with FXI yielding superior outcomes in mitigating output and price volatility. We further recalibrate the model to reflect South Korea's transition to a net external creditor since 2014 amid deepening economic integration, a shift that appears to act as a structural stabilizer, dampening exchange rate depreciation and output contractions. However, the integrated policy mix entails a trade-off: stabilizing output while increasing consumption and trade balance volatility. These findings highlight the need to weigh output stabilization gains against the accompanying increase in consumption and external account volatility.
This paper develops an empirical framework to analyze the relationship between geographical factors and economic integration. Critiquing traditional gravity models of bilateral trade for their empirical rather than theoretical foundations, we propose a new quantitative approach to enhance the accuracy of integration measurements. Addressing key theoretical and econometric challenges, we advocate for the use of hierarchical linear mixed models, which capture nuanced variations in international trade flows often overlooked by traditional methods. This approach integrates spatial and economic factors more effectively, offering a robust alternative for empirical trade analysis. Our findings contribute to the methodology of trade studies, providing improved tools for understanding the dynamics of economic integration.
This study examines the relationship between trade restrictions and economic growth, with a particular focus on the moderating role of governance. Using dynamic panel data of the two-step system generalised method of moments for 125 countries from 2010 to 2022, the analysis differentiates between import restrictions and export regulatory measures. Results reveal that import restrictions, particularly tariffs, licences, and state import monopolies, negatively affect economic performance, while export repatriation and financing requirements contribute positively to growth. At the aggregate level, trade restrictions exhibit an overall negative association with growth, and stronger governance, although generally beneficial, tends to magnify the adverse effects of such restrictions. These findings highlight important policy implications: easing import restrictions through tariff reductions, licensing reforms, and dismantling monopolies, enhancing export financing and ensuring effective repatriation of export proceeds, and strengthening governance through improved regulatory quality, transparency, and institutional effectiveness to ensure trade policies foster sustainable economic growth.
This paper tests the neutrality view for the Non-Financial Corporations (NFC) sector in the European Union (EU) between 2000 and 2021. We investigate how market-based and bank-based finance can affect Investment and Value-Added performance within this sector. We use a Panel VAR specification to account for the time profile in the response of performance indicators. Our evidence indicates that market-based finance stimulates Value-Added and investment growth in the EU's advanced economies, mainly in Intellectual Property Products. In Eastern and South-Eastern member states, investment growth, especially in tangible goods, is stimulated by bank finance. In this group, market-based finance plays an important role for intangible investment. Three main implications emerge. First, the neutrality view does not hold; second, the economic and financial systems of the various EU countries are characterized by deep differences; third, implementing the Capital Market Union alongside the Banking Union will remain a key priority in the EU.
This study investigates the effect of Geopolitical risk (GPR) on FDI inflows and outflows in G20 countries from 2002 to 2022. This study employs the PVAR model to analyze the empirical results. The results show that past FDI inflows affect current FDI decisions. Geopolitical risk has a smaller statistical effect on FDI inflows but a larger effect on FDI outflows. The Granger causality test shows that the GPR causes FDI, but FDI does not cause GPR directly. When we demean FDI and risk data, robustness checks confirm the persistence of FDI patterns and the autoregressive nature of risk. The study shows that policymakers need to pay more attention to strengthening economic fundamentals rather than simply focusing on the ability to fend off geopolitical risk. Future research should further assess the characteristics of sector-specific impacts and thoroughly investigate how geopolitical uncertainty impacts investment trends.
Morocco establish a large political and social change in the 90s and 2000s, this changes granted Morocco’s the advanced status in 2008 as the first country in the south of Mediterranean, making morocco the closest partner of the EU. The aims of this paper is to evaluate the effect of the advanced status agreement between morocco and the European Union on the quality of institutions in Morocco, we use the synthetic control approach to estimate the causal effect, our results suggest a small but not significant reduction in the corruption level of morocco over the treatment period.
Firms gain from globalization not only through exporting but also through access to foreign capital goods that embody superior technology, quality and variety. This paper examines whether imports of capital goods act as an effective channel of technology diffusion and whether firm-level technological capability shapes the gains from importing, using panel data from Vietnam SME Survey for 2011, 2013 and 2015. The paper applies stochastic frontier analysis to distinguish frontier shifts from changes in technical efficiency. The results show that a higher share of imported machinery is associated with an outward shift of the production frontier. This association is driven more by between-firm differences than within-firm changes, suggesting that imported capital goods matter more through embodied technology and cross-firm heterogeneity than through short-run learning. By contrast, the effects of technological capability and its interaction with import share are more mixed. Overall, the findings point to imported capital goods as an important channel of productivity upgrading for Vietnamese SMEs.
Foreign direct investment (FDI) plays a vital role in financing projects and generating spillover effects such as technology transfer and human capital development. This study analyzes FDI interactions among 193 countries from 2011 to 2021 by constructing inward and outward FDI networks. Using clustering coefficients, centrality measures, and community detection, the research examines the structural features of these networks. Results show that the United States, the United Kingdom, Luxembourg, and the Netherlands consistently hold central positions. Over time, the number of communities decreased while their size increased, with key FDI countries placed in the same community. Employing the GMM method, the study identifies significant determinants of network positions: trade openness, free-trade agreements, and GDP positively affect both inflow and outflow networks. Inward positions are further strengthened by good governance but weakened by inflation. Conversely, in outward networks, inflation boosts FDI, while governance has a negative impact.
This study examines the stability of European financial institutions through an empirical assessment of systemic risk and unexpected shocks over the period 2005-2024. By mobilizing several advanced measures of systemic risk, such as CoVaR, Delta CoVaR, SRISK and DCC-GARCH, we identify systemic banks and analyze the evolution of their vulnerability over the financial, sovereign and health crises. Our results reveal a marked heterogeneity of systemic risk across institutions and countries. German, French and Italian banks stand out for their significant contribution to European systemic risk, especially during crisis episodes. SRISK highlights growing recapitalization needs in some authorities, while dynamic correlations calculated confirm an intensification of contagion during periods of stress. The identified structural breaks coincide with major macro-financial events, reinforcing the importance of adapted prudential supervision. This research provides a comprehensive analysis of the vulnerabilities of the European banking system and proposes policy implications to strengthen financial resilience.
Sustainable economic growth in emerging economies is essential for achieving long-term development and global competitiveness. Yet, these economies often face structural barriers arising from institutional weaknesses, limited innovation capacity, and external sector vulnerabilities. This study aims to provide a comprehensive empirical assessment of how economic freedom, innovation capacity, exports, R&D expenditures, and patent applications influence economic growth in 17 emerging economies between 2005 and 2024. The analysis is grounded in institutional theory, endogenous growth models, and the export-led growth hypothesis, which jointly explain how institutions, technology, and openness shape growth dynamics. Using panel data techniques Dynamic OLS (DOLS) and Fully Modified OLS (FMOLS) the study estimates long-run cointegration relationships while addressing endogeneity, serial correlation, and potential unbalanced panel issues. The results reveal that economic freedom, innovation, and exports are the most significant drivers of sustainable growth, enhancing market efficiency, productivity, and global integration. R&D expenditures contribute positively but heterogeneously across countries, whereas patent applications have a weaker yet positive effect. A robustness test based on a balanced sub-panel (2008-2022) confirms the stability of the results. These findings emphasize that institutional reforms enhancing economic freedom, policies promoting innovation and R&D productivity, and strategies deepening trade openness are essential for sustaining long-term economic growth. Strengthening intellectual property rights and fostering innovation ecosystems are equally critical to converting technological progress into tangible economic outcomes.
