This paper investigates whether central banks can influence bank lending when conventional interest-rate policy is unavailable. Using bank-level data for Bosnia and Herzegovina over the period 2006–2023, a long-standing currency board economy, the analysis exploits cross-bank differences in reserve account balances to identify the effects of reserve policies on lending behavior. Banks with greater exposure to reserve balances respond more strongly to policy changes. Reserve remuneration generates larger and more persistent effects than adjustments in reserve requirement ratios. Higher remuneration of required and excess reserves is associated with a sustained decline in lending by more exposed banks, indicating that reserve policies influence bank lending by altering banks’ opportunity cost of liquidity holdings and their incentives to allocate liquidity between reserve balances and lending rather than through conventional interest-rate channels. The findings provide micro-level evidence that, even under a hard exchange-rate peg, reserve policies remain effective instruments of monetary policy implementation capable of influencing domestic credit conditions, with important implications for monetary stabilization in economies operating under hard exchange-rate regimes.
This paper asks whether the transmission of geopolitical risk to world trade depends on the redundancy of the global maritime logistics network. We construct a monthly, system-level proxy for logistics redundancy from UNCTAD liner shipping connectivity by computing the effective number of cross-country connectivity sources. Lower values indicate periods in which maritime connectivity is more concentrated and feasible substitution margins are thinner. We then estimate state-dependent local projections for the Global Supply Chain Pressure Index and the CPB World Trade Monitor over horizons of 0–18 months. The estimates indicate that the propagation of geopolitical risk differs between low- and high-redundancy regimes. The state-contingent differences are most visible for global supply-chain pressure, while the estimated trade-volume responses are less precise and should be interpreted cautiously. We summarise these low-minus-high differences as a Redundancy Amplification Effect and assess their cumulative magnitude using moving-block bootstrap inference. Overall, the results provide suggestive evidence that time variation in maritime connectivity concentration is an economically relevant conditioning state for open-economy shock propagation, while also highlighting the limitations imposed by measurement and sample size.
The purchasing power parity (PPP) hypothesis is based on the stationary characteristics of long-term real exchange rate behaviors. However, the nonlinear regime transitions and asymmetric behaviors observed in the economic time series lead to the inadequacy of traditional linear tests. In this study, a specific form of a nonlinear unit root test is proposed by employing robust estimation methods in time series analysis. An extremum-type test statistic, developed for an ESTAR-type unit root test through the estimation of long-run variance using a smoothed autocovariance estimator, is examined via Monte Carlo simulations to determine its critical values and size-power properties. The small-sample performance of the proposed test indicates the absence of size distortions. Power analysis results demonstrate that the proposed test outperforms comparable tests with similar structures. In the empirical analysis, the validity of purchasing power parity for the G10 countries is assessed by comparing the stationarity of the real effective exchange rate using both the proposed test and a conventional nonlinear unit root test. The findings show that the proposed test rejects the null hypothesis more frequently than similar unit root tests. The size and power properties of the proposed test suggest that it can serve as a viable alternative to existing approaches.
This paper investigates how global and domestic uncertainty shocks dynamically affect inflation and financial conditions across twenty diverse economies. Based on country-specific structural vector autoregression models with monthly data from 2009 to 2025, the empirical findings reveal substantial cross-country heterogeneity. Global uncertainty predominantly acts as a deflationary shock that systematically eases domestic borrowing costs, whereas domestic uncertainty produces more localized and muted effects. Second-stage cross-country regressions demonstrate that structural characteristics dictate the severity of these shocks. Notably, fixed exchange rate regimes yield a positive structural coefficient, indicating they act as a buffer that significantly weakens the baseline deflationary pass-through of global uncertainty compared to flexible regimes. The analysis also uncovers a positive alignment between the responses of inflation and interest rates, providing evidence that financial markets systematically tighten borrowing conditions in response to inflationary uncertainty and ease them in response to deflationary uncertainty.
