ABSTRACT This study examines the effects of China's low‐carbon city policy (LCCP) on wage inequality between executives and rank‐and‐file employees. Using a difference‐in‐differences approach with data from A‐share listed firms (2007–2023), we find that the LCCP reduces wage inequality mainly by increasing rank‐and‐file wages. The mechanism evidence is consistent with workforce restructuring, marked by more skilled and fewer unskilled workers. Additional results indicate that the policy stimulates green investment and raises compliance costs, which are consistent with increased demand for skilled labor. The impacts vary across firms and cities.
Tran and Vo analysed English-language-based geopolitical risk (GPR) indices and argued that local GPR dominates global GPR in explaining military spending worldwide. We revisit this claim by addressing limitations in their empirical design and measurement. After methodological corrections, panel and country-specific VAR estimates show no statistically significant effects of either local or global GPR on military spending, except for the U.S., possibly because the current GPR index predominantly reflects U.S.-centric perspectives. Indeed, local-language GPR indices for Germany, Russia, and Ukraine yield significant effects or at least reduce standard errors in VAR estimates. These findings highlight the importance of context-specific risk measurement.
The ability of the U.S. partisan conflict index to predict the U.S. stock market's return and volatility is checked in this paper. For this purpose, we have adopted quantile Granger Causality tests. The findings show that there is no linear causal link between the partisan conflict index and stock market returns and volatility. However, it is noted that there is robust linear causality between the lower and upper quantiles. Also, through Conditional Autoregressive Value at Risk (CAViaR) models, it is proven that non-linear causality is also present between the partisan conflict index and stock market return and volatility, especially in the lower as well as upper quantiles. It is advised that policymakers consider employing recommended models for assessing the non-linear pattern between economic indicators and stock market dynamics.
Using several data sets for the UK we track rising perceptions of mental well-being among the working-age population in the UK. The trend is apparent among all age groups and for men and women, but it is most pronounced among the young, and especially young women aged under 25. Young men's mental well-being began to fall markedly from 2008 whereas young women's mental ill-health began to deteriorate a few years later. The age profile of mental well-being shifts to the right over time such that the nadir of mental well-being shifts from mid-life, when people are in their late 40s and early 50s, around the time of the Great Recession, to ones early- to mid-20s in 2023.
The 2022 energy crisis, triggered by the war in Ukraine, led many governments to enact fuel tax holidays. We study the Italian fuel tax holiday, finding incomplete pass-through: 65% at less competitive stations versus 80% at those with more rivals. Less competitive stations also exhibit greater pass-through variability. When same-brand stations are neighbors, pass-through falls for less competitive stations but not in competitive markets. These results highlight how the multiplicity of equilibria in imperfectly competitive markets shapes tax pass-through. Finally, stations owned by Russian state-owned exhibit higher-than-average pass-through, possibly reflecting supply conditions shaped by the threat of future sanctions.
We study the investment effects of the Russia-Ukraine war using a novel, text-based measure of firm-level exposure derived from earnings call transcripts. Combining this measure with financial statement data for over 6500 firms across 50 countries, we show that exposure to the conflict led to sizable and persistent declines in corporate investment. Firms that discussed the war in early 2022 invested significantly less than otherwise similar firms. The results hold across multiple empirical strategies and highlight the role of geopolitical risk in shaping firm behavior during global crises.
On February 24, 2022, as Russia invaded, the National Bank of Ukraine switched from a flexible to a fixed-exchange rate regime. Was this optimal? We develop a tractable but carefully calibrated open-economy model of Ukraine with nominal rigidities and frictions in international financial markets. We find that the optimal response to small shocks is exchange rate flexibility, whereas to large (invasion size) shocks, currency depreciation is suboptimal and a Taylor-type rule may fail to admit an equilibrium, prompting the switch to a fixed-exchange rate regime. For robustness, we also consider risk-premium and non-tradable supply shocks, international reserves, and capital controls.
Geopolitical risk (GPR) shocks that trigger the imposition of sanctions tend to lower output and raise inflation in the sanctioned country. We develop a three-equation small open economy New Keynesian model where GPR shocks are modeled as negative productivity shocks and sanctions manifest as import tariffs in response to GPR increases. We calibrate the GPR process, sanction rule, and interest rate rule to match the observed dynamics of the GPR index, output, inflation, and the policy rate in Russian data. The sanction response to GPR allows the resulting model to capture the empirical impulse responses well. Additionally, we find that Russia's monetary policy rule is more accommodative than prescribed by the standard Taylor rule. Although this may reflect policy preferences, recent theoretical results indicate that such a policy stance may be optimal when sanctions act as cost-push shocks that shift the Phillips Curve.
This paper examines the distributional effects of minimum wage changes in the U.S., focusing on gender differences. Using CPS Merged Outgoing Rotation Group data (1990-2019) and a non-parametric difference-in-differences approach, we find significant income shifts following minimum wage increases. Women, especially those aged 35-44, benefit more than men, with notable gains among Hispanic women, married individuals, and union members. We disaggregate these effects by age, race, education, sector, marital status, immigration, and union status. Although gains are concentrated at the lower end of the income distribution, we also observe broader upward shifts across income levels.
The literature has primarily focused on regulated and compliance-oriented carbon markets and has rarely explored the effects of voluntary carbon-rights trading (VCRT) across industries. The present study employs an event-study approach to examine industry-level stock-return responses to Taiwan's announcement of a VCRT policy. The results reveal that market reactions are concentrated in the post-event window and produce negative abnormal returns for carbon-intensive and low-tech industries, while producing positive abnormal returns for high-tech industries. These patterns suggest that investors reassess firms' exposure to transition risks and opportunities associated with VCRT and highlight the importance of aligning corporate strategies with climate-related policy signals.
What is the link between cyclical systemic risk and bank solvency, and can we make it work for policymakers? This paper develops a framework for high-frequency monitoring of banking system health based on the link between the degree of accumulated vulnerabilities and bank solvency. Using local projection methods with a distributional focus, we show that this link is nonlinear, with substantially stronger effects in the lower tail of the profitability distribution. Downside impacts intensify during large exogenous shocks, such as wars and epidemics. Relying on regularly available supervisory data, the framework supports timely, evidence-based macroprudential monitoring under elevated uncertainty.
Regulators utilize surprise inspections to facilitate firms' regulatory compliance. Surprise inspections are valuable because they catch non-compliant firms "off-guard," preventing them from hiding incriminating evidence. However, surprise inspections encourage tip-offs, wherein a firm pays an informant to warn them about an upcoming inspection, thereby allowing the firm to conceal incriminating evidence. We study the relationship between tipping-off and bribing an official to avoid a fine, another form of corruption. We show that discouraging bribery encourages tipping-off. Accordingly, the optimal policy that balances these two countervailing effects will sometimes target only tipping-off even when it is feasible to fully eliminate bribery.
We examine how geopolitical risks (GPR) affect fiscal (FS) and external sustainability (ES) across 27 European Union economies over 2001Q4-2022Q3. We apply a two-step strategy: first, estimating time-varying FS and ES coefficients using Schlicht's (2021) approach; second, analyzing their response to geopolitical risks through a panel framework with bootstrapped inference. Our results show that higher GPR systematically weakens both fiscal and external sustainability, with the effects on ES between three and six times larger than those on FS. Domestic risks exert stronger pressures than global ones, while spillovers from neighboring-country GPR further amplify external imbalances, underscoring the interconnectedness of EU economies. The analysis also reveals structural shifts around major crises-including the global financial crisis, the European sovereign debt crisis, and the Russia-Ukraine war-that mark turning points in sustainability dynamics. These findings highlight the importance of maintaining fiscal buffers, diversifying trade, and enhancing regional coordination to mitigate the destabilizing effects of geopolitical tensions.
This paper examines whether prediction market data can forecast sovereign credit risk during periods of geopolitical conflict. Using prices from 152 political event contracts traded on Polymarket, we construct a market-based measure of geopolitical uncertainty and aggregate information using a neural network. We evaluate its ability to predict daily changes in Ukrainian sovereign bond spreads from September 2024 to September 2025. Models incorporating the prediction market signal outperform standard benchmarks in out-of-sample tests, with forecast improvements of up to 4.6% for the 5-year spread. These results indicate that prediction markets capture geopolitical risk not reflected in traditional financial variables.
We analyze the major challenges for the Ukrainian tax system for the post-war recovery of Ukraine. We identify the main areas of concern related to low compliance and high tax evasion and avoidance. Drawing on the recent economic literature and other countries' experiences, we propose realistic reforms to increase tax compliance and support the post-war reconstruction and economic development of Ukraine.
This paper examines the impact of the 2018 US-China trade war on China's industrial land supply using a novel dataset of 2.5 million land transactions from 2010 to 2023. We find that despite the trade war's adverse demand shock on exports, industrial land supply experienced a significant expansion. This increase was particularly pronounced in peripheral cities where land availability is abundant, rather than in core cities where industrial land utilization is more efficient. We interpret this phenomenon as a strategic response to heightened geopolitical uncertainty, characterized by defensive industrial expansion through hinterland development and the establishment of industrial backup capacities.
We investigate the trade effects of the 2022 Russia-Ukraine conflict. Specifically, we examine the impact of multinational enterprises (MNEs) from Western countries on exports to Russia from neutral countries. To accomplish this, we investigate exports from 36 neutral countries. We found that, on average, neutral countries significantly increased their exports to Russia after its invasion. However, the increase in exports to Russia was smaller in neutral countries with a greater presence of MNEs from Western countries (e.g., a 51% decrease in exports from a neutral country with their greatest presence).
This paper investigates how geopolitical risk affects corporate borrowing using firm-level data from Korea. We construct a novel perception-based geopolitical risk index related to North Korea and estimate a dynamic panel model using a long-difference instrumental-variables approach. We find that higher geopolitical risk significantly reduces corporate borrowing. The effect varies across firms, with weaker responses among larger, more liquid, and more tangible firms, while more profitable firms reduce borrowing more strongly. The negative marginal effect of geopolitical risk varies over time, intensifying during periods of heightened tension. Thus, perception-driven geopolitical risk from local media directly affects corporate borrowing in Korea.
Forecasting economic activity during institutional collapse requires nowcasts derived exclusively from alternative data sources. Such sources are abundant yet theoretically unanchored and potentially weakly informative. This study examines whether sparse supervised dimension reduction extracts reliable signals in a context rich in data but poor in statistics. Applying sparse Partial Least Squares to nowcast Ukrainian GDP during the 2022 invasion using only Google search categories, the methodology achieves lower nowcast errors than unsupervised Principal Component Regression. Geographic disaggregation amplifies gains: capital city search data systematically outperforms national aggregates across GDP components, consistent with information centralization in economic centers during existential threats.
