Conference Agenda

Strong institutions reduce financial intermediation costs---a cornerstone of law-and-finance research. I show this relationship reverses for high-risk participants in heavily regulated sectors. Using global data on cross-border payment costs as a laboratory, I find that anti-money laundering (AML) risks in advanced economies with strong enforcement have larger cost effects than such risks in developing countries with weak enforcement, despite advanced economies having lower underlying risks. This pattern reflects strong institutions operating through two channels: Directly reducing costs through risk mitigation while forcing risk-based pricing that eliminates cross-subsidization. Strong institutions benefit low-risk jurisdictions but compel high-risk ones to pay costs commensurate with their risk profiles. Declining AML risks could account for one-third of the reduction in costs over the past decade. As for payment-specific regulations, analysis of decisions to grey list countries shows that countries that commit to reform experience cost reductions while those resisting reform face increases. The findings have implications for law-and-finance research, regulatory policy, and emerging payment rails facing AML requirements. Clean money can be cheap.

We examine the procyclical nature and the economic effects on loan origination of bank

regulators’ prudential requirements for fair-valued positions recognized on banks’ balance

sheets beginning in 2016. The prudential requirements oblige banks to estimate additional value

adjustments (AVAs) based on nine sources of uncertainty for all positions recognized at fair

value and subsequently recognize those as a deduction from Common Equity Tier 1 (CET 1).

We expect and find the growth of macroeconomic uncertainty (i.e., economic downturn) to be

positively correlated with the growth of AVAs, indicating that the new prudential requirements

have a procyclical nature. Relatedly, we predict and find that those banks exposed to the new

prudential regulatory regime originate significantly less loans to businesses around the time of

bank regulators’ implementation of those prudential requirements.

In 2018, the Trump administration enacted the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) to ease financial regulation and strengthen financial support to the real economy, thereby ending nearly a decade of stringent oversight. While deregulation can stimulate economic growth, it may also elevate systemic risk in the banking system and generate new financial vulnerabilities. To evaluate the costs and benefits of the EGRRCPA, this study quantifies the Act’s impact on systemic risk in the U.S. banking sector by employing Difference-in-Differences (DID) and Synthetic Difference-in-Differences (SDID) approaches. The empirical results indicate that the impact of the EGRRCPA on systemic risk exhibits pronounced time‑varying characteristics. In the short run, systemic risk in the U.S. banking sector is not significantly affected by the policy. However, in the medium and long run, the Act’s effect on banks’ systemic risk increases. This study enriches the literature on the effects of the EGRRCPA, clarifies the rationale behind U.S. deregulation after a decade of strict oversight, and offers theoretical and empirical insights into systemic risk dynamics under a deregulated regulatory regime.

This paper studies the macroeconomic effects of regulatory risk weights in a DSGE model with bank intermediation, endogenous default, and nominal rigidities, calibrated to euro area data. Risk weights act as sector-specific wedges that reshape bank portfolios, tighten effective leverage constraints, and transmit to aggregate outcomes via credit supply and default risk. A tightening of risk weights for mortgages leads to a decline in both mortgage and corporate lending, highlighting general equilibrium spillovers across credit markets. Output declines modestly due to monetary policy accommodation, while financial resilience improves. Overall, the results show that bank risk weights are not merely regulatory parameters but also operate as macro-financial policy instruments with meaningful effects on aggregate outcomes.

This paper investigates how marketplace lending affects household credit after natural disasters. Using over seven million LendingClub loan applications and variation across 61 U.S. disasters during the sector’s expansion, we analyze platforms’ responses to disaster-driven credit demand. Using modern staggered difference-in-differences methods, we show marketplace loan demand rises by about 11% in the months after a disaster, but not during the disaster month. The effect is strongest where small banks are scarce, suggesting substitution for relationship lending. We find little evidence of credit tightening: approval, pricing, risk grading, and borrower performance remain largely stable, underscoring marketplace lending’s resilience.

Recognizing the profound influence of geopolitical risks and world uncertainty on financial investment behaviour, this study uses a comprehensive approach to assess the impact of rising geopolitical risk on sovereign debt holdings for a panel of 24 OECD economies from Q1 2004 to Q4 2023. To do so, we employ Ordinary Least Squares (OLS) fixed effects and Quantile Regression techniques within a panel data framework to capture the nuanced effects on both domestic and foreign entities. We find that escalating geopolitical tension decreases government debt holdings among domestic entities, notably domestic Banks, while foreign investors increase their ownership. This phenomenon is more pronounced for high proportion levels of debt in investor’s portfolios. Our results allow us to conclude that while domestic economic agents display clearer risk aversion, foreign economic agents have a more risk-taking behaviour in what concerns the financial investment on government debt.

Credit tightening and its impact on international trade have attracted substantial academic attention, particularly following the Global Financial Crisis. While firm-level studies highlight the role of credit rationing in shaping firms’ international behavior, they often overlook cross-country heterogeneity and focus on firm-specific rather than systemic constraints. Conversely, country-level analyses emphasize credit costs, paying less attention to access conditions and often facing endogeneity concerns. Moreover, the literature has largely focused on export flows, with limited attention to trade within Global Value Chains (GVCs). This paper contributes to the literature by providing a cross-country analysis based on an identification strategy designed to isolate the effects of supply-driven credit tightening on trade, with a particular focus on trade within GVCs. The results show that GVC-related trade responds more strongly and significantly to changes in credit conditions than traditional trade. Moreover, the findings highlight the key role of trade credit in mitigating liquidity constraints, particularly in downstream segments of the value chain. These results are robust across a range of model specifications, including controls for sectoral heterogeneity and interactions capturing foreign banking exposure and commercial dependence.

This paper provides the first comprehensive evidence on the distributional effects of the UK ringfencing regulation on mortgage credit allocation and pricing. Introduced after the Global Financial Crisis and fully implemented in 2019, ring-fencing required large banking groups to separate core retail activities from investment banking operations, reshaping funding structures and lending incentives. Using a unique dataset of over 13 million mortgages granted between 2010 and 2024, we examine how ring-fencing affected mortgage spreads, lending standards, and access to credit across borrower groups and market segments. Consistent with prior research, we document an aggregate decline in mortgage spreads following the reform. However, we show that these reductions were disproportionately larger for young borrowers and households in economically deprived regions, indicating a significant reduction in risk premia for traditionally disadvantaged groups. We also find that ring-fenced banks increased their tolerance for higher loan-to-value lending, particularly in the first-time buyer segment. During the cost-of-living crisis, ring-fenced banks absorbed a greater share of funding cost shocks for borrowers in disadvantaged areas. Overall, our findings demonstrate that structural banking reform can materially affect not only financial stability and pricing, but also the distribution of credit and inequality in housing finance.

We provide the first structural assessment of the U.S. green transition using the

q-theory of investment. Distinguishing emissions-free green capital from emissions-intensive brown capital, we develop a transparent identification strategy that infers

the replacement cost of the brown capital stock directly from observed emissions,

avoiding concerns about greenwashing. Structural estimation yields the market values and adjustment costs of green and brown capital. A pronounced divergence emerges: by 2022, brown capital accounts for 37% of replacement costs but only 22% of market value, indicating that markets value green capital at a premium and discount brown capital. Green investment entails large adjustment costs— 16.7% of output—reflecting both its intensity and the frictions involved in scaling up green capital.

Firms with high pollution face strong environmental scrutiny from investors, regulators, and the public. We find that more polluting firms exhibit greater greenwashing by intensifying positive environmental communication while showing weaker environmental improvements. We further show that greenwashing is associated with higher subsequent environmental ratings, suggesting that external evaluations partly reflect narrative management. Dynamic evidence provides suggestive support that increases in communication precede weaker performance improvements. Exploiting political flips at firms’ headquarters locations, we find that increases in local pro-environmental expectations strengthen the effect of environmental pressure on greenwashing, consistent with firms adjusting disclosure rather than real outcomes.

We investigate whether the unique greenness characteristics of green bonds (GB), i.e., their commitment to allocate proceeds specifically to environmentally sustainable initiatives and regularly report their progress, explain cross-sectional variations in demand for corporate bonds. Leveraging unique information on orderbook size of investment-grade fixed-coupon corporate bonds issued globally from 2013 to 2022, we find that GB attract, on average, about 0.35 to 0.44 times higher demand multiples than comparable non-GB. Importantly, the credibility of this greenness signal appears to depend on the regulatory environment: higher relative demand is observed only in markets with stringent sustainable finance regulations (EU) than in the US or other markets. Our results further show that the issuers' ex-ante greenness profile, i.e., better environmental performance (lower CO2), higher investments in green innovations, and lower ESG risk incidents, drives the heterogeneity in the demand for GB.

This paper examines the unintended consequences of the 2021 publication of revenue eligibility and alignment under the EU Taxonomy. We argue that the explicit classification of “eligible” and “aligned” rev enues generated competitive pressures across industries, as firms faced stronger incentives to signal green performance to attract sustainable f inance. Using a difference-in-differences design, we show that ESG in cidents became significantly more likely after 2021 in industries more exposed to the policy. To explore the underlying mechanism, we construct a firm-level measure of competitive pressure based on the share of eligible revenues reported by close competitors. We find that firms more exposed to these pressures are more likely to be involved in ESG incidents.

Stablecoins are designed to maintain a stable value through redeemability at par and the holding ofnexternal reserves, yet their cross-border issuance increasingly exposes regulatory and financial stability vulnerabilities.

This article examines the risks arising from multi-issuer stablecoin arrangements,

whereby a single, fungible stablecoin is issued by multiple legally distinct entities across different jurisdictions and regulatory regimes. Focusing on the European Union’s Markets in Crypto-Assets Regulation (MiCAR), the analysis shows how such structures—currently employed by major issuers such as Circle and Paxos—facilitate regulatory arbitrage, amplify liquidity and redemption risks, and undermine the effectiveness of EU prudential supervision.

The article highlights how the fungibility of tokens issued under divergent regimes may concentrate redemption pressures on EU issuers, strain reserve adequacy, and create contagion risks for the EU banking sector. Legal and operational frictions, including the potential ring-fencing of reserves held outside the Union, further exacerbate these vulnerabilities, particularly under stressed market conditions. While MiCAR equips competent authorities with certain supervisory tools, data limitations and uncertainties surrounding the classification of ‘significant’ issuers constrain their effective use.

The article argues that MiCAR inadequately addresses the systemic implications of cross-border multiissuer stablecoins and proposes targeted reforms. These include a centralised supervisory regime for participating EU issuers under the European Banking Authority, complemented by a stringent equivalence framework for third-country partners which would limit multi-issuance to jurisdictions with comparable regulatory standards. The article concludes that enhanced cross-border supervisory

cooperation and coordinated crisis management frameworks are essential to ensure the resilience of stablecoin markets and to safeguard financial stability within the Union.

This research evaluates the systemic risk amplification of stablecoins and assesses the mitigating effects of the US GENIUS Act and the UK Bank of England mandate. Using an Agent-Based Model of 4,400 commercial banks and a Systemic Stablecoin Issuer, we simulate liquidity and solvency stress to analyze crisis contagion. Findings reveal a regulatory trilemma balancing stablecoin safety, banking liquidity, and sovereign bond stability. The integrationist US framework retains reserves in commercial banks, permitting bidirectional contagion and wholesale deposit flight during crises. Conversely, the isolationist UK mandate utilizes central bank reserves, severing banking contagion but concentrating liquidity stress in sovereign bond markets. Our results show that regulatory choices dictate where systemic stress manifests, demonstrating that fully isolated cash buffers are essential to prevent stablecoin-driven feedback loops from destabilizing the core banking sector.

This paper studies how monetary policy announcements and asso-

ciated surprises shape the volatility surface of G10 currency options,

with particular emphasis on risk reversals across moneyness and maturity,

which capture the cost of insuring against tail exchange rate movements.

We document that unexpected and hawkish policy announcements are

associated with a pronounced shift toward risk-off behavior, as investors

increase demand for protection against downside risk in foreign currencies

relative to the U.S. dollar.

To rationalize these patterns, we develop a simple model of supply

and demand in risk-reversal markets. When dealer balance sheets are

unconstrained, intermediaries absorb hedging demand by supplying option

insurance. When balance-sheet constraints tighten, dealers reduce their

risk-bearing capacity, amplifying price pressure in skew-sensitive option

contracts.

Local projection evidence supports the model’s predictions and shows

that monetary policy shocks interact with intermediary constraints to

shape the pricing of tail risk in currency option markets.

This paper investigates the implications of the rapid expansion of crypto assets and stablecoins for the international monetary system and the global roles of major currencies. Specifically, it examines how regulatory and policy regimes governing crypto assets and stablecoins shape the international position of the U.S. dollar relative to competing currencies. From a methodological perspective, the paper applies a range of econometric techniques to analyze both short-run dynamics and long-run relationships between stablecoins and exchange rates vis-à-vis the U.S. dollar. Cross-market connectedness is quantified using the Diebold–Yilmaz vector autoregression (VAR)–based framework and its frequency-domain extension proposed by Baruník and Křehlík (2018), which enables a decomposition of common shocks into transitory and persistent components. Finally, the paper develops early-warning indicators to detect structural changes in the interactions between digital asset markets and foreign exchange markets.

This study examines the association between corporate tax avoidance and firm-level equity returns using a sample of firms from 56 countries over the period 2004–2024. We find a robust negative relationship between tax avoidance and equity returns, suggesting that the agency costs, opacity, and risk associated with aggressive tax strategies outweigh potential tax-saving benefits. We further show that corporate governance plays a moderating role. Stronger board and executive structures, proxied by larger board size, higher board compensation and greater executive gender diversity, mitigate the adverse impact of tax avoidance, consistent with enhanced monitoring and reduced information asymmetry. Further, the negative effect of tax avoidance on equity returns is more pronounced for firms operating in countries with stronger institutional protection and governance frameworks. Our results are robust to alternative specifications and endogeneity tests. Overall, the findings highlight the importance of governance mechanisms in shaping the market consequences of corporate tax behavior.

This paper examined whether improved corporate governance structure could lead to improved performance for cross-listing firms from Emerging Economies Group (EEG) countries. We found that board governance quality is not significantly associated with enhanced market valuation across multiple estimation methodologies. These challenges prevailing assumptions about the effectiveness of Anglo-American governance structures for emerging and growth economy firms. The analysis of dual-class share structures reveals that such arrangements reduce the efficacy of translating operating earnings into firm valuation, supporting the entrenchment hypothesis.

This article advances an integrated theory of global debt governance that brings together sovereign debt, corporate debt and household debt within a single analytical framework. Building on the critique of the Smithian narrative about the spontaneous emergence of markets, it argues that debt is a political legal institution constructed through a stratified architecture of contractual norms, soft law instruments, financial conditionality, case law and transnational professional networks. The paper shows how this architecture constitutes a form of "governance without government" that relocates key distributive decisions to technical and private fora, thereby generating structural deficits of democratic legitimacy, equity and transparency. Sovereign debt is examined as a laboratory of contractualisation whose logic is gradually extended to corporate debt and, ultimately, to households, contributing to the production of the homo debtor as the central subject of the contemporary financial order. Based on this integrated reading, the article highlights the limits of incremental, contract-based reforms and explores the need for transnational quasi-insolvency frameworks and responsible lending and borrowing principles capable of rebalancing the global debt regime in terms of sustainability, distributive justice and democratic control.

This study re-examines the relationship between governance mechanisms and Shariah Non-Compliance Risk (SNCR) disclosure by challenging the prevailing assumption that governance structures inherently enhance accountability. While prior literature typically models governance as a direct determinant of disclosure, empirical findings remain inconsistent. This study argues that such inconsistency reflects a deeper conceptual limitation: governance effectiveness is conditional rather than structural.

Drawing on agency, stakeholder, and institutional perspectives, and extending them through a systems-based lens, the study introduces risk governance as a moderating mechanism that shapes how governance attributes translate into disclosure outcomes. Using panel data from 22 Islamic financial institutions over the period 2016–2024, and employing panel regression techniques, the analysis examines both direct and interaction effects. SNCR disclosure is measured using a multidimensional index that captures qualitative depth, quantitative reporting, and governance responses.

The findings show that structural governance attributes, including committee size and board independence, do not consistently enhance disclosure and may, under certain conditions, weaken it. In contrast, competency-based governance demonstrates a more stable and positive association with disclosure. More importantly, risk governance significantly moderates these relationships by strengthening the effectiveness of competency-based attributes while mitigating the limitations of structural features.

The study contributes to governance and disclosure literature by demonstrating that governance mechanisms cannot be understood as isolated structural proxies but must be viewed within an enabling organisational system. By shifting the analytical focus from governance as structure to governance as system, the study offers a coherent explanation for mixed empirical findings and provides a conditional model of governance effectiveness. The findings have important implications for regulators and practitioners, indicating that structural compliance alone is insufficient to ensure meaningful accountability in environments where governance carries regulatory, ethical, and Shariah dimensions.

Banks differ in specialization. We study the aggregate and distributive effects of financial development in a heterogeneous-firm model where banks specialize in domestic or foreign activities. Internationally oriented banks promote the growth of larger incumbent exporters. Locally specialized banks enable financially vulnerable firms to enter foreign markets but induce incumbent exporters to focus on domestic markets, reducing their export intensities and fragmenting the export sector. The quantitative analysis reveals that financial development boosts total output, moderates inter-firm inequalities driven by internationalization, but may reduce aggregate trade. The predictions are supported by evidence from a major Italian banking deregulation.

We document a novel empirical pattern: Elevated foreign financial vulnerabilities shift the entire U.S. growth distribution leftward, not merely the downside tail, suggesting structural effects on potential output rather than purely cyclical impacts. This stands in sharp contrast to financial conditions, which primarily affect tail risk. Building on Adrian et al. (2019)’s Growth-at-Risk framework, we develop a Transmission Growth-at-Risk (TGaR) model that treats foreign financial conditions as shocks and foreign vulnerabilities as shock amplifiers. While the effects of financial conditions peak in the near term, foreign vulnerabilities weigh on U.S. GDP at a medium-term horizon, consistent with vulnerabilities being slow-moving state variables. Asset valuation pressures and financial sector leverage abroad are key amplifiers, operating through trade and dollar funding channels of similar magnitude. Out of sample, TGaR improves significantly predictive accuracy. During the European sovereign debt crisis from 2010 to 2012, elevated European vulnerabilities shifted the U.S. growth distribution leftward by about 1.5 percentage points despite stabilizing domestic conditions. In the Global Financial Crisis, U.S.-originated shocks were amplified by foreign vulnerabilities and returned to worsen domestic outcomes, illustrating “spillback” effects beyond standard one-way spillover models.

We examine whether the data revolution promotes acquisition activities at the firm level. We develop firm-year data assets measures using a combination of economic modeling and a large language model. Since 2010, data assets have expanded and increasingly concentrated in large firms. Firms with greater data assets are more likely to be a bidder, with the effect significantly stronger among large firms. Evidence supports a defensive “eat or be eaten” motive: data-driven M\&A activity is stronger in industries with a higher concentration of small- and medium-sized data-intensive firms and is often value-destroying. Data assets improve the information environment and reduce financing costs are also channels for data-asset-induced mergers. Our findings are robust to alternative proxies for data assets and remain consistent under instrumental variable estimations. The data era has intensified defensive and inorganic growth, accruing disproportionately to large firms.

The well-known Taylor rule creates a straightforward linear relationship between the interest rate, inflation, and output gap in the original version. Forward-looking assumption of the central bank’s behavior is a noteworthy expansion of this rule over the last years. Instead of current values of the variables, forward looking version of the rule uses predicted variables. In this paper, forward-looking Taylor rule is being estimated for the case of Turkey using the most updated quarterly data (2002Q1-2021Q3). The results of the estimations show that, the Central Bank of Turkey reacts to changes in the output gap and inflation rate when there is a concern for price stability and economic activity. According to the baseline model estimates, the CBRT has an anti-inflation bias, focusing more on inflation stabilization than output stabilization.

FinTech is reshaping traditional financial services including small and medium-sized enterprise (SME) credit. This paper investigates whether FinTech adoption by UK banks “democratises” SME credit, with a focus on underserved markets and risk implications. We develop a theoretical model of bank lending in which FinTech can affect credit supply through two distinct channels: reducing the cost of serving geographically remote borrowers and improving the precision of borrower screening. The model generates testable predictions that allow us to empirically distinguish between these mechanisms. Using a measure of FinTech adoption based on bank–FinTech business relationships and granular loan level data, we find that FinTech adoption enables banks to extend larger, more affordable unsecured loans to SMEs, with benefits concentrated among low-risk, digitally assessable borrowers. The effects are strongest in rural regions, consistent with the model’s prediction that FinTech drives geographic inclusion by reducing the marginal cost of reaching underserved borrowers without physical branch infrastructure, rather than through improved information processing.

We examine the effects of less stringent non-financial disclosure regulation on operating costs and access to external financing for micro firms in Italy. Since 2016, firms below certain size thresholds have been exempt from filing reports with qualitative information that complements standard balance sheet items. Compliance rates were higher among older and more productive firms, in line with strategic considerations that play a role in influencing policy uptake. However, the benefits of simplified reporting appear limited: using a regression discontinuity design that exploits the multidimensional size cut-offs determining eligibility, we find no evidence of cost savings. Instead, we document a negative impact on ownership transfers and access to credit markets due to increased opacity, suggesting that reduced information disclosure to stakeholders may hinder business dynamism.

This paper develops an asset-pricing framework in which investors evaluate disaster outcomes relative to the entire anticipated distribution of disaster severities rather than a fixed benchmark. When realised outcomes fall sufficiently deep within this distribution, additional loss-sensitive marginal utility is activated, generating a valuation-side amplification of downside risk. The mechanism does not rely on higher disaster probabilities or heavier physical tails; instead, it raises the price of sufficiently adverse states through the endogenous breakdown of perceived safety.

Within this framework, we derive closed-form pricing results for equity and defaultable bonds. The model produces large equity premia under moderate curvature and shows that bond spreads reflect not only expected default losses but also the loss of a benchmark-safe role when claims can fail in bad states. The theory therefore extends disaster-based pricing from risky premia to fragility premia on nominally safe assets.

More generally, the framework identifies a distinct tail-fear component in the conditional price of disaster risk. Because this component concentrates in sufficiently adverse states, deep out-of-the-money put options provide a natural empirical counterpart for identifying the left-tail pricing wedge implied by the model.

We study product innovation in the UK mortgage market by analysing when and how attributes outside the traditional structure of mortgage contracts become pricing relevant. To do so, we develop a stylised framework that treats mortgage products as structured bundles of attributes, focusing on the two-part tariff, comprising interest rates and fees, to infer innovation from pricing patterns. Our empirical strategy first uses transaction-level data and exploits within-product variations over time to detect when new product features affect pricing, which we apply to the case of green mortgages. Matching Energy Performance Certificates (EPCs) to UK mortgage originations, we show that EPCs become pricing-relevant in 2018, with lenders starting to offer pricing discounts for loans to buy properties with higher energy efficiency. We also use offer-level data on advertised green products to precisely estimate pricing discounts. We detect considerable green discounts, which reach up to 15 basis points in 2022. Mortgages against high EPC properties are concentrated in new buildings, suggesting relaxed credit constraints and increased housing investment, with implications for the broader economy.

Fixed-income indices rebalance at month-end, which mechanically increases index

duration and induces synchronized portfolio adjustments by benchmark-constrained

investors. We show that these adjustments generate predictable end-of-month price

pressure in U.S. Treasury markets. Using ETF holdings, futures data, and intraday re

turns, we document elevated trading activity, positive abnormal returns at month-end,

and subsequent reversals consistent with non-informational demand. Furthermore,

month-end returns increase when there is a stronger urgency for funds to adjust du

rations when volatility is high. A quasi-experimental change in index pricing time

confirms that price pressure shifts with benchmark timing. The results highlight a

hidden costs of passive investing driven by index design and benchmarking constraints.

Online investment forums have risen rapidly over the last decade, reshaping processes for information sharing, belief formation, and market (in)efficiency. This paper analyses recommendations in such forums around stock manipulation events. We find a 300% increase in stock recommendations on social media during the 2-week period preceding a manipulation event. However, the change in the number of recommendations is not sufficient to drive stock prices. Only when combined with sentiment does it affect returns. Tone might be used for certain manipulation strategies, such as “spoofing,” in which benefits accrue when trading volume decreases, while disagreement might be used for “pump-and-dump,” in which manipulators benefit when volume increases. In the presence of institutional block holders, increased attention, regardless of tone, is sufficient for stock price manipulation. The results are corroborated with robustness and falsification tests.

We examine the impact of Asset Quality Review (AQR) conducted by the Reserve Bank of India in the financial year 2015-16 of public and private sector banks of India on their earnings through an event study. We analyse the influence of NPL and write-off ratios on ROE with the panel data of 12 public sector banks and 4 private sector banks for the financial years between 2014 and 2025, keeping HDFC bank which emerged least hurt from AQR as control bank, in the presence of bank specific control variables of CRAR, CD ratio, priority sector advances to total advances, and size of the bank as measured by logarithm of total assets, and the macro variables of GDP growth rate and unemployment ratio. Replacing ROE by ROA, we do the robustness check. The results significantly verify the effectiveness of AQR. We identify the variables leading to the best performance to help banks in their policy reviews.

We examine the effects of pension liquidity policies on individuals’ saving, investment, and housing decisions over the life cycle. The policy permits or restricts early pension withdrawals for financing homeownership, distinguishing them from those made for general consumption purposes. We develop a novel life-cycle consumption-investment model that incorporates the two distinct early access penalties and a pension contribution incentive. Our preliminary results confirm that, at early working ages, the optimal contribution rate doubles from 9 per cent to 18 per cent when full pension access is allowed. Under a retirement account with restricted pension access, 10 to 60 per cent of wealth can be transferred to an ordinary investment account and allocated to risky assets. This occurs because the retirement account loses its precautionary savings function, and individuals employ the ordinary account to hold investment assets matching their risk preferences. The model’s final and promising outcomes will allow us to evaluate the effects of experimental policy reforms that permit early pension withdrawals for home purchases or mortgage repayment. Our findings are expected to offer valuable insights for policymakers and stakeholders in pension and housing markets, informing the design of welfare-enhancing financial regulation.

At year-end 2022, U.S. banks reported $620 billion in unrealized losses on their investment securities portfolios, as the Federal Reserve Board raised its target interest rate by 400 basis points to combat inflation. These losses are strikingly similar in character to the losses on residential mortgages experienced by savings & loan (S&L) institutions in the early 1980s when the Federal Reserve Board raised interest rates to combat inflation—despite subsequent regulatory reforms that were ostensibly put into place to prevent such crises. In this study, we analyze the role of interest rate risk in losses in bank securities investments. We show that banks used RMBS to “reach for yield” during 2020–2022, and we show the losses that ensued. We find that the equities market for publicly traded bank holding companies failed to price this risk. We use publicly available data to show these results, raising the question of why neither bank shareholders nor regulators responded to the interest rate threat that was “hiding in plain sight.”

This study explores how emissions are financed by financial institutions could represent an indirect source of risk. Transition risk, albeit not being directly borne by banks, may indirectly affect financial intermediaries via their financing activities. As firms are under pressure to comply with transition, their relative credit risk increases thus exposing banks and, ultimately, the credit system. By using a sample of 8753 syndicated loans from DealScan, this study builds an empirical network model to relate lenders and borrowers. Such a structure allows us to measure the amount of lenders' financed emissions while considering also their centrality in the lending market network. The results show that the most central financial intermediaries are positively associated with higher shares of emissions with a joint probability around 60\%. Several robustness checks as well as different ways to account for emissions are considered, confirming the main results.

Climate change is increasingly turning water from a local environmental issue into a broader source of economic and financial risk. In this context, this paper investigates whether the mechanisms of shock transmission between commodity markets and the water sector differ across market regimes, especially during periods of energy and climate stress. The analysis spans from November 16, 2001, to December 31, 2025, and examines the interconnectedness among three water-sector equity indexes: the S&P Global Water Index, the Dow Jones U.S. Water Index, and the MSCI Europe Water Utilities Index, and selected commodity market segments, including Brent crude oil, industrial metals, grains, softs, and livestock. These variables represent three possible channels through which commodities may influence the water sector: an energy-cost channel, a climate-agricultural channel, and an industrial-input and infrastructure channel. To address nonlinearities and asymmetries in shock transmission, the study uses a quantile connectedness approach.

The results show that the water–commodity transmission network is strongly state-dependent. Total connectedness is markedly higher in the tails of the distribution than around the median, indicating that spillovers intensify under extreme market conditions. Dynamic estimates and structural break tests further reveal substantial regime shifts over time. The findings do not support a uniformly dominant role for crude oil. Instead, agricultural and soft commodity markets exhibit more asymmetric spillovers, especially in downside states, consistent with a climate-related transmission channel.

This paper develops an early warning system for predicting distress

for large European banks. Using a novel definition of distress derived

from banks’ headroom above regulatory requirements, we

investigate the performance of three machine learning techniques

against the traditional logistic model. We find that the random forest

model shows superior performance both out-of-sample and out-oftime. Unlike previous studies, we also employ a series of sampling

techniques showing that they significantly improve the ability to

identify distress events irrespective of the model used. Moreover, we

show that ensemble techniques can help improve performance

relative to the single best performing model. Finally, using the latest

machine learning interpretability tools, we show that the variables

closely tied to bank profitability and solvency are important drivers

for predicting bank distress. Overall, our paper has important

practical implications for bank supervisors and macroprudential

authorities who can utilise our findings to identify bank weaknesses

ahead of time and adopt pre-emptive measures to safeguard

financial stability.

To align the bank’s business and portfolio with the UN Sustainable Development Goals and the Paris Climate Agreement, the United Nations launched in 2019 the UN Principles for Sustainable Banking. More than half of the banking industry worldwide adhered to the principles. We build up a dataset which includes all the banks that adhered to the UN Principles (277) and a sample of 669 peer nonmember banks from 77 countries to study what are the determinants and effects of membership on banking behavior and performance. The results show that larger, listed and riskier banks are more likely to join the UN Principles. In contrast, a higher intensity of CO2 (CO2/GDP) of the country, climate-related natural disasters, public awareness of global warming, or the Paris agreement do not stimulate the likelihood of adherence. Interestingly, a higher bank’s market power decreases the incentive to join the UN Principles. The behavior and performance of member banks relative to non-members did not change significantly upon membership. This conclusion is also supported by additional evidence on a small sample of banks related to green lending and the issuance of green bonds. In contrast, member banks overstate their green language in the annual report in relation to their behavior and ESG performance, although only 27% of them reveal information about the CO2 content of their loans. Overall, the paper suggests that current UN Principles do not spur the green transition and highlights the symbolic nature of voluntary green commitments in banking.

We show that sustainable investment by mutual funds influences non-financial firms’ stock prices and real outcomes. Our identification exploits the EU Sustainable Finance Disclosure Regulation (SFDR) – requiring mutual funds to disclose no, mild, or strong commitment to sustainable investment – and rich microdata. Funds disclosing a mild commitment reduce exposure to high ESG risk (“brown”) stocks, relatively to those with no commitment. Differently, strongly committed funds do not adjust, being already perceived as sustainable and facing little incentive to further signal their ESG strategy. The divestment of brown firms occurs independently of their prior sustainability pledges and reduces their stock prices. This reduction is in turn associated with lower environmental spending and higher carbon emissions. Our findings suggest that blanket divestment by ESG funds may unintentionally worsen environmental performance by weakening firms’ incentives to invest in sustainability.

This paper examines whether sustainability uncertainty is priced in the cross-section of US stock returns. Using the newly introduced ESG-based Sustainability Uncertainty Index (ESGUI), we estimate firm-level exposure to aggregate sustainability uncertainty and construct tradeable uncertainty-sorted portfolios. The empirical design distinguishes between directional pricing and intensity-based pricing by comparing a conventional signed-beta specification with an absolute-beta specification based on the magnitude of ESGUI exposure. The signed-beta design produces weak and statistically insignificant abnormal returns across standard benchmark models and delivers little evidence of a stock-level cross-sectional premium. In contrast, the absolute-beta design generates economically large and statistically significant alphas under all classical asset pricing models, with supporting evidence from Fama-MacBeth regressions. Portfolio-level diagnostics further show that signed-beta portfolios exhibit a U-shaped return pattern: firms at both tails of the signed-beta distribution earn higher returns than firms with moderate exposure. The evidence therefore indicates that the US equity market prices the intensity of firms' exposure to sustainability uncertainty rather than the direction of that exposure. Sustainability uncertainty is a priced source of risk in US equities, but it enters expected returns through a nonlinear, magnitude-based channel rather than through a simple directional premium.

Recent asset-pricing models imply that a brown-minus-green (BMG) portfolio should earn a positive expected return as compensation for climate and transition risk, yet realized BMG returns are mixed. We propose that the key missing state variable is investors' belief dispersion about economic damages from climate change. Empirically, we proxy belief dispersion in financial markets using analysts’ earnings forecasts for matched brown and green firms. Belief dispersion is low pre-Paris agreement, but becomes more volatile thereafter and, more importantly, predicts BMG returns. Motivated by these facts, we develop a model in which investors' motivations are purely pecuniary. They internalize climate damages but disagree about their magnitude. Climate change reduces future output, and investors' heterogeneous beliefs generate speculative trading and alter the equilibrium risk-sharing arrangement. The equilibrium admits a two-factor representation (financial and climate risk) augmented by belief-driven pricing terms. Introducing an endogenous emissions cap determined by political pressure links disagreement to transition risk. We show that the sign and magnitude of the BMG expected return depend on belief dispersion and political pressure: BMG premia can be positive, zero, or negative, and sufficiently convex damages restore a uniformly positive BMG return premium.

In this paper, we examine how dividend taxes (and bans) and capital requirements that vary with the state of the economy influence a bank’s optimal capital buffers and shareholder value. In the model, the bank distributes dividends and issues costly equity to maximise shareholder value, while its assets generate stochastic income under time-varying macroeconomic conditions. We solve the bank’s stochastic control problem and derive the distribution of its capital buffers in closed form. Imposing dividend taxes (or bans) in bad macroeconomic states generates an intertemporal trade-off, as it encourages capital buffers accumulation in those states but promotes dividend payouts in the good ones. Furthermore, the policy undermines financial stability by reducing the bank’s value and weakening its incentives to recapitalise in both good and bad states. Coordinating dividend taxes with counter-cyclical capital requirements can mitigate value losses and ease the trade-off, but it also exacerbates disincentives for recapitalisation.

We examine how a lender of last resort (LLR) and liquidity regulation jointly shape bank fragility when both liquidity and debt pricing are endogenous. In a global-games model of rollover risk, a bank’s ex-ante fragility—the probability of a run—depends on how liquidity choices interact with the pricing of short-term debt. We show that LLR policy on its own can backfire: by reducing incentives to self-insure with liquid reserves, it raises debt burdens and amplifies fragility. Minimum liquidity requirements counteract this effect by strengthening balance-sheet resilience and making central-bank support more targeted. Together, the two instruments deliver greater stability and welfare than either in isolation. The analysis highlights a new micro-prudential role for liquidity regulation—enhancing the social value of the LLR.

This paper examines how financial regulation and institutional quality jointly determine agricultural innovation across 48 Sub-Saharan African (SSA) countries over 2000–2022, a region largely absent from the empirical finance-innovation literature. We construct composite indices of regulatory quality, financial regulation, and agricultural innovation following WIPO methodology (Dutta et al., 2023), and employ a methodological triad of fixed-effects, two-step System GMM, and PLS-SEM to address unobserved heterogeneity, endogeneity, and mediation pathways simultaneously.

Fixed-effects results show that the Financial Regulation Index (β = 0.033, p < 0.05) and Institutional Regulation Index (β = 8.685, p < 0.01) significantly promote innovation. When financial regulation is disaggregated, financial depth (β = 0.216, p < 0.01) and financial stability (β = 0.026, p < 0.01) emerge as the dominant channels. System GMM confirms strong persistence in innovation (ρ = 0.787, p < 0.01), consistent with the cumulative, path-dependent nature of technological adoption. PLS-SEM decomposes institutional quality effects into a direct innovation impact (β = 0.328) and a significant indirect pathway operating through financial depth (β_indirect = 0.187), with large effect sizes (f² > 0.35) for both constructs.

These results challenge conventional sequentialist approaches by showing that financial depth, not the breadth of financial inclusion, constitutes the binding constraint on agricultural innovation in Sub-Saharan Africa. This shifts the policy focus toward the efficiency and intermediation capacity of financial systems. The findings carry direct implications for regulators and development finance institutions, emphasizing the need to deepen credit markets, enhance land collateralization through secure tenure systems, and calibrate regulatory frameworks to sector-specific risks. Strengthening financial intermediation thus emerges as a key channel through which regulation can support innovation and structural change.

We study the interplay between Federal Reserve communication on banking regulation and

U.S. bank equity anomaly returns. Using 124 anomaly characteristics and Natural Language

Processing techniques, we document amplified anomaly premia in the cross-section of bank

stocks, largely driven by market reactions to pro-regulation speeches. Such speeches generate a

daily return premium of 0.51 percent for banks at the extreme ends of anomaly characteristics.

The effect reflects a decline in risk premia for more opaque banks with illiquid shares and does

not appear among non-banks. Overall, regulatory communication emerges as a distinct and

meaningful determinant of banks’ cost of equity.

This paper shows that the leveraged positioning of offshore hedge funds causes sovereign bond yields to temporarily overshoot in response to shocks. Combining granular regulatory transaction-level data on repo positions with high-frequency monetary policy surprises, I find that nearly one-third of the total yield movement on days with monetary policy surprises can be attributed to hedge fund trading, and that this effect scales with positioning intensity. Decomposing by position direction reveals that shocks induce deleveraging when prices move against the position and trend-following when prices move in its favor. These asymmetries have direct implications for bond market fragmentation, as they generate differential responses across countries.

Do private equity funds compensate investors for illiquidity through superior returns? Using a Monte Carlo simulation of 50 million synthetic funds, we estimate the full distribution of private equity returns under explicitly calibrated cash flow structures, circumventing the sample selection bias, NAV manipulation, and vintage dependence that limit existing empirical estimates. Under the standard 2/20 compensation structure, fewer than 46% of simulated funds outperform a passive public markets equivalent on a raw return basis, with mean underperformance of approximately 1%. However, PE funds exhibit substantially lower return volatility, yielding a coefficient of variation more than double that of a public markets benchmark. We interpret this as evidence that the illiquidity premium manifests as a volatility premium rather than a return premium. Analyzing the contractual determinants of returns, we find that hurdle rate and carried interest modifications produce modest LP gains but have large, asymmetric effects on GP incentives. The catch-up provision emerges as the dominant source of distributional distortion. We develop a theoretical model that identifies an interior optimal catch-up parameter of approximately 60% of current market practice, robust to LP risk preferences but sensitive to GP effort productivity. Our model-experiment design provides novel results in the debate about PE performance allowing full replicability and exact identification of the effects of different treatments on the estimated performance metrics.

Career transitions of U.S. mutual fund managers from 2004 to 2024 reveal two distinct paths: (i) simultaneously managing single funds (SFs) and fund-of-funds (FOFs), and (ii) fully switching to FOFs. Concurrent management reflects an opportunity-driven expansion strategy. However, managers who oversee both fund types experience a notable performance decline of 3.5–6.2 basis points per month. In contrast, complete switching represents a necessity-driven repositioning strategy. Interestingly, investor responses are asymmetric: despite similar performance, dual-role managers face persistent flow penalties, suggesting investor skepticism toward divided responsibilities, whereas managers who fully transition to FOFs encounter no such disadvantage.

Using confidential regulatory hedge fund data, we document strong negative sensitivity of fund performance to heightened interest rate volatility and a narrowing slope of the yield curve. This sensitivity varies significantly with hedge funds' use of interest rate derivatives and financial leverage, which play a critical role in their ability to generate returns across different interest rate scenarios. In addition, we find significant cross-sectional variation in performance sensitivity both across and within hedge fund strategies, consistent with divergent interest rate positioning within the sector that produces winners and losers from the same rate movements. This heterogeneity, combined with widespread leverage and derivative use, poses challenges for assessing systemic risks and interest rate transmission through the hedge fund sector.

This paper examines whether geopolitical risk affects the pricing and terms of

bank lending in the euro area. We construct a novel country-level measure of geopo

litical risk using multilingual news coverage from the Global Database of Events,

Language, and Tone (GDELT), and map it to individual banks based on the ge

ographic composition of their pre-war lending portfolios. Exploiting the outbreak

of the Russia–Ukraine war in February 2022 as an exogenous shock, we estimate a

difference-in-differences model using newly originated loans from the ECB’s Ana

Credit credit registry. We find that banks with higher geopolitical risk exposure

charge higher interest rates on new loans following the shock. A one-standard

deviation increase in exposure is associated with an increase in lending rates of

approximately 2.9 basis points. More exposed banks also shorten loan maturities,

while we find no robust evidence of adjustments in loan size or collateralisation.

These findings suggest that geopolitical risk is reflected in the terms of newly orig

inated bank credit, operating primarily through pricing and maturity adjustments.

We document an active secondary market for shares in syndicated term loans using confidential supervisory data. While most of the literature examines trades near origination, we study the secondary market throughout the life of a syndicated loan. We establish novel empirical facts about the post-origination trading of loan shares and identify key participants and their trading patterns. We characterize the determinants of an active secondary market, the turnover of lender shares, and of the resulting credit exposure allocations. Gross and net flow decompositions reveal that mutual funds are net sellers and CLOs are net buyers, with banks intermediating on both sides and hedge funds becoming more active when liquidity deteriorates and credit risk increases.

Tight monetary policy may not bring immediate outcomes in high inflation episodes. Unaccommodating regulations which do not fully align with tight monetary policy are likely to delay disinflation. This paper examines the impact of prepayment penalties in the term structure of commercial loan interest rates, by exploiting a regulation revision in Türkiye that amended prepayment penalties across varying maturities. Using administrative micro data over 1.5 million loan contracts, our findings indicate that the amendment of prepayment penalties lowers interest rates of long-term maturities compared to the ones of short-term maturities at a range between 2-8%. This effect is almost flat across firm type but varied with differing bank characteristics. Our results imply that the amendment improves the functioning of bank lending channel in commercial loan segment which is helpful to achieve disinflation.

Using administrative data from the Shared National Credit (SNC) program, we document systematic downward drift in loan ratings that are predictable from pre-issuance borrower and loan characteristics, suggesting that ratings do not fully incorporate screening and pricing information. We exploit the conditionally random assignment of loan examinations and find that supervision increases the timeliness of examined loans' ratings and spills over within banks' portfolios, consistent with learning. We investigate counterfactual capital ratios under different degrees of informational efficiency and offer new insights about the role of supervision in banks' internal credit assessments and capital cyclicality.

Conventional assessments of market efficiency in emerging economies often conflate exploitable predictable patterns with structural instability. This study challenges this monolithic view by examining the evolutionary efficiency of five major Latin American currency markets (2000–2025) through the lens of the Adaptive Market Hypothesis (AMH). Using a rolling-window Multifractal Detrended Fluctuation Analysis (MF-DFA) paired with a surrogate-based spectrum decomposition, we isolate the distinct sources of market complexity: long-range temporal correlations (memory) versus distributional extremes (fat tails). Our results uncover a critical “Efficiency Paradox” exemplified by the Mexican Peso (MXN): despite exhibiting the region’s highest efficiency in price discovery, its departure from the random walk is driven decisively by unpriced tail risk (68%) rather than exploitable memory. Conversely, the Peruvian Sol (PEN) displays structural inefficiency driven by persistence, likely an artifact of central bank smoothing interventions. These findings demonstrate that in liquid emerging markets, the disappearance of arbitrage opportunities does not imply stability; rather, it signals a regime shift where risk migrates to the tails, rendering standard linear models (e.g., Gaussian VaR) inadequate for capturing structural fragility.

A defining feature of monetary unions is the persistence of differences in investors’ portfolio choices. Even under common institutions and similar transaction costs, investors display stable preferences across asset categories, often reflected in home bias and other systematic portfolio patterns. This paper examines the macroeconomic consequences of convergence in financial preferences within a monetary union. We analyze the case in which bond preferences in Spain gradually align with those observed in Germany, and vice versa, using these countries as representative examples of the core and the periphery in the EMU. We show that the direction of convergence is decisive. When preferences shift toward those of Spain, union-wide private debt expands, long-run GDP declines, and macro-financial volatility rises, although inflation volatility falls. Welfare increases for the monetary union as a whole in this scenario, with Germany capturing the largest gains and Spain benefiting more modestly. By contrast, convergence toward German bond preferences reduces union-wide private debt and output volatility but generates only moderate welfare gains for Germany and sizeable welfare losses for Spain. These results show that financial convergence does not yield uniform benefits: its effects depend critically on the direction of convergence and reveal a trade-off between welfare and stability.

Social media networks have become integral to modern information exchange. This study develops a conceptual framework to examine how non-financial influencers, and more importantly the characteristics of their audiences, affect firms through investor attention and stock market outcomes. We find that influencers can significantly increase investor attention, especially when audiences are geographically concentrated, affluent, and socioeconomically aligned with investors, or when firm visibility and traditional information channels are weak. These attention shocks generate short-lived market effects, including narrower bid–ask spreads and transitory abnormal returns. The effects are stronger when engagement originates from audience groups that are more likely to invest or are socially aligned with active investors, such as higher-income or more educated audiences. The rapid decay of these responses indicates that attention affects markets primarily through participation and liquidity channels rather than durable information transmission. Overall, results suggest that social media exposure serves as a partial substitute for formal disclosures, underscoring the growing importance of informal attention networks in shaping information flows and market performance in the digital economy.

We develop a term-structure model of analysts' earnings forecasts that embeds a latent state of analyst-firm-level uncertainty to construct a measure of long-run belief dispersion. We show that conventional cross-sectional dispersion in short-horizon earnings forecasts, although typically regarded as scale-invariant, becomes positively associated with stock price levels after controlling for firm fundamentals. In contrast, our model-implied dispersion in valuation beliefs is negatively related to price because it increases with analyst overoptimism. We identify earnings uncertainty as a belief-based channel that amplifies valuation disagreement and interacts with nominal price illusion, leading investors to perceive low-priced stocks as having higher earnings growth potential. We further show that analysts' earnings uncertainty predicts investors' ex-ante uncertainty, as reflected in option-implied volatility prior to earnings announcements. Overall, our results indicate that investors' expectation noise can be explained by information frictions arising from analysts' belief bias, complementing existing firm-level uncertainty measures based on downside risk.

This paper contributes to studying the impacts of monetary policy on labour income inequality

in the euro area using subnational regional data on compensation per employee. The dataset

covers 932 NUTS3 regions from 16 countries over the period 2000 – 2022 at a yearly

frequency. Using sub-sample analysis combined with local projections, the results show that

monetary policy rate changes have heterogeneous effects on the growth of real compensation

per employee (deflated by the GDP deflator) at both the bottom and upper ends of the regional

distribution within individual countries. From the whole euro area perspective, monetary policy

tightening has a heterogeneous effect on labour incomes between regions - in times of monetary

policy easing, shortening the gap between average low- and high-income regions.

We show that bank-level deposit flows shape the heterogeneous transmission of monetary policy through asset-side portfolio rebalancing. In all monetary policy tightening cycles, deposits reallocate within the banking sector resulting in some banks gaining deposits (gainers) while some banks losing deposits (losers). During high-rate environments, banks’ long-term securities depreciate resulting in losses for banks, while lending becomes more profitable. Deposit losers increase their reliance on wholesale funding, which is typically more costly than retail deposit financing. The increase in financing costs incentivises these banks to rebalance their asset portfolio from securities to loans to profit from the high-rate environment. Since gainers do not experience this increased financing costs, they refrain from portfolio rebalancing during the monetary policy tightening cycles because there are associated costs, such as capital loss and liquidity costs. Since, the loser banks experience higher cost of funding, they charge an equivalent high interest rate on their loans. Thus, in a tightening cycle, a higher number of deposit loser banks strengthens the price channel of monetary policy transmission but weakens the lending channel of monetary policy transmission.

Standard macroeconomic theory shows that hiking interest rates reduces inflation. However, Argentina's recent history of an active contractionary monetary policy stance and increasing inflation gives the impression of a conflict with this mainstream view. I construct monthly monetary policy shocks, first as deviations from the Central Bank's policy rule, following Romer & Romer (2004), and secondly as daily forward premium to overcome a potential "price puzzle", this is an unexpected increase in inflation from contractionary monetary policy in VAR models due to misspecification, following Witheridge (2024), to estimate the dynamic responses of inflation, economic growth and exchange rate to higher interest rates. Results suggest that, as opposed to standard macroeconomic theory, a 10% hike in the monetary policy rate unequivocally increases headline inflation using both approaches. These results are robust to different models (SVAR vs local projections), different approaches (one-step vs two-step), endogeneity (using instrumental variables), and misspecification, as I control directly by monetary and exchange rate regime changes (currency crisis, inflation targeting, FX controls, etc.). I theorize, building on the framework developed in Werning (2024) and Rodriguez (1986), that this seemingly unconventional result is actually consistent with standard macroeconomic theory: in a fiscal-led regime, inflation increases after an interest rate hike if and when a Central Bank uses interest-bearing liabilities as an active policy stance, offsetting present inflation for future inflation.

Against the backdrop of the 2007-2009 global financial crisis, central banks intervened to stabilize, in particular, financial markets by supplying, through conventional and unconventional monetary policies, liquidity to financial institutions and markets. This an illustration of the objective of this article consisting in examining the interplay between monetary policy and stock market liquidity between 1962 and 2017 for NYSE/AMEX and NASDAQ markets. We derive four main results. (i) There is little evidence on the (linear) impact of monetary policy on stock market liquidity; only market variables are significant determinants of liquidity. (ii) More specifically, focusing on relatively recent unconventional monetary policy instruments, we found that quantitative easing is ineffective in explaining market liquidity. (iii) In contrast, by using a Markov switching-regime model, our findings indicate that monetary policy has an asymmetric impact on stock market liquidity depending on the market liquidity regime, low or high. (iv) To the extent that uncertainty about the future monetary policy influences the transmission of monetary policy shocks to financial markets, we study the relationship between monetary policy uncertainty (MPU) and market liquidity. Our results suggest that market liquidity has a significant impact on MPU, while the opposite does not hold.

Using upcoming gubernatorial elections in the U.S. as a source of variation in local political uncertainty, we examine how bank branches—key players in local credit markets—adjust deposit interest rates and, subsequently, local deposit funding and the supply of local credit in response. We find that branches facing heightened uncertainty ahead of gubernatorial elections tend to raise deposit rates, which gradually return to normal levels after the elections. This adjustment is accompanied by an increase in deposit volumes prior to the elections, but does not translate into growth in mortgages and small business lending, consistent with a stronger motive for liquidity hoarding under political uncertainty. In contrast, branches in states without gubernatorial elections—whose parent banks are headquartered in states holding elections—are more likely to lower deposit rates, possibly reflecting efforts to manage funding costs at the bank level. By isolating the effects of political uncertainty at both the branch and headquarters levels, our study highlights that uncertainty at each level plays a critical role in shaping branch-level deposit pricing.

The aim the article is to provide a comprehensive assessment of respondents’ uncertainty

regarding inflation expectations in Germany across different inflation regimes over the period

1985–2025. The analysis accounts for heterogeneity across demographic groups defined by

age, education, and gender. Understanding the degree of uncertainty in inflation perceptions is

essential for improving forecasting accuracy and informing monetary policy. To quantify

uncertainty, we employ an entropy-based measure derived from Shannon’s information theory.

The analysis uses data from the European Commission’s Consumer Sentiment Survey. The

results demonstrate that entropy is an effective tool for capturing variation in respondents’

perceptions of price developments. The results indicate that among surveyed consumers in

Germany, there are differences in the uncertainty accompanying answers to questions about

price developments. These differences also appear within individual consumer groups

depending on age, education, and gender

This study examines the role of digital infrastructure in strengthening trade resilience across African economies amid rising global uncertainty. Using panel data for 54 African countries over 2000-2024, we apply a bias-corrected generalized method of moments estimator to address dynamic persistence and finite-sample bias, complemented by fixed-effects models for robustness. The results reveal strong persistence in trade openness, trade policy uncertainty, and market concentration, indicating that trade-related shocks in Africa are durable. Digital infrastructure enhances trade resilience by sustaining trade openness and attenuating the transmission of geopolitical and global supply chain shocks into trade. Mobile connectivity emerges as a particularly effective stabilizing channel, reflecting its role in improving information flows and facilitating rapid adjustment. The effects on market structure are more nuanced, as broadband expansion may reinforce scale advantages under certain conditions. Overall, the findings highlight digital infrastructure as a key structural mechanism for enhancing trade stability and adaptive capacity in African economies confronting an increasingly volatile global trading environment.

Model risk of market risk measures is investigated as a possible risk factor for equity stock asset pricing. We show that the joint model risk of value at risk and expected shortfall are passing the cross-sectional Fama-MacBeth asset pricing tests. The joint model risk measure captures a distinct dimension of tail risk uncertainty that is priced separately in the cross-section of expected stock returns. The premium of this joint model risk factor is prominent upon the introduction of expected shortfall in 2000. Our findings provide support for regulatory guidance asserting that model risk should be incorporated into decision-making processes.

This paper studies emergency borrowing by banks during the March 2023 banking crisis. Using transaction-level data, I show that both liquidity and solvency concerns influenced bank borrowing. Borrowing banks faced the threat of uninsured depositor runs as interest rate increases threatened their solvency. At the same time, rising interest rates also diminished their ability to meet these anticipated withdrawals. Together, these mutually reinforcing effects explain which banks sought emergency liquidity and from which facilities. These findings have implications for our understanding of bank runs and lender-of-last-resort policies in the modern era.

In this paper, we investigate how periods of expansion and contraction in banks’ corporate variables relate to systemic risk. We apply the Backward Supremum Augmented Dickey Fuller approach of Phillips et al. (2015a,b) on a sample of 217 US and 105 European banks from December 1999 to June 2022. We find that systemic risk increases significantly when Leverage, Intermediary Capital Ratio, and Maturity Mismatch reach higher than usual levels. Furthermore, we find that systemic risk is particularly sensitive during expansion phases of bank corporate variables and periods of banking crises. A key implication of this study is that policymakers should strengthen their efforts to closely monitor periods of rapid expansion in banks’ corporate variables.

Exchange rate comovements intensify during episodes of global financial stress, with consequences for portfolio diversification, contagion risk, and macroprudential policy. This paper studies how the Global Financial Cycle (GFC) - the joint movements in global risk appetite, capital flows, and asset prices - shapes the time-varying dependence structure among 24 currencies from developed and emerging economies. We estimate pairwise dynamic conditional correlations using a DCC-Copula framework and then assess their determinants using quantile panel regressions, which characterize the effects of the GFC drivers across the entire correlation distribution. We document three principal findings. First, exchange rate correlations are markedly time-varying, rising sharply during periods of global financial stress. Second, the VIX - as a proxy for global risk appetite and a key driver of the GFC - exerts an increasingly strong effect on correlations at higher quantiles, indicating that comovement intensifies precisely when contagion risk is most pronounced. Finally, currency pairs with elevated baseline correlations have larger increases in comovement in response to the VIX, suggesting that pre-existing interconnectedness amplifies vulnerability to global stress episodes.

This paper examines the sovereign credit risk network among China and

Belt and Road Initiative (BRI) member countries using credit default swap

data. We develop a time-varying measure of risk spillovers between country

pairs and investigate the causal impact of joining the BRI on the transmis￾sion of risk between China and BRI member countries. We find increased risk

spillovers from China to BRI countries post-BRI membership, with foreign di￾rect investment and Chinese exports identified as key channels. These findings

underscore the importance of policy makers developing effective strategies to

manage and alleviate potential sovereign risk.