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We document fragile demand for socially responsible investments (SRIs) by retail mutual fund investors. Using COVID-19 as an economic shock, we show funds with higher sustainability ratings experienced sharper declines in retail flows during the pandemic, controlling for fund characteristics. The decline in retail SRI fund flows is sharper than that of institutional flows, more pronounced when economies are hit harder by COVID-19, and unlikely to be driven by fund performance, past flows and size, or shifting investor attention. Corroborated by out-of-sample survey evidence, our findings highlight the high sensitivity of SRI demand by retail investors with respect to income shocks. [ABSTRACT FROM AUTHOR]

Exploiting demand shocks from changes in federal government spending, we examine how the organizational structure of a firm affects its investment behavior. Government spending shocks affect the investment of government-dependent conglomerate segments less than matched stand-alone firms. Investment also increases in lower government-dependent segments when other segments within the same firm experience positive demand shocks, indicating cross-subsidization between segments. We further show that this cross-subsidization leads to worse operating performance and increases the diversification discount. Our findings are robust after addressing the endogeneity of government spending. [ABSTRACT FROM AUTHOR]

We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones' investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

This article investigates spillovers from foreign economies to the U.S. through changes in long-term Treasury yields. We document a decline in the contribution of U.S. domestic news to the variance of long-term Treasury yields and an increased importance of overnight yield changes, a proxy for foreign shocks' contribution to U.S. yields. A model that identifies U.S., Euro area, and U.K. shocks that move global yields suggests that foreign shocks account for at least 20% of the daily variation in long-term U.S. yields in recent years. We also document the predictability of long-term U.S. yields by the U.S.–foreign yield spread. [ABSTRACT FROM AUTHOR]

Disequilibrating macro shocks affect different firms' prospects differently, increasing idiosyncratic variation in forward-looking stock returns before affecting economic growth. Consistent with most such shocks from 1947 to 2020 enhancing productivity, increased idiosyncratic stock return variation forecasts next-quarter real GDP growth, industrial production growth, and consumption growth both in-sample and out-of-sample. These effects persist after controlling for other leading economic indicators. [ABSTRACT FROM AUTHOR]

We construct text-based measures of the primary concerns listed firms associated with the spread of COVID-19 and other epidemic diseases. We identify which firms perceive to lose or gain from a given epidemic and textually decompose the epidemic's effect on the firm's demand and supply. We find that the effects of COVID-19 manifest as a simultaneous shock to demand and supply, with both shocks affecting firms' market valuations in equal measure on average. By contrast, demand-related impacts appear more important in accounting for the observed collapse in firm-level investment during the COVID-19 crisis. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

We propose a model of strategic renegotiation in which businesses are sequentially interconnected through their liabilities. This financing structure, which we refer to as a credit chain, gives rise to externalities, as each lender's willingness to provide concessions to its borrower depends on how this lender's own liabilities are expected to be renegotiated. We highlight how government interventions aimed at preventing default waves should account for private renegotiation incentives and interlinkages. In particular, we contrast the consequences of targeted subsidy and debt reduction programs following economic shocks, such as pandemics and financial crises. [ABSTRACT FROM AUTHOR]

Using the near universe of U.S. consumer credit cards, we show that banks transmit their wholesale funding shocks to consumers by reducing their credit card limits. Credit-constrained consumers who are unable to hedge against the transmitted shock by accessing other credit cards experience a stronger and more persistent reduction in aggregate credit card limits at the consumer level. Consequently, these credit-constrained consumers reduce their aggregate credit card borrowing. Our results document a credit card lending channel for the transmission of adverse bank shocks and show who bears the costs of fragile bank funding structures. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

How does creditor health affect the pass-through of monetary policy to households? Using data on the universe of U.S. credit unions, I document that creditor asset losses increase the sensitivity of consumer credit to monetary policy. Identification exploits plausibly exogenous variation in asset losses and high-frequency identification of monetary policy shocks. Weaker lenders can respond more if they face financial frictions that easing alleviates. The estimates imply constraints on monetary policy become more costly in financial crises featuring creditor asset losses and that an additional benefit of monetary easing is that it weakens the causal, contractionary effect of asset losses. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

Using firm-level survey information, we investigate whether relationship lending affects firms' employment decisions in the face of negative sales shock. We find that firms with a durable relationship with their main bank display significantly less employment growth sensitivity to such shocks, especially where these are transitory. The result is stronger for younger and smaller firms that benefit from tighter bank-firm relationships, and for firms in sectors or economic environments where the costs of employment adjustment are greater. Our findings indicate that relationship lending provides liquidity insurance to firms to meet their demand for labor hoarding. [ABSTRACT FROM AUTHOR]

We study how the growth of exchange-traded funds (ETFs) affects the sensitivity of international capital flows to the global financial cycle. Using comprehensive fund-level data on investor flows, we show that their sensitivity to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. This higher sensitivity can be directly linked to ETFs underlying shorter-trading-horizon clientele that trades more often in response to shocks. Using country-level data, we find that where ETFs hold a larger share of financial assets, equity inflows and prices become more sensitive to global risk. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

How do economic shocks affect pressure by the mass public for pro-environmental political action? If democratic systems are to develop and sustain ambitious environmental policy over several decades, this question is important to answer. Theoretically, we argue to look beyond changes in attitudes such as environmental concern, and trace whether and how citizen's policy preferences, and the political importance they attach to environment-related issues change when experiencing a deterioration of their personal economic situation. Empirically, we draw on high-quality population-representative panel survey data for an affluent country, Switzerland, combining tailored survey measures for quasi-random Corona-related employment and income losses, nuanced measures of environmental attitudes and policy preferences, and recently developed measures for issue importance. We neither find a decline of environmental policy support among economically affected individuals compared to the rest of the population (a population wide drop, however), nor lower importance given to environment related relative to economic issues in voting decisions. While this suggests that politicians need not fear electoral losses when pursuing environmental policies in times of economic crisis, we note that the severe extent of the Covid-induced recession, coupled with a rapid recovery, is peculiar to this economic crisis and warrants further research regarding the generalizability of our findings to economic shocks of longer duration. [ABSTRACT FROM AUTHOR]

In the span of two years, Sri Lanka saw one of the biggest protests in South Asia, ousted a president and his government, defaulted on its sovereign debt, declared bankruptcy, appointed an unelected president, went to the IMF for a bailout loan, delayed elections, moved even further away from justice and reconciliation, and celebrated 75 years of independence. While the resignation of president Gotabaya Rajapaksa and his family from government hinted at change for the country, the appointment of Ranil Wickremesinghe demonstrated a firm commitment to lack of reform or accountability. Austerity, intimidation, instability, and further decay followed. These economic and non-economic shocks converged to reveal a country where multiple crises of dissent, debt, decay, and decline were inextricably bound together, with no way forward yet in sight. [ABSTRACT FROM AUTHOR]

This paper examines the effect of national income on the total fertility rate (children born per woman). We estimate the effects on fertility of shocks to national per capita income using plausibly exogenous variations in oil price shock as an instrument for income and using instrumental variable generalized quantile regressions (IV-GQR). Using data for a panel of 122 countries spanning the period 1965–2020, our results show that national per capita income has generally a negative and significant effect on the total fertility rate. Looking at the entire spectrum of the fertility distribution, the IV-GQR estimates exhibit considerable heterogeneity in the impact of income on fertility. The income elasticity of fertility is relatively low at the upper tail of the distribution (for countries with high fertility) compared to the value at the median. [ABSTRACT FROM AUTHOR]

This article investigates the dynamic process of convergence among a set of real alternative (art, fine wine, gold, residential real estate) and financial assets in the US context over the period 2003–2019. The objective is to explore the time-varying behavior of their links considering structural breaks coming from exogenous economic and financial shocks that prevent market convergence from being a linear process. Using a procedure that determines endogenously multiple structural breaks and a rolling co-integration framework, we show that price co-movements depend on the global financial and economic environments. Our results confirm the existence of a long-term co-integration relationship among price series but with structural breaks. We find that exogenous shocks lead to a lower degree of convergence of real alternative and conventional assets, and expansion phases promote market convergence between them. Our results contribute to guiding investors in their efforts to diversify their wealth and portfolio. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic has given rise to a spike in financial market volatility. In this paper, we attempt to assess the effects of financial & news-driven uncertainty shocks in growing Asian economies, using country-specific bond volatility shocks as a measure of local interest rate uncertainty. Also, we contrast the effects of local uncertainty with global stock market uncertainty. Using bond market data from nine Asian markets, we uncover a transmission mechanism of uncertainty shocks via the bond market. The mechanism works as a crowding-out effect due to government-led excessive market borrowing with supply-side consequences for the private sector, as opposed to economic policy or global stock market uncertainty which works more like a demand shock as in the literature. We conclude that countries with growing fiscal deficits that entail a larger government bond market or higher current account deficits, tend to experience an increase in the cost of borrowing due to this bond market volatility or interest rate uncertainty shocks. [ABSTRACT FROM AUTHOR]

A common statement found in regional policy reports is that regional growth is an "export or die" issue. However, the succession of disruptions in the international supply chain has highlighted the crucial roles of domestic activities, local markets and short supply chains, turning the environmental and resilience challenge present in growth policy into a "domestic or die" issue. Recent regional growth theories have seriously questioned export activity as the only way in which to drive regional growth and have highlighted the crucial role of the domestic sector. However, no empirical study has assessed the roles of the domestic and export sectors in growth during this troubled economic period, despite the usefulness of this information for nonbiased policy decisions. Using a spatial endogenous regional growth model as a framework, we investigate the role of the domestic sector during the 1999–2014 period for 263 European Union (EU) Nomenclature of Territorial Units for Statistics (NUTS) regions. The results stress the importance of domestic productivity for regional growth during this period, which is characterized by three economic shocks, thereby elucidating the importance of domestic productivity for competitiveness and resilience issues. [ABSTRACT FROM AUTHOR]

There is an evident research gap in the literature on the geography of innovation: very little is known about the innovation activities of rural enterprises in times of crisis. The topic is addressed here by analysing space–time differences in the receipt of research, development and innovation (RDI) funding by Finnish firms before and during the COVID-19 pandemic as a major economic shock. Using firm- and municipal-level panel regression analyses, the main goal was to identify key differences and temporal changes in RDI funding patterns across different region types. The empirical results show that firms located in urban regions have been generally more successful in applying for competitive public RDI funding than firms located in rural regions, but that rural firms have caught up to their urban counterparts during the COVID-19 pandemic. This narrowing of the rural–urban RDI funding gap (1) shows that easy and flexible access to RDI funding during the COVID-19 pandemic appears to be especially attractive for small rural enterprises, (2) points to the strategic flexibility of small rural enterprises in times of crisis, and (3) indicates that the innovation capacity of these firms/regions is more resilient to economic shocks than typically thought. [ABSTRACT FROM AUTHOR]

This paper provides the first evidence of positive bank-to-bank spillovers. I show that geographic linkages between banks that engage in home lending in the same geographic region transmit positive shocks from one bank to another. I exploit shocks to the deposit base of banks located in counties experiencing shale oil booms and show that a nonshocked bank in a nonboom county expands lending more if its linkages have greater exposure to shale booms. Results show that the shock exposure of linkages has a positive impact on home prices of nonboom counties, and nonshocked banks located therein respond with increased lending. [ABSTRACT FROM AUTHOR]

We show that analyst behavior changes in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing mandatory disclosures in the cross-section of investors: analysts reduce coverage and issue less optimistic, more accurate, less bold, and less informative forecasts. Our evidence indicates that analysts reduce a strategic component of their behavior: the changes are stronger among analysts with more strategic incentives like affiliated or retail-focused analysts. We conclude that mandatory disclosure can substitute for analyst information production, which is constrained by investors' ability to verify forecasts using corporate filings. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

In this paper, we consider conditional measures of lead-lag relations between aggregate growth and industry-level cash flow growth in the United States. Our results show that firms in leading industries pay an average annualized return 3.6 |$\%$| higher than that of firms in lagging industries. Using both time-series and cross-sectional tests, we estimate an annual pure timing premium ranging from 1.2 |$\%$| to 1.7 |$\%$|⁠. This finding can be rationalized in a model in which (a) agents price growth news shocks, and (b) leading industries provide valuable resolution of uncertainty about the growth prospects of lagging industries. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

How does trading in one venue affect the quoting strategies of market makers in other venues? We develop a two-venue imperfect competition model in which market makers face quadratic costs when absorbing shocks. Nonconstant marginal costs imply that absorbing a shock in one venue simultaneously changes marginal costs in all other venues. Moreover, market makers strategically choose which shock(s) to absorb. These two forces may intensify competition, leading to enhanced liquidity. Using Euronext proprietary data, we track individual best bid and ask quotes of intermediaries in each venue. We uncover evidence of strategic cross-venue market-making behavior which is uniquely predicted by our model. [ABSTRACT FROM AUTHOR]

Large-scale shocks directly affect some firms and households and indirectly affect others through general equilibrium spillovers. In this paper, I describe how researchers can directly estimate spillovers using quasi-experimental or experimental variation. I then argue that spillover estimates suffer from distinct sources of mechanical bias that standard empirical tools cannot resolve. These biases are particularly relevant in finance and macroeconomics, where multiple spillover channels and nonlinear effects are common. I offer guidance on how to detect and overcome mechanical biases. An application and several examples highlight that the suggested methods are broadly relevant and can inform policy and multiplier calculations. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We develop an equilibrium model with moral hazard, which arises because some productivity shocks are privately observed by firm managers only. We characterize the optimal contract and its implications for firm size, growth, and managerial pay-performance sensitivity and exploit them to quantify the severity of the moral hazard problem. Our estimation suggests that unobservable shocks are relatively modest and account for about 10 |$\%$| of the total variation of firm output. Nonetheless, moral-hazard-induced incentive pay is quantitatively significant and accounts for 50 |$\%$| of managerial compensation. Eliminating moral hazard would result in about a 1 |$\%$| increase in aggregate output. [ABSTRACT FROM AUTHOR]

This article provides micro-level evidence for the role of foreign-invested enterprises (FIEs) in the cross-border transmission of global financial uncertainty shocks. Using Chinese firm-level data, we find that rising uncertainty has a significantly larger contractionary effect on real investment for FIEs than their local counterparts. This effect is more pronounced for firms faced with greater investment irreversibility or financial constraints. The contractionary effect is mainly driven by downside uncertainty, whereas upside uncertainty is modestly expansionary. Similar effects are found for other firm-level performances. There is also a spillover effect to local private firms with FIEs concentrated in downstream sectors. [ABSTRACT FROM AUTHOR]

Election forecasting is a growing enterprise. Structural models relying on "fundamental" political and economic variables, principally to predict government performance, are popular in political science. Conventional wisdom though is these standard structural models fall short in predicting individual blocs' performance and their applicability to multiparty systems is restricted. We challenge this by providing a structural forecast of bloc performance in Ireland, a case primarily overlooked in the election forecasting literature. Our model spurns the economic and performance variables conventionally associated with structural forecasting enterprises and instead concentrates on Ireland's historical party and governance dynamics in the vein of testing whether these patterns alone offer solid predictions of election outcomes. Using Seemingly Unrelated Regression (SUR), our approach, comprising measures of incumbency, short-term party support, and political and economic shocks, offers reasonable predictions of the vote share performance of four blocs: Ireland's two major parties, Fianna Fáil and Fine Gael, Independents, and the Left bloc combined across 20 elections spanning 60 years. [ABSTRACT FROM AUTHOR]

Since 2020, the world has faced two unprecedented shocks: lockdowns (regulation) and the invasion of Ukraine (war). Although we realise the health and economic effects of these shocks, more research is needed on the effect on happiness and whether the type of shock plays a role. Therefore, in this paper, we determine whether these macro-level shocks affected happiness, how these effects differ, and how long it takes for happiness to adapt to previous levels. The latter will allow us to test whether adaptation theory holds at the macro level. We use a unique dataset of ten countries spanning the Northern and Southern hemispheres derived from tweets extracted in real-time per country. Applying Natural Language Processing, we obtain these tweets' underlying sentiment scores, after which we calculate a happiness score (Gross National Happiness) and derive daily time series data. Our Twitter dataset is combined with Oxford's COVID-19 Government Response Tracker data. Considering the results of the Difference-in-Differences and event studies jointly, we are confident that the shocks led to lower happiness levels, both with the lockdown and the invasion shock. We find that the effect size is significant and that the lockdown shock had a bigger effect than the invasion. Considering both types of shocks, the adaptation to previous happiness levels occurred within two to three weeks. Following our findings of similar behaviour in happiness to both types of shocks, the question of whether other types of shocks will have similar effects is posited. Regardless of the length of the adaptation period, understanding the effects of macro-level shocks on happiness is essential for policymakers, as happiness has a spillover effect on other variables such as production, safety and trust. [ABSTRACT FROM AUTHOR]

Numerous studies have demonstrated the negative impact of severe economic shocks (such as those associated with wars) on the growth of children and adolescents. Individuals exposed to these shocks during their developmental years exhibited shorter average heights compared to both previous and subsequent generations. Anthropometric research has highlighted the sensitivity of the height variable in understanding the biological well-being of children and adolescents. However, little attention has been paid to the evolution of other anthropometric variables. This study investigates the impact of the famine following the Spanish Civil War on biological well-being in nine municipalities of the Region of Valencia (with over 120,000 observations of individuals born between 1890 and 1955) using two indicators: chest circumference, and the percentage of individuals of short stature. Our findings confirm that both of these anthropometric indicators were responsive to the economic shock of the Civil War. The well-being levels prior to the war took 20 years to recover. [ABSTRACT FROM AUTHOR]

Financial resilience is a faculty that improves the capabilities of companies to identify financial problems, resist them, confront them and recover quickly in the face of an economic crisis, such as that generated by COVID-19. The objective of this article is to determine the effects of financial resilience on the economic well-being of MSMEs in Baja California, Mexico. An economic well-being index is estimated based on the OECD/INFE (2020) methodology and an econometric model with information from 465 entrepreneurs to prove that financial resilience attenuated economic shocks in MSMEs during the recent period of economic crisis. The results suggest that, although the economic deficit negatively affected the economic well-being of the MSME, the majority of entrepreneurs preferred to be prudent, supporting deficits and avoiding new financial instruments. It was evident that MSME entrepreneurs sought to restore and improve their economic well-being through financial prudence. [ABSTRACT FROM AUTHOR]

We study the international transmission of U.S. real and financial shocks on the USMCA region using a global approach. The study relies on a GVAR (Global Vector Autoregressive) model and generalized impulse-response functions (GIRF). The main findings suggest that: 1) The USMCA economies are contemporaneously linked to the world economy mainly through private credit, international trade and real GDP; 2) shocks on U.S. GDP and U.S. trade flows have higher influence in Canada than in Mexico; 3) shocks on U.S. interest rates have higher influence in Mexico than in Canada; 4) the private credit and the international trade channels are the most important ones for the transmission of international macroeconomic shocks. The study relies on quarterly data for 33 countries of the period 1986:Q1-2019:Q4. [ABSTRACT FROM AUTHOR]

We assemble a data set of more than eight million German Twitter posts related to the war in Ukraine. Based on state-of-the-art methods of text analysis, we construct a daily index of uncertainty about the war as perceived by German Twitter. We then estimate a VAR model with daily financial and macroeconomic data and identify an exogenous uncertainty shock. The increase in uncertainty has strong effects on financial markets and causes a significant decline in economic activity as well as an increase in expected inflation. We find the effects of uncertainty to be particularly strong in the first months of the war. [ABSTRACT FROM AUTHOR]

This study contributes to the debate on the impact of international shocks on the integration of national systems of cities into global economic networks. We examine how the crisis in Ukraine and the following economic sanctions of 2014 imposed on Russia affected the positions of Russian cities in global economic networks. To do so, we used worldwide data on the corporate networks of the largest multinational firms and their subsidiaries from 2010 to 2019 to create intercity linkages at both the global and national levels to show how Russian cities' positions evolved during the period. The study shows that although the Russian cities' position in the global network shrank (with a general decrease in Russian cities' linkages), their internationalization increased despite the economic sanctions. The decrease in connectedness mostly concerned the intranational firm linkages between Russian cities, which could explain the increasing interregional inequalities in Russia observed by numerous scholars. In addition, contrary to the main arguments of the global cities approach, among the cities that were most resistant to crises were not only the largest and most diversified cities, as we would expect during such times of uncertainty, but also some highly specialized small towns. [ABSTRACT FROM AUTHOR]

How do immigration attitudes form? Drawing on the political socialization literature, I argue that growing up in a recession causes a lasting increase in anti-immigration attitudes. I delineate two mechanisms that emphasize the negative consequences of recessions for young workers and the anti-immigration narrative that often emerges during economic turmoil. Young adults are particularly vulnerable to these external shocks because they have minimal political experience and are developing their core political attitudes. Support is provided for this argument with evidence from the European Social Survey. An economic shock during young adulthood causes a significant increase in anti-immigration attitudes, a relationship not found for other ages. I find tentative evidence that growing up in a recession has a larger effect on the racial and cultural dimensions of immigration and causes a broader sociotropic response. Results highlight how economic crises affect the socialization of young adults and underscore their lasting political consequences. [ABSTRACT FROM AUTHOR]

Purpose: Oil price shocks greatly impact the global economy, but the effects vary among countries. While higher oil prices benefit oil-exporting countries, they harm the economic performance of oil-importing nations, and vice versa for lower oil prices. However, economic relations, such as trade, can mitigate the impacts of oil price shocks on both groups. In this paper, the authors aim at estimating the effects of oil price shocks on the major net oil-exporting and net oil-importing countries while accounting for international trade. Design/methodology/approach: The authors derive a reduced form of a macro model and set up a Panel VAR model to estimate the direct and indirect impacts of oil price shocks on economic growth. The sample includes data on macroeconomic variables from 30 oil-exporting and oil-importing countries that comprise more than 73 percent of the world's economy. The authors construct the spillover variables using bilateral trade matrix. To control for institutional and structural variations across the countries, they are divided into four groups of developed and developing oil-exporting and oil-importing countries. Findings: The results reveal that all oil-exporting countries have significantly benefited from oil price shocks, although trade has dampened the effect. The positive growth effect has been more pronounced in oil-exporting developing countries. The impact of oil price shocks on oil-importing countries has been negative with a one-year delay, but not statistically significant, and trade has only had a small effect. The effect has been more substantial in oil-importing developing countries. Research limitations/implications: One of the limitations of this study is the focus on trade as the main spillover channel. Given the data availability, other channels such as foreign investment and financial markets can also be included in future studies. Practical implications: Removing trade restrictions would help both oil-exporting and oil-importing countries to mitigate the negative impacts of the oil price shocks. However, the asymmetric oil-macroeconomy relationship across oil-exporting and oil-importing countries puts oil-exporting countries in a more vulnerable position as they cannot rely on trade with oil-importing countries to reduce the negative impacts of lower oil prices on their growth. Therefore, it is crucial for oil-exporting countries to reassess their oil-dependent development plans and invest their oil revenues in non-oil sectors to diversity their economies and prepare for a future with reduced dependence on oil. Social implications: The recent technological advances, structural changes, and increasing energy efficiency suggest that major oil-importing countries will become less dependent on oil in near future. As a result, oil-exporting countries will also need to undergo structural changes in order to sustain their income level. These significant changes will have important social implications, particularly in the labor market, during the transition, for which preparation will be necessary. Originality/value: While the literature on the total impact of oil price shocks on either oil-exporting or oil-importing countries is rich, studies on their spillover impacts are limited. Recent research has shown that trade and migration can affect the impact of oil price shock on the economy in federated countries such as Canada. However, the trade effect on oil price shocks in the international level, where countries are subject to different regulations/restrictions and institutional variations, remains scarce. By considering the trade relationship between different groups of oil-exporting and oil-importing countries, the authors aim to contribute to the literature of the global impacts of oil price shocks on the world economy. [ABSTRACT FROM AUTHOR]

In recent years, a revival of the so-called 'utilisation controversy' has seen several scholars engage in a lively debate that still revolves around the same old question: what should we expect, beyond the short run, with regard to the degree of capacity utilisation? In this article, we tackle this issue by investigating the relationship between the level of economic activity and the ensuing utilisation of existing capacity. In order to assess the effect of the former on the latter and to provide a robust and clear picture of this phenomenon, we use a Structural VAR and Local Projection methodologies to estimate three alternative models, based on monthly data on the US economy. After presenting our empirical results, which point to only temporary effects on capacity utilisation of shocks to the level of economic activity, we verify their compatibility with alternative demand-led growth models. We conclude that autonomous demand-led models cum convergence towards normal utilisation perform better in terms of consistency with the econometric evidence, while the latter seems to call for a re-examination of 'conventional' versions of the Neo-Kaleckian model. [ABSTRACT FROM AUTHOR]

The health costs of economic uncertainty always remain a major concern among policymakers of China. The theoretical and empirical literature on the economic uncertainty-human health nexus is still in its infancy stage. This study is firmly rooted in the economic uncertainty theory advanced by Baker, Bloom, & Davis. In this study, the primary objective of the analysis is to estimate the asymmetric impact of economic uncertainty on human health in China's economy. In order to evaluate the short and long-run estimates of economic uncertainty on human health across various quantiles, we have employed the linear and nonlinear QARDL models. The linear QARDL model shows that the long-run relationship between economic uncertainty and the infant mortality rate is positive and significant at all quantiles, while the long-run relationship between economic uncertainty and the death rate is positive and significant at higher quantiles. The nonlinear QARDL model reveals that, in the long run, the relationship between the positive shock of economic uncertainty and the infant mortality rate is positive and significant at quantiles 0.30 to 0.95, while the long-run relationship between the positive shock of economic uncertainty and the death rate is positive and significant at higher quantiles. The relationship between the negative shock of economic uncertainty and the infant mortality rate is negative and significant at the highest quantiles, while the relationship between the negative shock of economic uncertainty and death rate is negative and significant at higher quantiles in the long run. The findings indicate a positive relationship between economic uncertainty in China and higher rates of infant mortality and death. Thus, adopting suitable policies for controlling economic uncertainty can help in improving human health in China. [ABSTRACT FROM AUTHOR]

The evaluation of relative changes in policy agenda composition using dynamic compositional models can offer a useful way to lead future studies of policy agenda trade‐offs for sustainability. As a specific empirical case, this study examines changes in the annual composition of legislative attention in the United States congressional hearings on energy as a substantive issue domain. Using the description texts of hearings, this article assesses the compositional energy topic changes of conventional agendas, other general agendas, and unconventional agendas, including environmental and social agendas. By focusing on how economic contextual shocks, along with political factors, shape the energy agenda attention mix, this study discovers that conventional agendas related to energy topics in U.S. congressional hearings are relatively less likely to be discussed when economic conditions are adverse under Democratic legislature controls. It illustrates example conditions under which policy agenda subtopics for sustainability are more likely to be pursued at the expense of which subtopics. Related Articles: Heidbreder, Brianne. 2012. "Agenda Setting in the States: How Politics and Policy Needs Shape Gubernatorial Agendas." Politics & Policy 40(2): 296–319. https://doi.org/10.1111/j.1747‐1346.2012.00345.x. Morini, Marco, and Marco Cilento. 2020. "New Parties, Fractionalization, and the Increasing Duration of Government Formation Processes in the EU Member States." Politics & Policy 48(6): 1202–32. https://doi.org/10.1111/polp.12381. Steger, Wayne P. 2008. "The President's Legislative Program: An Issue of Sincere versus Strategic Behavior." Politics & Policy 33(2): 312–29. https://doi.org/10.1111/j.1747‐1346.2005.tb00645.x. [ABSTRACT FROM AUTHOR]

This paper assesses the impact of uncertainty on income and wealth inequality in Germany, France, Italy and Spain. For that purpose, mixed-frequency SVAR models are used. The results show that uncertainty shocks lead to heterogeneous responses across countries. A positive uncertainty shock increases income inequality in Spain, but reduces it in Germany and France. In the case of wealth, the response is statistically significant only in Spain and Italy, where an increase in inequality is experienced. Overall, these results highlight the important role of macroeconomic stabilisation policies in situations of high uncertainty. [ABSTRACT FROM AUTHOR]

Do negative economic shocks change fiscal policy preferences? We examine this question via the large COVID-19 shock, as the virus and ensuing lockdowns caused one of the largest acute economic contractions in recent history. While previous evidence that recessions meaningfully change fiscal preferences is limited, we hypothesize that the health pandemic should have had distinct effects. We argue that this is due to the large breadth, uncertainty, and socio-tropic basis of the economic contraction, and that worse economic evaluations and reduced economic optimism should correspond with greater support for fiscal interventions to address the crisis. To test these hypotheses, we use new panel evidence from Spain, a hard-hit country, surveying individuals prior to the pandemic and the same individuals during the pandemic. We find that individuals became more economically pessimistic across many measures. However, there is little evidence that this translates into support for more expansive fiscal policies. Second, we find through a framing experiment that this could be because individuals believe that the government's fiscal policies would disproportionately benefit lower-income individuals. The findings indicate the theoretical importance of recessions for changing individual and socio-tropic economic expectations, but do not support the claim that large economic shocks can significantly change fiscal preferences. [ABSTRACT FROM AUTHOR]

A large portion of the world's rural population has limited access to paved roads, which is widely believed to constrain rural economic growth opportunities. Using a panel of nighttime lights and road placement data from the Integrated Road Investment Program (iRoad), a large-scale rural road development program in Sri Lanka, this study examines the relationship between rural road connectivity and local nighttime luminosity. The program was found to result in better and more consistent rural road conditions. Rural areas with improved connectivity after two years show higher local nighttime luminosity, a proxy for economic activity, compared to areas without connectivity. These gains hold even for indirectly targeted rural areas where the iRoad passes through. The gains vary spatially, which are most pronounced in areas at a moderate distance to socioeconomic centers and with more adequate complementary infrastructure provisions. These findings support the notion that improving rural connectivity can ease development constraints, increase resilience in managing negative economic shocks caused by the COVID-19 pandemic, and contribute to post-pandemic economic recovery. The findings also lend to the idea that targeted placements based on the beneficiary's location and complementary infrastructure (e.g., educational and medical facilities) can enhance the effectiveness of rural road investments. An intensive margin analysis suggests that post-construction maintenance is effective in bringing about sustained impact. • Using data from a large-scale rural road program in Sri Lanka, we study the relationship between rural connectivity and local economic activity. • The rural road program was found to result in better and more consistent rural road conditions. • Rural areas with improved connectivity after two years show higher local nighttime luminosity compared to areas without connectivity. • The gains vary spatially, which are most pronounced in areas at a moderate distance to socioeconomic centers and with more complementary infrastructure. • The findings lend to the idea that targeted placements can enhance the effectiveness of rural road investments. [ABSTRACT FROM AUTHOR]

This study assesses whether changes in older adults' financial situation after an economic shock are associated with feelings of loneliness. Data come from the 2006 and 2010 waves of the Health and Retirement Study (N = 2,510) which span the 2008 Great Recession. We conduct first-differencing and formal mediation analyses to determine whether change in financial situation is related to change in loneliness in older age and test potential mediation of personal and social resources. Results show that a higher level of loneliness in 2010 is associated with a higher level of subjective financial strain but not with changes in household income and net assets. The findings hold when accounting for personal and social resources. Knowledge of the direct link between financial strain and loneliness in older age provides an important insight for programmes and initiatives aimed at relieving widespread loneliness in later life. [ABSTRACT FROM AUTHOR]

This paper assesses the effects of adverse economic shocks on children's mental health. We rely on the Brazilian High-Risk Cohort Study for mental conditions, which provides an unprecedented array of data on psychopathology, life events, family medical history as well as parental behaviour and polygenic scores for mental disorders over a ten-year period. Our empirical strategy exploits parental job loss events over time in a difference-in-differences framework. We document that parental job loss significantly worsens children's mental health, resulting in increased clinical diagnoses of mental disorders. These results are robust to several specifications and pre-trends. Heterogeneous results and mechanism analysis indicate that psychological distress in the household brought about by job loss events may be a key mechanism affecting children's mental health. [ABSTRACT FROM AUTHOR]

Using three‐stage least squares, the present study examines how the household expenditure on socialising activities, including eating out, entertainment and religious and social obligations changed during the COVID‐19 pandemic in India. Our results suggest a negative impact of COVID‐19 cases on the socialising expenditure shares of the households. Further, a higher spending on food is associated with a lower spending on socialising. We find that during the crisis, the increased food expenditures entails lower discretionary expenditures. Or, in other words, they are substitutes. A quadratic socialising expenditures curve confirms the expenditure variability and the wide‐ranging responses of households belonging to different income groups to the COVID‐19 induced economic shocks. The rising prices of food and other necessities required the households to spend larger shares of their incomes on necessary goods, and curtail the consumption of leisure goods. The role of maintaining a healthy work‐life balance, active social network as well as leisure activities to be content in life is well documented. Hence a reduced expenditure on socialising due to the pandemic, may throw light on some larger and significant concerns such as the deteriorating mental health of individuals and greater stress and frustration. [ABSTRACT FROM AUTHOR]

For centuries, national economies have been engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also allow for economic shocks to propagate across borders. Using global, firm-level supply network data, we estimate a country's exposure to direct and indirect economic losses caused by the failure of a company in another country. We show the network of international systemic risk-flows. We find that rich countries expose poor countries stronger to systemic risk than vice-versa. The risk is highly concentrated, however, higher risk levels are not compensated with a risk premium in GDP levels, nor higher GDP growth. Our findings put the often praised benefits for developing countries from globalized production in a new light, by relating them to risks involved in the production processes. Exposure risks present a new dimension of global inequality that most affects the poor in supply shock crises. Thurner and colleagues explore how economic shocks spread risk through the globalized economy. They find that rich countries expose poor countries stronger to systemic risk than vice-versa. The risk is highly concentrated, however higher risk levels are not compensated with a risk premium in GDP levels, nor higher GDP growth. The findings put the often-praised benefits for developing countries from globalized production in a new light, by relating them to risks involved in the production processes [ABSTRACT FROM AUTHOR]

Amid escalating geopolitical tensions, we offers insights into the far-reaching consequences of wars. Based on a new dataset on major conflicts since 1870, the findings show that wars cause a substantial decline in GDP and spike in inflation within war zones. Interestingly, countries geographically close to war zones experience significant economic disruptions, even when neutral to the conflict, whereas countries far from the conflict may see minimal to slightly positive spillovers. The study demonstrates how wars represent a massive negative supply shock, with geographical proximity and trade integration explaining the varying effects on different countries. [ABSTRACT FROM AUTHOR]

In April 2020, the U.S. government sent economic impact payments (EIPs) directly to households as part of its measures to address the COVID-19 pandemic. We characterize these stimulus checks as a wealth shock for households and examine their effect on retail trading in Bitcoin. We find a significant increase in Bitcoin buy trades of size $1,200, which is the modal EIP amount. We find similar increases in trading for other countries that paid out stimulus checks. We estimate that the EIPs have a significant impact on the U.S. dollar–Bitcoin trading pair, increasing buy volume by 3.8% and the price by 0.6%. We also find that demand for Bitcoin is highly price inelastic compared with the demand for stocks. We suggest the demographic characteristics that make people more resilient to the COVID-19 economic shock—single, computer literate, and educated—are also characteristics of people who are more interested in Bitcoin. This paper was accepted by Bruno Biais, finance. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4790. [ABSTRACT FROM AUTHOR]

The global financial crisis highlighted the crucial role of stress tests in evaluating a bank's resilience to severe economic shocks. Accordingly, the purpose of the study was to examine the contribution of stress tests to credit risk in terms of hedging banking opacity and improving financial resistance against negative shocks in MENA countries, observed for the period from 2012 to 2022. Furthermore,, this study explores the impact of stress tests on enhancing bank transparency, particularly within the contexts of Islamic and conventional banking systems using the Panel-VAR and GMM approach. A conceptual framework is established to explain the connection between stress testing and bank transparency, emphasizing on the mechanisms through which stress tests can promote greater disclosure and accountability. A comparative analysis of stress testing practices across both banking sectors reveals similarities and distinctions in scenario selection, modeling techniques, and disclosure practices. In-depth case studies of Islamic and conventional banks illustrate the practical application of stress testing in fostering transparency. These results show that stress tests produce information about credit risk exposure and about the real conditions of financial institutions. Therefore, more transparency on bank losses and risks would have also enabled bank regulators to focus more attention on financial institutions and react early to take "corrective measures". Policy recommendations are drawn to enhance the effectiveness of stress testing in promoting transparency and financial stability within both Islamic and conventional banking sectors. This study contributes to a deeper understanding of stress testing's role in fostering a more resilient and stable financial system. [ABSTRACT FROM AUTHOR]

This study explores the relationship and connectedness between oil returns and financial stresses in six Gulf Cooperation Council (GCC) countries using daily data from September 21, 2006 to May 31, 2019. The Bayesian Graph‐based Structural Vector Autoregression (BGSVAR) model is utilised to estimate and analyse the direction of causality. In addition, the spillover approach is utilised to examine connectedness and risk transmission patterns between oil returns and financial stresses in the GCC economies in both time and frequency domains. The empirical analysis of the BGSVAR model shows that oil returns and financial stresses have both a contemporary and temporal relationship, whilst findings from the spillovers analysis show that oil returns tend to act as a net transmitter of spillovers to GCC financial markets in both medium and long‐run horizons but a net receiver of spillovers in the short‐run. [ABSTRACT FROM AUTHOR]

The objective of this paper is to provide a deeper insight into the impact of weekly inventory announcements and especially their associated surprises on crude oil returns and volatility during the period from 27 March 2012 to 2 October 2018. The results can be summarized as follows. First, we find that all inventory surprises exert an inverse impact on the oil price returns. Such impact appears more pronounced during the collapse and post‐collapse periods, than during the pre‐collapse period. Second, we show that the reducing volatility effects of inventory shocks that we establish for the whole period are entirely attributed to those observed in the pre‐collapse period. Third, the different effects obtained for positive and negative shocks support evidence that our split of inventory news by nature matters. Fourth, compared to macroeconomic and unconventional monetary news, the inventory statements appear as the most pertinent news during the event window. Fifth, we find evidence also that the effect of the uncertainty about economic stance, when it is significant, changes the way the oil prices and volatility react to inventory surprises, and hence weakens the effectiveness of the inventory policy. Lastly, we make an original use of the information content of the implied volatility to assess the persistence of the link between the conditional variance and the inventory news. The central finding is that the implied volatility enters with a significant effect on the conditional variance for WTI oil returns and namely with a reduced volatility persistence. Also, a significant effect from inventory surprises namely when we split the announcements into negative and positive news is detected even the implied volatility is introduced exogenously in the GARCH‐type variance specification highlighting the predominance of our main variable. [ABSTRACT FROM AUTHOR]