Search Results (39)

This article investigates the macroeconomic and labor market conditions that shape the adoption of artificial intelligence (AI) technologies among large firms in Europe. Based on panel data econometrics and supervised machine learning techniques, we estimate how public health spending, access to credit, export activity, gross capital formation, inflation, openness to trade, and labor market structure influence the share of firms that adopt at least one AI technology. The research covers all 28 EU members between 2018 and 2023. We employ a set of robustness checks using a combination of fixed-effects, random-effects, and dynamic panel data specifications supported by Clustering and supervised learning techniques. We find that AI adoption is linked to higher GDP per capita, healthcare spending, inflation, and openness to trade but lower levels of credit, exports, and capital formation. Labor markets with higher proportions of salaried work, service occupations, and self-employment are linked to AI diffusion, while unemployment and vulnerable work are detractors. Cluster analysis identifies groups of EU members with similar adoption patterns that are usually underpinned by stronger economic and institutional fundamentals. The results collectively suggest that AI diffusion is shaped not only by technological preparedness and capabilities to invest but by inclusive macroeconomic conditions and equitable labor institutions. Targeted policy measures can accelerate the equitable adoption of AI technologies within the European industrial economy. Full article

This study examines the impact of environmental, social, and governance (ESG) performance on economic growth in Saudi Arabia from 1990 to 2022. It uses a tailored ESG index and applies ordinary least squares (OLS) and autoregressive distributed lag (ARDL) models. The analysis reveals that while individual ESG components do not show significant short-term effects, the composite ESG index has a statistically significant positive effect on long-term GDP growth. These findings highlight the importance of integrated ESG strategies in enhancing economic resilience and diversification in resource-based economies. Moreover, although oil rents and trade openness continue to support short-term growth, they are associated with governance and environmental trade-offs, reflecting transitional challenges on the path to sustainability. Thie study provides new empirical evidence on the macroeconomic relevance of ESG in emerging economies and introduces a context-specific ESG index aligned with national policy goals. The results underscore the need to embed of embedding ESG frameworks into national development plans to ensure long-term economic resilience and structural transformation in line with Vision 2030. Full article

I show that house prices can be modeled using machine learning (kNN and tree-bagging) and a small dataset composed of macroeconomic factors (MEF), including an inflation metric (CPI), US Treasury rates (10-yr), Gross Domestic Product (GDP), and portfolio size of central banks (ECB, FED). This set of parameters covers all the parties involved in a transaction (buyer, seller, and financing facility) while ignoring the intrinsic properties of each asset and encompassing local (inflation) and liquidity issues that may impede each transaction composing a market. The model here takes the point of view of a real estate trader who is interested in both the financing and the price of the transaction. Machine learning allows for the discrimination of two periods within the dataset. First, and up to 2015, I show that, although the US Treasury rates level is the most critical parameter to explain the change of house-price indices, other macroeconomic factors (e.g., consumer price indices) are essential to include in the modeling because they highlight the degree of openness of an economy and the contribution of the economic context to price changes. Second, and for the period from 2015 to today, I show that, to explain the most recent price evolution, it is necessary to include the datasets of the European Central Bank programs, which were designed to support the economy since the beginning of the 2010s. Indeed, unconventional policies of central banks may have allowed some institutional investors to arbitrage between real estate returns and other bond markets (sovereign and corporate). Finally, to assess the models’ relative performances, I performed various sensitivity tests, which tend to constrain the possibilities of each approach for each need. I also show that some models can predict the evolution of prices over the next 4 quarters with uncertainties that outperform existing index uncertainties. Full article

This paper extends the micro-founded DSGE open economy model by incorporating unionized labor markets. Unlike the standard framework with atomistic unions, large labor unions consider broader economic conditions and internalize the impact of their wage settlements on the aggregate economy. By emphasizing the interplay between internal and external sources of economic distortions and monetary policy regimes, we demonstrate that the economy’s openness, the degree of wage-setting centralization, and different monetary policy regimes influence unions’ wage-setting behavior and macroeconomic outcomes. The analysis identifies three key effects—the monetary policy effect, the intertemporal substitution effect, and the open economy effect—that large unions internalize when adjusting their wage demands in response to policy actions and external conditions. This novel wage-based mechanism alters the New Keynesian Phillips curve, with implications for the conduct of monetary policy, particularly in shaping the economy’s response to shocks and equilibrium determinacy. The real effects of monetary policy shocks under different policy settings depend on large unions’ internalization effect. In a unionized labor market, the impact of monetary shocks on the real economy is amplified compared to the standard case with atomistic unions. Additionally, interactions among large unions, openness, and monetary policy regimes affect determinacy properties of equilibrium (i.e., uniqueness of the solution path) under various forms and timing of monetary policy rules. This paper offers new insights into how union coordination interacts with monetary policy regimes and trade openness to shape macroeconomic stability (uniqueness of rational expectations equilibrium) and the dynamic response of the economy to shocks. These findings enhance our understanding of monetary policy design in economies with strong large labor institutions and external trade exposure—an area that remains underexplored in the existing DSGE literature. Full article

The paper aims to analyze the effect of geopolitical uncertainties on growth in the countries of selected Turkic republics and neighboring states which are experiencing geopolitical uncertainty, especially regarding their position in the global economy. This study investigates how uncertainties quantified by geopolitical risk indices for the global economy (GE), the United States (US), and the Russian Federation (RS) influence the economic growth of the Turkic republics and neighboring states which implement open macroeconomic policies. This analysis employs panel data techniques that consider the interdependence between cross-sectional units. The selected countries included in the study are Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Turkmenistan, Mongolia, and Uzbekistan. The results show the existence of constricting effects on the economic growth performance of selected countries. Full article

The aim of this paper is to investigate how the central bank of Mexico—a prototypical emerging market economy (EME)—adjusted its reaction coefficients according to an estimated Taylor-type rule in response to the COVID-19 pandemic and the posterior surge in inflation. To do so, we estimate a small open economy model and employ Bayesian methods with a rolling window strategy. Our findings suggest that, during and after the COVID-19 crisis, the central bank slightly reduced its response to inflation and significantly decreased the reaction to the output gap. Further, the exchange rate response increased, pointing to a higher fear of floating. Additionally, a counterfactual experiment shows that these policy adjustments effectively dampened the macroeconomic volatility during the pandemic. We attribute these changes to the lower sensitivity of inflation to the output gap and the amplification of external shocks. However, we argue that these adjustments, particularly the heightened fear of floating, are temporary measures designed to anchor inflation expectations. Full article

This study highlights the superior performance of Bayesian Model Averaging (BMA) in credit risk modeling under IFRS 9, particularly during economic uncertainty, such as the COVID-19 pandemic. Using granular bank-level data from Malta, spanning 2017–2023, the analysis integrates macroeconomic scenarios and sector-specific transition matrices to assess credit risk dynamics. Key findings demonstrate BMA’s ability to outperform Single-Equation Models (SEM) in predictive accuracy, robustness, and adaptability. The results emphasize BMA’s resilience to structural economic changes, making it a critical tool for regulatory stress testing and provisioning in small open economies highly exposed to external shocks. This work underscores the importance of forward-looking, flexible frameworks for credit risk management and policy decisions. Full article

International market openness has long been regarded as critical for economic development, and recent evidence highlights the distinct roles of financial and trade openness, particularly in emerging and developing economies. This study examines the impact of financial and trade openness on economic growth in ten emerging and developing countries from 1970 to 2023. It employs a dynamic panel generalized method of moments (GMM) model, which is selected for its ability to address potential endogeneity and dynamic relationships within panel data. The analysis finds that both financial and trade openness positively influence economic growth and that stable macroeconomic conditions and political stability enhance these growth-promoting effects. In the context of growing geo-economic tensions, trade fairness, and national security concerns, the study underscores the need for policies that balance global integration with national interests. These findings suggest the importance of designing policies that promote greater integration into global financial and trading systems while ensuring sound macroeconomic fundamentals and supportive institutions. The study recommends that policymakers pursue strategic liberalization and strengthen governance structures to achieve sustained and inclusive growth. Full article

This paper examines the effects of inward Foreign Direct Investment (FDI) on the female employment rate in the economy and the share of female employment across sectors. The empirical analysis is implemented through the Generalized Method of Moments (GMM) System estimator for dynamic panel models using different empirical specifications and FDI openness indicators. The main results show that the overall effects of inward FDI on the national female employment rate are not statistically significant. However, they reveal that inward FDI has promoted the share of female employment in the service sector and has led to decreases in the share of female employment in agriculture. The FDI effects on the share of female employment in the industrial sector are found to be statistically insignificant. These results are generally supported when running the empirical analysis through alternative FDI openness indicators. Also, supplementary analysis reveals some variations in the magnitude of these effects over different national income categories. The findings in this paper emphasize FDI’s gendered influences in the labour market. They are consistent with the prevalence of macroeconomic channels through which inward FDI impacts female employment across sectors, and they encompass the underlying implications of various counteracting microeconomic factors. Full article

In analyzing the decoupling of emissions from economic growth, current literature foregoes the nonlinear complexities of macroeconomic systems, leading to ineffective energy transition policies, specifically for developing countries. This study focuses on the Indian energy–economy–emission nexus to establish a control system that internalizes inflation, trade openness, and fossil fuel imports with economic growth and macro-emissions to visualize the complex pathways of decoupling. Through long-term cointegration and vector error correction modeling, it was found that GDP and energy affect capital, inflation and energy imports, which are locked in a long-run negative feedback loop that ultimately increases emissions. Capital growth enables decoupling at 0.7% CO₂ emissions reduction for every 1% capital growth, while 1% inflation growth inhibits decoupling by increasing CO₂ emissions by 0.8%. A cybernetic fractional circuit of R-C elements and operational amplifiers was utilized to examine the delay of pulses from GDP to the loop elements, which revealed that capital is periodic with GDP pulses. However, inflation, being aperiodic with the clock pulses of GDP, causes the pulse-width of capital to decrease and fossil fuel imports to increase. Through the circuital model, it was possible to determine the exact policy intervention schedule in business cycle growth and recession phases that could build clean energy capital and limit inflation-induced recoupling. Full article

The roles of finance are well stipulated in the various indicators of the sustainable development goals (SDGS). However, the extant literature still finds conflicting outcomes of the finance-led growth. Hence, this study redirects empirical evidence by unbundling the effects of financial development on sustainable economic growth into aggregated and disaggregated, focusing on seven robust indicators (financial development index, financial institution index, depth, and access, and financial market index, depth, and access) in selected African countries from 1995 to 2021. Similarly, the intervening roles of government expenditure, digital economy, domestic investment, human capital, macroeconomic volatility, and trade openness are evaluated based on advanced estimators. Findings show that the seven indices of financial development drive sustainable economic growth in Africa both in the long and short runs. Similarly, government expenditure, digital economy, and human capital promote sustainable economic growth both in the short- and long-term periods. The driving effects of domestic investment are only noticeable in the long run. Conversely, trade openness and macroeconomic instability are noted to be growth-deterring. Policy insights that support sustainable economic growth in Africa emanate from the outcomes. Full article

In the context of the increasing interdependence of countries due to the development of international trade, a relevant question arises as to whether it is necessary to conduct independent monetary policies for each country or whether it is advisable to coordinate these policies. This question becomes a key in the debate on optimal monetary policy strategies in open economies. The aim of this study is to analyze the impact of asymmetric aggregate demand shocks on the appropriateness of monetary policy coordination in a simple stochastic model of two interacting countries. The analysis of equilibrium states of the monetary authorities’ interaction strategies under study was carried out analytically by minimizing the loss function and solving one-period static optimization problems. The equilibrium states of macroeconomics of interacting countries under coordination of monetary policy and in cases of lack of coordination (Nash and Stackelberg equilibrium) in the presence of asymmetric, serially uncorrelated demand shocks have been analyzed. It is proven that the response of inflation to asymmetric demand shocks is smaller in the case of coordinated policy than in the case of non-cooperative policy. The loss function analysis shows that the compensation of demand shocks is found to be more costly in Nash equilibrium than in the case of monetary authority coordination policy. The analysis of the monetary authorities’ interaction strategies showed that the real exchange rate plays an important role in balancing supply and demand in the two economies. Full article

The evolving global economic landscape necessitates adaptive monetary policies, especially for economies like South Korea that are deeply integrated with global markets. This research explores the strategic recalibrations of the Bank of Korea’s monetary policy amid fluctuations in global economic uncertainty. Utilizing a sophisticated microeconomic theoretical framework, this study employs Bayesian estimation techniques and impulse response analysis to dissect the dynamic effects of these global shocks on South Korea’s macroeconomic stability and policy direction. Our findings reveal that the Bank of Korea has adeptly navigated through turbulent economic conditions induced by external shocks through well-coordinated policy adaptations. These adaptations, which include both traditional and innovative monetary tools, have been crucial in stabilizing the financial environment and promoting economic growth. By detailing the tailored application of the Taylor rule within the Korean context and strategic foreign exchange interventions by the central bank, this study contributes significantly to the broader discourse on the efficacy of monetary policy in open economies and offers insights on integrating advanced analytical methods into economic policy analysis. Full article

Globalization opens up economies and encourages the free movement of persons and factors of production. Diaspora investors and workers earn income in the process and make remittances to the migrating countries. We examine the impact of the remittance inflow on the macroeconomic performance of top emigrating countries, which comprise nine emerging and two advanced economies. We conduct group and individual country analyses with distinct econometric models (Feasible Quasi Generalized Least Squares and Dynamic Common Correlated Effects) using data between 1987 and 2021. The results reveal positive impact of remittance inflows on nominal GDP and nominal GDP per capita and on real GDP and real GDP per capita, although evidence on the latter is weaker. In all, the emigrating countries can benefit from diaspora remittance in terms of improved productivity and macroeconomic performance. We therefore recommend better systems to facilitate remittance receipt and policies to channel such flows more into investment activities. Full article

Identifying macroeconomic events that are responsible for dramatic changes of economy is of particular relevance to understanding the overall economic dynamics. We introduce an open-source available efficient Python implementation of a Bayesian multi-trend change point analysis, which solves significant memory and computing time limitations to extract crisis information from a correlation metric. Therefore, we focus on the recently investigated S&P500 mean market correlation in a period of roughly 20 years that includes the dot-com bubble, the global financial crisis, and the Euro crisis. The analysis is performed two-fold: first, in retrospect on the whole dataset and second, in an online adaptive manner in pre-crisis segments. The online sensitivity horizon is roughly determined to be 80 up to 100 trading days after a crisis onset. A detailed comparison to global economic events supports the interpretation of the mean market correlation as an informative macroeconomic measure by a rather good agreement of change point distributions and major crisis events. Furthermore, the results hint at the importance of the U.S. housing bubble as a trigger of the global financial crisis, provide new evidence for the general reasoning of locally (meta)stable economic states, and could work as a comparative impact rating of specific economic events. Full article