Pub Date : 2026-01-09DOI: 10.1016/j.econlet.2026.112816
Whelsy Boungou , Bastien Dufau
This paper examines the influence of monetary policy on the impact of the Phase IV announcement of the EU Emissions Trading System (EU ETS) on firms’ R&D investments. To this end, we employ a Difference-in-Differences approach on 128 industrial sectors (95 regulated and 33 non-regulated) across OECD countries between 2005 and 2019. The results show that the announcement of Phase IV in 2015 significantly boosted R&D investments in regulated firms, with the effects strengthening as the implementation year approached. Moreover, accommodative monetary policy, through persistently low interest rates, amplified these investments by lowering financing costs. Our findings highlight the complementarity between environmental regulation and macroeconomic policy in fostering green innovation.
{"title":"Empirical evidence of a green investment channel of monetary policy under the EU ETS","authors":"Whelsy Boungou , Bastien Dufau","doi":"10.1016/j.econlet.2026.112816","DOIUrl":"10.1016/j.econlet.2026.112816","url":null,"abstract":"<div><div>This paper examines the influence of monetary policy on the impact of the Phase IV announcement of the EU Emissions Trading System (EU ETS) on firms’ R&D investments. To this end, we employ a Difference-in-Differences approach on 128 industrial sectors (95 regulated and 33 non-regulated) across OECD countries between 2005 and 2019. The results show that the announcement of Phase IV in 2015 significantly boosted R&D investments in regulated firms, with the effects strengthening as the implementation year approached. Moreover, accommodative monetary policy, through persistently low interest rates, amplified these investments by lowering financing costs. Our findings highlight the complementarity between environmental regulation and macroeconomic policy in fostering green innovation.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112816"},"PeriodicalIF":1.8,"publicationDate":"2026-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146024000","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-07DOI: 10.1016/j.econlet.2026.112818
Timothy Watson , Juha Tervala
Learning by doing (LBD), a mechanism whereby productivity depends on past employment, is increasingly used in macroeconomic models to capture hysteresis and endogenous productivity. A key challenge has been calibrating its structural parameters, primarily due to the limited availability of empirical estimates. We estimate a productivity persistence of 0.91 and an elasticity of productivity with respect to lagged employment ranging from 0.13 to 0.30, with seven statistically significant estimates averaging 0.22. These results provide empirically grounded parameters and demonstrate the value of LBD as a tractable approach to capturing endogenous and procyclical productivity dynamics in macroeconomic models.
{"title":"Hysteresis through learning by doing: Estimating endogenous productivity","authors":"Timothy Watson , Juha Tervala","doi":"10.1016/j.econlet.2026.112818","DOIUrl":"10.1016/j.econlet.2026.112818","url":null,"abstract":"<div><div>Learning by doing (LBD), a mechanism whereby productivity depends on past employment, is increasingly used in macroeconomic models to capture hysteresis and endogenous productivity. A key challenge has been calibrating its structural parameters, primarily due to the limited availability of empirical estimates. We estimate a productivity persistence of 0.91 and an elasticity of productivity with respect to lagged employment ranging from 0.13 to 0.30, with seven statistically significant estimates averaging 0.22. These results provide empirically grounded parameters and demonstrate the value of LBD as a tractable approach to capturing endogenous and procyclical productivity dynamics in macroeconomic models.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112818"},"PeriodicalIF":1.8,"publicationDate":"2026-01-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145923902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-06DOI: 10.1016/j.econlet.2025.112788
Ahmet Akyol , Kartik Athreya , Simon Farbman , Urvi Neelakantan
In the US, Black self-employment rates are roughly half the overall rate and half of that predicted by a standard life cycle model of occupational choice. Even the total elimination of credit access from the model leaves predicted Black self-employment 50% above actual rates. Given that the literature has documented a variety of barriers to self-employment, it is useful to have a measure of their total effect. The contribution of this paper is to demonstrate that a surprisingly simple measure — a constant 20% wedge on self-employment productivity — quantitatively captures the total effect of these headwinds over the entire life-cycle.
{"title":"Measuring the headwinds to Black self-employment","authors":"Ahmet Akyol , Kartik Athreya , Simon Farbman , Urvi Neelakantan","doi":"10.1016/j.econlet.2025.112788","DOIUrl":"10.1016/j.econlet.2025.112788","url":null,"abstract":"<div><div>In the US, Black self-employment rates are roughly half the overall rate and half of that predicted by a standard life cycle model of occupational choice. Even the total elimination of credit access from the model leaves predicted Black self-employment 50% above actual rates. Given that the literature has documented a variety of barriers to self-employment, it is useful to have a measure of their total effect. The contribution of this paper is to demonstrate that a surprisingly simple measure — a constant 20% wedge on self-employment productivity — quantitatively captures the total effect of these headwinds over the entire life-cycle.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112788"},"PeriodicalIF":1.8,"publicationDate":"2026-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145923904","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.econlet.2025.112775
Byoungho Choi
When a central bank lacks independence and is subject to political influence, pressure to lower interest rates intensifies. Consequently, markets come to expect rate cuts or a slower pace of increases. These sticky expectations can trigger stock price crash risk when rates rise. We develop a simple model in which investors respond asymmetrically to interest rate signals and show that this asymmetry is amplified by biased investors. Evidence from 22 non-Eurozone countries supports this prediction. When the policy rate increases, countries with low central bank independence (CBI) exhibit larger, more positive monetary policy surprises than high CBI countries, implying biased beliefs under low CBI. Stock markets are more overvalued in low CBI countries than in high CBI countries, and this overvaluation is sensitive to policy rate hikes. In low CBI countries, rate hikes result in pronounced return declines and elevated crash risk, whereas high CBI countries exhibit no such pattern.
{"title":"Central bank independence and stock price crash risk","authors":"Byoungho Choi","doi":"10.1016/j.econlet.2025.112775","DOIUrl":"10.1016/j.econlet.2025.112775","url":null,"abstract":"<div><div>When a central bank lacks independence and is subject to political influence, pressure to lower interest rates intensifies. Consequently, markets come to expect rate cuts or a slower pace of increases. These sticky expectations can trigger stock price crash risk when rates rise. We develop a simple model in which investors respond asymmetrically to interest rate signals and show that this asymmetry is amplified by biased investors. Evidence from 22 non-Eurozone countries supports this prediction. When the policy rate increases, countries with low central bank independence (CBI) exhibit larger, more positive monetary policy surprises than high CBI countries, implying biased beliefs under low CBI. Stock markets are more overvalued in low CBI countries than in high CBI countries, and this overvaluation is sensitive to policy rate hikes. In low CBI countries, rate hikes result in pronounced return declines and elevated crash risk, whereas high CBI countries exhibit no such pattern.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112775"},"PeriodicalIF":1.8,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145974732","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.econlet.2026.112808
Hai Lin , Rui Qiao
This letter investigates whether scheduled macroeconomic news announcements influence the market dark trading activities and how dark trading affects market efficiency around the news arrivals. We provide empirical evidence that the workup trading activities increase significantly after scheduled news arrivals, and the impact of news weakens after five minutes. We also find that dark trading decreases informational efficiency. Additionally, we find that the U.S. Treasury market incorporates new information very quickly, and the market efficiency is improved after news announcements.
{"title":"Dark trading and informational efficiency around macroeconomic news arrivals: Evidence from the U.S. Treasury market","authors":"Hai Lin , Rui Qiao","doi":"10.1016/j.econlet.2026.112808","DOIUrl":"10.1016/j.econlet.2026.112808","url":null,"abstract":"<div><div>This letter investigates whether scheduled macroeconomic news announcements influence the market dark trading activities and how dark trading affects market efficiency around the news arrivals. We provide empirical evidence that the workup trading activities increase significantly after scheduled news arrivals, and the impact of news weakens after five minutes. We also find that dark trading decreases informational efficiency. Additionally, we find that the U.S. Treasury market incorporates new information very quickly, and the market efficiency is improved after news announcements.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112808"},"PeriodicalIF":1.8,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145974731","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.econlet.2026.112809
Yingjie Niu , Zian Tang , Jinqiang Yang
We consider the optimal skills acquisition and labor supply plans of a household that worries about model uncertainty and seeks robust decisions. Quantitative implications show that model uncertainty acts as a state-dependent amplifier on household effort. It induces higher effort at low to moderate debt levels via a precautionary motive, but this is eventually outweighed by an amplified debt overhang effect at high debt levels, leading to a lower level of effort. These shifts in household policies ultimately lead to a decrease in the household’s probability of default.
{"title":"Robust human capital investment","authors":"Yingjie Niu , Zian Tang , Jinqiang Yang","doi":"10.1016/j.econlet.2026.112809","DOIUrl":"10.1016/j.econlet.2026.112809","url":null,"abstract":"<div><div>We consider the optimal skills acquisition and labor supply plans of a household that worries about model uncertainty and seeks robust decisions. Quantitative implications show that model uncertainty acts as a state-dependent amplifier on household effort. It induces higher effort at low to moderate debt levels via a precautionary motive, but this is eventually outweighed by an amplified <em>debt overhang</em> effect at high debt levels, leading to a lower level of effort. These shifts in household policies ultimately lead to a decrease in the household’s probability of default.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112809"},"PeriodicalIF":1.8,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145904128","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-04DOI: 10.1016/j.econlet.2026.112807
Min Cao, Philipp D. Schaberl
The rapid shifts in Treasury yields from 2020 to 2024 necessitate an understanding of the value relevance of accounting information under different yield levels. We examine whether and how Treasury yields impact the price relevance of two key accounting constructs: the book value of equity and earnings. Our findings reveal positive relationships between Treasury yields and the combined relevance of book value and earnings, as well as the relevance of book value alone in price-based relevance models. Further analysis using decomposition and normalization shows that rising Treasury yields shift valuation weights from earnings to book value. These effects are particularly pronounced for high-leverage firms. Our results are consistent with the abandonment hypothesis. This study contributes to the understudied area of how macroeconomic factors influence the usefulness of accounting information in market valuations and has important implications for investors, analysts, and policymakers in interpreting financial statements under varying economic conditions.
{"title":"Yielding to relevance: How treasury yields impact accounting relevance","authors":"Min Cao, Philipp D. Schaberl","doi":"10.1016/j.econlet.2026.112807","DOIUrl":"10.1016/j.econlet.2026.112807","url":null,"abstract":"<div><div>The rapid shifts in Treasury yields from 2020 to 2024 necessitate an understanding of the value relevance of accounting information under different yield levels. We examine whether and how Treasury yields impact the price relevance of two key accounting constructs: the book value of equity and earnings. Our findings reveal positive relationships between Treasury yields and the combined relevance of book value and earnings, as well as the relevance of book value alone in price-based relevance models. Further analysis using decomposition and normalization shows that rising Treasury yields shift valuation weights from earnings to book value. These effects are particularly pronounced for high-leverage firms. Our results are consistent with the abandonment hypothesis. This study contributes to the understudied area of how macroeconomic factors influence the usefulness of accounting information in market valuations and has important implications for investors, analysts, and policymakers in interpreting financial statements under varying economic conditions.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112807"},"PeriodicalIF":1.8,"publicationDate":"2026-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145923923","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-02DOI: 10.1016/j.econlet.2025.112800
Dylan Brewer, Daniel Dench, Maxwell Rosenthal
We study the pass-through of wholesale natural gas prices into 12-month fixed-rate residential contracts in Georgia’s deregulated natural gas market. Our theoretical model suggests that socially optimal contracts should uniformly pass through future wholesale fuel costs during the contract period. We find that total pass-through is close to complete, but almost entirely driven by contemporaneous and lagged wholesale prices. Future price pass-through is limited and sometimes negative, deviating from the theoretical socially optimal benchmark.
{"title":"Energy price pass-through with long-term contracts","authors":"Dylan Brewer, Daniel Dench, Maxwell Rosenthal","doi":"10.1016/j.econlet.2025.112800","DOIUrl":"10.1016/j.econlet.2025.112800","url":null,"abstract":"<div><div>We study the pass-through of wholesale natural gas prices into 12-month fixed-rate residential contracts in Georgia’s deregulated natural gas market. Our theoretical model suggests that socially optimal contracts should uniformly pass through future wholesale fuel costs during the contract period. We find that total pass-through is close to complete, but almost entirely driven by contemporaneous and lagged wholesale prices. Future price pass-through is limited and sometimes negative, deviating from the theoretical socially optimal benchmark.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112800"},"PeriodicalIF":1.8,"publicationDate":"2026-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145974730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-01DOI: 10.1016/j.econlet.2025.112785
Maxim Ivanov
This paper provides bounds on the survival function and the mean of an increasing utility function for continuous probability distributions that are analytically complex. The idea is to select a calibration distribution whose inverse hazard rate approximates that of the original under specified criteria. Consequently, the survival function and mean utility of the original distribution fall within the corresponding bounds of the calibration distribution. Moreover, the non-existence of the calibration mean utility implies the same for the original. As an application, we derive the upper bound on the mean utility of the Generalized Beta of the Second Kind (GB2) distribution.
{"title":"Mean bounds and existence: Calibration approach via inverse hazard rates","authors":"Maxim Ivanov","doi":"10.1016/j.econlet.2025.112785","DOIUrl":"10.1016/j.econlet.2025.112785","url":null,"abstract":"<div><div>This paper provides bounds on the survival function and the mean of an increasing utility function for continuous probability distributions that are analytically complex. The idea is to select a calibration distribution whose inverse hazard rate approximates that of the original under specified criteria. Consequently, the survival function and mean utility of the original distribution fall within the corresponding bounds of the calibration distribution. Moreover, the non-existence of the calibration mean utility implies the same for the original. As an application, we derive the upper bound on the mean utility of the Generalized Beta of the Second Kind (GB2) distribution.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112785"},"PeriodicalIF":1.8,"publicationDate":"2026-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145939159","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-31DOI: 10.1016/j.econlet.2025.112799
Claudia Diehl , Felix Wolter
We examine the relationship between local income inequality and people’s misperception that they are in the middle of the national income distribution (“center bias”). Local contexts shape perceptions of inequality by influencing the availability of opportunities for upward and downward social comparisons. Four mechanisms could link local inequality to perceptions of one’s relative income position: exposure versus segregation and contrast versus assimilation. We supplement geo-referenced survey data with context information and show that higher local inequality is associated with lower “center bias” (“exposure” mechanism). There is no clear evidence that respondents feel richer in richer contexts (“assimilation” mechanism).
{"title":"“Center bias” is lower in more unequal local contexts","authors":"Claudia Diehl , Felix Wolter","doi":"10.1016/j.econlet.2025.112799","DOIUrl":"10.1016/j.econlet.2025.112799","url":null,"abstract":"<div><div>We examine the relationship between local income inequality and people’s misperception that they are in the middle of the national income distribution (“center bias”). Local contexts shape perceptions of inequality by influencing the availability of opportunities for upward and downward social comparisons. Four mechanisms could link local inequality to perceptions of one’s relative income position: exposure versus segregation and contrast versus assimilation. We supplement geo-referenced survey data with context information and show that higher local inequality is associated with lower “center bias” (“exposure” mechanism). There is no clear evidence that respondents feel richer in richer contexts (“assimilation” mechanism).</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112799"},"PeriodicalIF":1.8,"publicationDate":"2025-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145923901","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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