Pub Date : 2025-12-13DOI: 10.1016/j.econlet.2025.112772
Nan Liu , Yanbo Liu
This work supplements Li and Liao (2020) by giving the uniform inference method for the nonparametric model that can include stationary mixingale and unit root regressors. The main intuition is to develop a self-generated regressor with reduced degrees of persistence and test an equivalent model under the null hypothesis. This paper gives the sup-test whose critical values can be approximated by score bootstrap and verifies the finite-sample performance numerically.
{"title":"Robust uniform nonparametric inference for time series","authors":"Nan Liu , Yanbo Liu","doi":"10.1016/j.econlet.2025.112772","DOIUrl":"10.1016/j.econlet.2025.112772","url":null,"abstract":"<div><div>This work supplements Li and Liao (2020) by giving the uniform inference method for the nonparametric model that can include stationary mixingale and unit root regressors. The main intuition is to develop a self-generated regressor with reduced degrees of persistence and test an equivalent model under the null hypothesis. This paper gives the sup-test whose critical values can be approximated by score bootstrap and verifies the finite-sample performance numerically.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112772"},"PeriodicalIF":1.8,"publicationDate":"2025-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798510","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 : 2025-12-12DOI: 10.1016/j.econlet.2025.112781
Zhuo Wang , Tong Liu , Mizhou Chen
We study how central bank communication affects China’s Treasury yield curve. Using large language models (LLM) to quantify the stance and timing orientation of PBC statements, we find that more accommodative statements raise medium-term yields while lowering long-term yields. Decomposing communication shows that current-policy signals increase medium-term premia, whereas future-policy statements induce duration extension that places downward pressure on long-term yields. Future accommodative communication also leads yield declines over the following year. Our results uncover a distinctive cross-maturity substitution mechanism in China’s bond market and highlight the value of text-based measures of communication.
{"title":"Current stance vs. future guidance: LLM evidence on how PBC communication shapes the yield curve","authors":"Zhuo Wang , Tong Liu , Mizhou Chen","doi":"10.1016/j.econlet.2025.112781","DOIUrl":"10.1016/j.econlet.2025.112781","url":null,"abstract":"<div><div>We study how central bank communication affects China’s Treasury yield curve. Using large language models (LLM) to quantify the stance and timing orientation of PBC statements, we find that more accommodative statements raise medium-term yields while lowering long-term yields. Decomposing communication shows that current-policy signals increase medium-term premia, whereas future-policy statements induce duration extension that places downward pressure on long-term yields. Future accommodative communication also leads yield declines over the following year. Our results uncover a distinctive cross-maturity substitution mechanism in China’s bond market and highlight the value of text-based measures of communication.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112781"},"PeriodicalIF":1.8,"publicationDate":"2025-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798513","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 : 2025-12-12DOI: 10.1016/j.econlet.2025.112780
Thiago Dalmédico Gil, Wesley Mendes-Da-Silva
We test whether UN climate conferences (COPs) act as recurrent policy shocks that move ESG thematic ETFs. Using a stacked difference-in-differences design around COP dates and mutual information to gauge market coupling, we study 70 ESG ETFs across two regimes: 2016–2020 (A) and 2021–2024 (B). Phase-A estimates fail standard parallel trend checks, but Phase-B yields credible effects: Solar energy sector underperforms post-COP, while Sustainable Infrastructure and Low-Carbon themes drift up; technology-adjacent themes display volatility compression and higher post-COP coupling with the S&P500, indicating reduced diversification. Results imply COPs reorient expectations and synchronize returns in transition sectors.
{"title":"The COP Effect: Repricing and re-coupling in ESG ETFs","authors":"Thiago Dalmédico Gil, Wesley Mendes-Da-Silva","doi":"10.1016/j.econlet.2025.112780","DOIUrl":"10.1016/j.econlet.2025.112780","url":null,"abstract":"<div><div>We test whether UN climate conferences (COPs) act as recurrent policy shocks that move ESG thematic ETFs. Using a stacked difference-in-differences design around COP dates and mutual information to gauge market coupling, we study 70 ESG ETFs across two regimes: 2016–2020 (A) and 2021–2024 (B). Phase-A estimates fail standard parallel trend checks, but Phase-B yields credible effects: Solar energy sector underperforms post-COP, while Sustainable Infrastructure and Low-Carbon themes drift up; technology-adjacent themes display volatility compression and higher post-COP coupling with the S&P500, indicating reduced diversification. Results imply COPs reorient expectations and synchronize returns in transition sectors.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112780"},"PeriodicalIF":1.8,"publicationDate":"2025-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798133","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 : 2025-12-11DOI: 10.1016/j.econlet.2025.112784
Josh Ederington , Yoonseon Han , David Lindequist , Jenny Minier
It is commonly assumed that the drastic decline in trade costs over the past century has made the world more interconnected and reduced the importance of physical distance. However, empirical gravity regressions show that distance continues to play an important role in explaining trade flows. We investigate whether physical distance has also continued to affect GDP comovements between countries: that is, is it still the case that neighboring countries are more likely to have synchronized business cycles than countries further apart? We show that, while geographic distance was a significant predictor of GDP comovements between 1955–2000, this effect disappears after 2000. Thus, we find evidence for the “death of distance” when it comes to GDP comovements.
{"title":"Has the world become more interconnected? Distance and GDP comovements over time","authors":"Josh Ederington , Yoonseon Han , David Lindequist , Jenny Minier","doi":"10.1016/j.econlet.2025.112784","DOIUrl":"10.1016/j.econlet.2025.112784","url":null,"abstract":"<div><div>It is commonly assumed that the drastic decline in trade costs over the past century has made the world more interconnected and reduced the importance of physical distance. However, empirical gravity regressions show that distance continues to play an important role in explaining trade flows. We investigate whether physical distance has also continued to affect GDP comovements between countries: that is, is it still the case that neighboring countries are more likely to have synchronized business cycles than countries further apart? We show that, while geographic distance was a significant predictor of GDP comovements between 1955–2000, this effect disappears after 2000. Thus, we find evidence for the “death of distance” when it comes to GDP comovements.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112784"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798512","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 : 2025-12-11DOI: 10.1016/j.econlet.2025.112776
DongIk Kang , Jongsang Park
This study tests for adverse selection in a government sponsored reverse mortgage market where pricing depends only on age, aggregate interest rates, and home value. Using district-level data from South Korea, we apply the “positive-correlation test,” linking coverage to unpriced risk factors such as longevity and housing-price expectations. We find that areas with higher life expectancy show greater participation and coverage. In contrast, slower past housing-price growth predicts greater coverage, particularly for high-value districts. The significant relationship between the unpriced risk factors and coverage reveal the presence of adverse selection in the market for reverse mortgages.
{"title":"Adverse selection in reverse mortgages: Evidence from South Korea","authors":"DongIk Kang , Jongsang Park","doi":"10.1016/j.econlet.2025.112776","DOIUrl":"10.1016/j.econlet.2025.112776","url":null,"abstract":"<div><div>This study tests for adverse selection in a government sponsored reverse mortgage market where pricing depends only on age, aggregate interest rates, and home value. Using district-level data from South Korea, we apply the “positive-correlation test,” linking coverage to unpriced risk factors such as longevity and housing-price expectations. We find that areas with higher life expectancy show greater participation and coverage. In contrast, slower past housing-price growth predicts greater coverage, particularly for high-value districts. The significant relationship between the unpriced risk factors and coverage reveal the presence of adverse selection in the market for reverse mortgages.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112776"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750278","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 : 2025-12-11DOI: 10.1016/j.econlet.2025.112777
Wassim Rajhi
This paper quantifies how global dollar shocks redistribute macro-financial stress toward developing economies. We construct an annual country-year indicator, the Development Drag Index (DDI), which measures the recurring cost of dollar dependence as a share of GDP. The DDI aggregates import price pass-through, reserve carry costs, and sovereign spreads on foreign-currency debt. Using a shift-share two-way fixed effects design for 2016–2024, we interact common dollar shocks with time-invariant country exposure. Quantitatively, crisis-scale dollar appreciations are associated with an increase in the DDI for highly dollar-exposed developing economies, while routine dollar movements have no detectable effect.
{"title":"Global dollar shocks and the development drag index","authors":"Wassim Rajhi","doi":"10.1016/j.econlet.2025.112777","DOIUrl":"10.1016/j.econlet.2025.112777","url":null,"abstract":"<div><div>This paper quantifies how global dollar shocks redistribute macro-financial stress toward developing economies. We construct an annual country-year indicator, the Development Drag Index (DDI), which measures the recurring cost of dollar dependence as a share of GDP. The DDI aggregates import price pass-through, reserve carry costs, and sovereign spreads on foreign-currency debt. Using a shift-share two-way fixed effects design for 2016–2024, we interact common dollar shocks with time-invariant country exposure. Quantitatively, crisis-scale dollar appreciations are associated with an increase in the DDI for highly dollar-exposed developing economies, while routine dollar movements have no detectable effect.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112777"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798511","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 : 2025-12-11DOI: 10.1016/j.econlet.2025.112783
Lijuan Qu
This paper studies optimal monetary policy under incomplete information and strategic uncertainty. We show that heightened strategic uncertainty steers policy toward price stabilization by strengthening the central bank’s price-stabilizing response, while an increase in public relative to private information promotes output stabilization by raising the policy weight on output stability. Under endogenous learning, private learning reinforces price stabilization, whereas public learning strengthens output stabilization.
{"title":"Incomplete information, strategic uncertainty and optimal monetary policy","authors":"Lijuan Qu","doi":"10.1016/j.econlet.2025.112783","DOIUrl":"10.1016/j.econlet.2025.112783","url":null,"abstract":"<div><div>This paper studies optimal monetary policy under incomplete information and strategic uncertainty. We show that heightened strategic uncertainty steers policy toward price stabilization by strengthening the central bank’s price-stabilizing response, while an increase in public relative to private information promotes output stabilization by raising the policy weight on output stability. Under endogenous learning, private learning reinforces price stabilization, whereas public learning strengthens output stabilization.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112783"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750279","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 : 2025-12-11DOI: 10.1016/j.econlet.2025.112778
Yike Sun , Yimin Wu
We show heterogeneity in risk factors for carry trade risk premia across country groups by decomposing global foreign exchange (FX) volatility innovations into geopolitical risk (GPR), economic policy uncertainty (EPU), and a residual FX market risk factor. Using monthly data for 40 economies (1999M1–2024M6), we orthogonalize innovations and estimate prices using a two-step Fama–MacBeth procedure. Three asymmetries emerge: GPR premia are positive but smaller in advanced economies (AEs) than in emerging and developing economies (EMDEs); EPU premia are positive in AEs and smaller, often negative, in EMDEs; the residual FX factor is priced negatively in AEs and positively in EMDEs.
{"title":"Carry trades and risk factors heterogeneity: Three asymmetries","authors":"Yike Sun , Yimin Wu","doi":"10.1016/j.econlet.2025.112778","DOIUrl":"10.1016/j.econlet.2025.112778","url":null,"abstract":"<div><div>We show heterogeneity in risk factors for carry trade risk premia across country groups by decomposing global foreign exchange (FX) volatility innovations into geopolitical risk (GPR), economic policy uncertainty (EPU), and a residual FX market risk factor. Using monthly data for 40 economies (1999M1–2024M6), we orthogonalize innovations and estimate prices using a two-step Fama–MacBeth procedure. Three asymmetries emerge: GPR premia are positive but smaller in advanced economies (AEs) than in emerging and developing economies (EMDEs); EPU premia are positive in AEs and smaller, often negative, in EMDEs; the residual FX factor is priced negatively in AEs and positively in EMDEs.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112778"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750280","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 : 2025-12-09DOI: 10.1016/j.econlet.2025.112771
Jacint Balaguer
Using data from the 2023 Spanish municipal elections, we show that newly elected mayors who replace incumbents from a different ideological bloc reduce their own pay upon taking office — by about 6 and 13 percentage points of the legal maximum in left-to-right and right-to-left turnovers, respectively — relative to reelected incumbents. No such adjustment occurs when the incoming mayor shares the predecessor’s ideological orientation. The pattern of results is consistent with a costly-signaling mechanism in which ideological outsiders use early pay cuts to credibly convey otherwise hard-to-observe attributes. More broadly, the findings suggest a previously unexplored way in which electoral turnover may shape local political behavior.
{"title":"Do newly elected mayors cut their own pay?","authors":"Jacint Balaguer","doi":"10.1016/j.econlet.2025.112771","DOIUrl":"10.1016/j.econlet.2025.112771","url":null,"abstract":"<div><div>Using data from the 2023 Spanish municipal elections, we show that newly elected mayors who replace incumbents from a different ideological bloc reduce their own pay upon taking office — by about 6 and 13 percentage points of the legal maximum in left-to-right and right-to-left turnovers, respectively — relative to reelected incumbents. No such adjustment occurs when the incoming mayor shares the predecessor’s ideological orientation. The pattern of results is consistent with a costly-signaling mechanism in which ideological outsiders use early pay cuts to credibly convey otherwise hard-to-observe attributes. More broadly, the findings suggest a previously unexplored way in which electoral turnover may shape local political behavior.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112771"},"PeriodicalIF":1.8,"publicationDate":"2025-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750277","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 : 2025-12-08DOI: 10.1016/j.econlet.2025.112759
Samyam Shrestha , Hugo Sant’Anna
This paper examines how the end of free movement following Brexit in January 2021 reshaped non-transient international migration flows involving the UK. Using a novel dataset of monthly bilateral migration flows from 2019 to 2022 constructed from Facebook user location data covering 181 countries with high spatial and temporal resolution, we estimate a gravity model framework to assess post-Brexit changes in migration patterns. We find that the end of free movement significantly reduced migration between the UK and EU countries, while migration from non-EU countries to the UK increased. Migration from the UK to non-EU countries also declined. These findings illustrate that Brexit reconfigured the geography and composition of international migration flows.
{"title":"The end of free movement and international migration","authors":"Samyam Shrestha , Hugo Sant’Anna","doi":"10.1016/j.econlet.2025.112759","DOIUrl":"10.1016/j.econlet.2025.112759","url":null,"abstract":"<div><div>This paper examines how the end of free movement following Brexit in January 2021 reshaped non-transient international migration flows involving the UK. Using a novel dataset of monthly bilateral migration flows from 2019 to 2022 constructed from Facebook user location data covering 181 countries with high spatial and temporal resolution, we estimate a gravity model framework to assess post-Brexit changes in migration patterns. We find that the end of free movement significantly reduced migration between the UK and EU countries, while migration from non-EU countries to the UK increased. Migration from the UK to non-EU countries also declined. These findings illustrate that Brexit reconfigured the geography and composition of international migration flows.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112759"},"PeriodicalIF":1.8,"publicationDate":"2025-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798519","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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