Pub Date : 2026-01-22DOI: 10.1016/j.inteco.2026.100678
Marcella Lucchetta
This work presents a dynamic three-period model integrating the European Union’s (EU) Green Asset Ratio (GAR) with the Basel III Leverage Ratio (LR) and Liquidity Coverage Ratio (LCR) in a context of stochastic economic and deposit shocks. Banks optimize portfolios across green and non-green assets, highlighting critical inefficiencies. Unregulated equilibria favor overinvestment in volatile assets and elevated systemic risk; binding GAR constraints distort allocations toward volatile green assets; and LCR requirements exacerbate fragility through deposit volatility. We highlight the dynamic interplay between these regulations, demonstrating the conditional effects under shocks of varying magnitudes. We propose an adaptive regulatory supplement that realigns incentives with first-best efficiency. We demonstrate the greater effectiveness of flexible, dynamic regulations over static ones in terms of risk mitigation. Numerical simulations and simple examples validate these results, offering insights for the design of sustainable banking policies.
{"title":"Green Banking Resilience: Trade-offs under Shocks","authors":"Marcella Lucchetta","doi":"10.1016/j.inteco.2026.100678","DOIUrl":"10.1016/j.inteco.2026.100678","url":null,"abstract":"<div><div>This work presents a dynamic three-period model integrating the European Union’s (EU) Green Asset Ratio (GAR) with the Basel III Leverage Ratio (LR) and Liquidity Coverage Ratio (LCR) in a context of stochastic economic and deposit shocks. Banks optimize portfolios across green and non-green assets, highlighting critical inefficiencies. Unregulated equilibria favor overinvestment in volatile assets and elevated systemic risk; binding GAR constraints distort allocations toward volatile green assets; and LCR requirements exacerbate fragility through deposit volatility. We highlight the dynamic interplay between these regulations, demonstrating the conditional effects under shocks of varying magnitudes. We propose an adaptive regulatory supplement that realigns incentives with first-best efficiency. We demonstrate the greater effectiveness of flexible, dynamic regulations over static ones in terms of risk mitigation. Numerical simulations and simple examples validate these results, offering insights for the design of sustainable banking policies.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100678"},"PeriodicalIF":0.0,"publicationDate":"2026-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146034245","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.inteco.2025.100672
Alberto Tidu, Luigi Apuzzo, Stefano Usai
This paper investigates the relationship between trade, technology, and regional productivity growth across European Union regions between 2017 and 2023. Leveraging newly available NUTS-2 level data on interregional and international trade flows, we estimate a series of Barro-type growth regressions derived from the Solow model and extended to include institutional quality, foreign direct investment, urbanisation, and the COVID-19 shock. The analysis confirms conditional convergence: less productive regions tend to grow faster, particularly when supported by higher capital intensity and employment in high-tech sectors.
Trade exposure is positively associated with productivity growth, but this relationship is not uniform. Regions more engaged in extra-EU trade — particularly those exporting final goods beyond the EU or importing capital goods from abroad — experience stronger productivity gains. In contrast, a higher share of final goods exports within the EU is linked to weaker performance, suggesting possible saturation or weaker technological spillovers within the Single Market.
These findings underscore the importance of trade composition and direction in shaping regional development. They highlight the need for EU policies that enhance technological capacity and facilitate global market access for lagging regions. Supporting targeted integration into global value chains, especially in capital-intensive sectors, may offer a pathway to more equitable productivity growth across the Union.
{"title":"The importance of trade and technology for productivity: An empirical assessment across EU regions","authors":"Alberto Tidu, Luigi Apuzzo, Stefano Usai","doi":"10.1016/j.inteco.2025.100672","DOIUrl":"10.1016/j.inteco.2025.100672","url":null,"abstract":"<div><div>This paper investigates the relationship between trade, technology, and regional productivity growth across European Union regions between 2017 and 2023. Leveraging newly available NUTS-2 level data on interregional and international trade flows, we estimate a series of Barro-type growth regressions derived from the Solow model and extended to include institutional quality, foreign direct investment, urbanisation, and the COVID-19 shock. The analysis confirms conditional convergence: less productive regions tend to grow faster, particularly when supported by higher capital intensity and employment in high-tech sectors.</div><div>Trade exposure is positively associated with productivity growth, but this relationship is not uniform. Regions more engaged in extra-EU trade — particularly those exporting final goods beyond the EU or importing capital goods from abroad — experience stronger productivity gains. In contrast, a higher share of final goods exports within the EU is linked to weaker performance, suggesting possible saturation or weaker technological spillovers within the Single Market.</div><div>These findings underscore the importance of trade composition and direction in shaping regional development. They highlight the need for EU policies that enhance technological capacity and facilitate global market access for lagging regions. Supporting targeted integration into global value chains, especially in capital-intensive sectors, may offer a pathway to more equitable productivity growth across the Union.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100672"},"PeriodicalIF":0.0,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146034247","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","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.inteco.2025.100675
Kay Kiang Tan , Andrew Jia Yi Kam
This study investigates the heterogeneous impact of Global Value Chain (GVC) participation on multidimensional income inequality within Malaysia's manufacturing sector between 2000 and 2015. Using unpublished and detailed economic census data from the Department of Statistics Malaysia, the analysis employs panel regressions to assess the effects of GVC participation, mediated by human and technological capital endowments, across various manufacturing industries. We examine how different types of GVC participation, namely backward and forward linkages, interact with human and technological capabilities to influence income inequality. Our results show that Malaysia's integration into GVCs has generally widened income inequality in terms of value-added, wage distribution, and a decreased labour income share, with backward linkages being the primarily driver of these effects. In contrast, forward linkages tend to have weaker impacts and may even reduce inequality in low- and medium-technology industries. The impact also display substantial regional heterogeneity, with less-developed states or those without Free Industrial Zones experiencing a more significant rise in inequality. Medium-high-technology industries likewise exhibit stronger inequality-worsening effects. While stronger technological and human capabilities can moderate inequality in value-added and wage distribution, they are not able to improve the income inequality effects of GVC participation on factor income distribution. Policy recommendations include the need to support domestic firms in upgrading technology and skills, better leverage the potential benefits of forward GVC participation, and address regional disparities. Continuous monitoring and further research, alongside sustained investment in education and R&D, remain essential.
{"title":"Chains of disparity: How global value chains reshape income distribution in the Malaysian manufacturing sector","authors":"Kay Kiang Tan , Andrew Jia Yi Kam","doi":"10.1016/j.inteco.2025.100675","DOIUrl":"10.1016/j.inteco.2025.100675","url":null,"abstract":"<div><div>This study investigates the heterogeneous impact of Global Value Chain (GVC) participation on multidimensional income inequality within Malaysia's manufacturing sector between 2000 and 2015. Using unpublished and detailed economic census data from the Department of Statistics Malaysia, the analysis employs panel regressions to assess the effects of GVC participation, mediated by human and technological capital endowments, across various manufacturing industries. We examine how different types of GVC participation, namely backward and forward linkages, interact with human and technological capabilities to influence income inequality. Our results show that Malaysia's integration into GVCs has generally widened income inequality in terms of value-added, wage distribution, and a decreased labour income share, with backward linkages being the primarily driver of these effects. In contrast, forward linkages tend to have weaker impacts and may even reduce inequality in low- and medium-technology industries. The impact also display substantial regional heterogeneity, with less-developed states or those without Free Industrial Zones experiencing a more significant rise in inequality. Medium-high-technology industries likewise exhibit stronger inequality-worsening effects. While stronger technological and human capabilities can moderate inequality in value-added and wage distribution, they are not able to improve the income inequality effects of GVC participation on factor income distribution. Policy recommendations include the need to support domestic firms in upgrading technology and skills, better leverage the potential benefits of forward GVC participation, and address regional disparities. Continuous monitoring and further research, alongside sustained investment in education and R&D, remain essential.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100675"},"PeriodicalIF":0.0,"publicationDate":"2026-01-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146034248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates whether or not the access to and use of ICT can help African countries reduce their growth inefficiencies. Inefficiency is measured, on the one hand, by the gap between a country's growth rate and its own frontier, and on the other hand by the relative position of each country compared to the best achievers. We find that if countries were doing a better job of controlling corruption and improving citizen participation in politics, they would achieve higher growth efficiency performance by using ICT. When countries are compared with each other, considering the growth "frontier" as countries in the sample, then growth differentials are explained primarily by non-ICT factors of growth (human capital, schooling rates, capital growth rates, etc.). The role of ICT factors is secondary. But they contribute to growth to a greater extent for the best achievers (compared to the lowest and middle achievers) because they are better endowed with ICT factors than the others.
{"title":"Technology in Africa: is the use of ICT making a decisive contribution to growth?","authors":"Désiré Avom , Gilles Dufrénot , Sylvie ML. Eyeffa Ekomo","doi":"10.1016/j.inteco.2025.100676","DOIUrl":"10.1016/j.inteco.2025.100676","url":null,"abstract":"<div><div>This paper investigates whether or not the access to and use of ICT can help African countries reduce their growth inefficiencies. Inefficiency is measured, on the one hand, by the gap between a country's growth rate and its own frontier, and on the other hand by the relative position of each country compared to the best achievers. We find that if countries were doing a better job of controlling corruption and improving citizen participation in politics, they would achieve higher growth efficiency performance by using ICT. When countries are compared with each other, considering the growth \"frontier\" as countries in the sample, then growth differentials are explained primarily by non-ICT factors of growth (human capital, schooling rates, capital growth rates, etc.). The role of ICT factors is secondary. But they contribute to growth to a greater extent for the best achievers (compared to the lowest and middle achievers) because they are better endowed with ICT factors than the others.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100676"},"PeriodicalIF":0.0,"publicationDate":"2025-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146034246","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-27DOI: 10.1016/j.inteco.2025.100673
Tii Nchofoung , Nathanael Ojong , Eric Kehinde Ogunleye
This study investigates the impact of exchange rate fluctuations on the energy transition in Africa, using data from 41 African countries over the period 2000–2021. It assesses the transition to clean energy while accounting for different monetary policy coordination scenarios. Methodologically, the analysis relies on a panel data framework, employing fixed-effects estimations with Driskoll and Kraay (1998) standard errors, as well as panel vector autoregressive (PVAR) models. The findings indicate that both exchange rate misalignment and exchange rate volatility adversely affect the energy transition in the region. These results suggest that African policymakers should prioritise policies aimed at enhancing exchange rate stability and ensuring alignment with economic fundamentals in order to support the energy transition.
{"title":"Exchange rate fluctuations and energy transition in Africa","authors":"Tii Nchofoung , Nathanael Ojong , Eric Kehinde Ogunleye","doi":"10.1016/j.inteco.2025.100673","DOIUrl":"10.1016/j.inteco.2025.100673","url":null,"abstract":"<div><div>This study investigates the impact of exchange rate fluctuations on the energy transition in Africa, using data from 41 African countries over the period 2000–2021. It assesses the transition to clean energy while accounting for different monetary policy coordination scenarios. Methodologically, the analysis relies on a panel data framework, employing fixed-effects estimations with Driskoll and Kraay (1998) standard errors, as well as panel vector autoregressive (PVAR) models. The findings indicate that both exchange rate misalignment and exchange rate volatility adversely affect the energy transition in the region. These results suggest that African policymakers should prioritise policies aimed at enhancing exchange rate stability and ensuring alignment with economic fundamentals in order to support the energy transition.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100673"},"PeriodicalIF":0.0,"publicationDate":"2025-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145880131","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines whether renewable energy adoption unconditionally contributes to economic outcomes in developing countries, or whether it can, under certain institutional conditions, impede economic progress. Analyzing panel data from 45 developing countries (2000–2020) using Driscoll–Kraay standard errors, we find a statistically significant negative association between an increasing renewable energy share and both GDP growth and GDP per capita. Crucially, institutional quality plays a pivotal moderating role. While stronger institutions, such as control of corruption and rule of law, mitigate negative impacts on per capita income and employment, they paradoxically appear to exacerbate the negative effect on overall GDP growth, suggesting a more transparent internalization of transition costs in better-governed environments. Furthermore, our findings demonstrate significant heterogeneity across income levels: low-income countries experience positive economic effects from renewable energy adoption, whereas lower-middle-income countries face more pronounced negative impacts. These results challenge the uniformly positive narrative of green growth, underscoring that the energy transition involves significant economic trade-offs critically dependent on a nation’s institutional framework and developmental stage. Policymakers must adopt context-specific strategies to navigate these complexities effectively.
{"title":"Economic sustainability and institutional quality in the green energy transition: Evidence from developing economies","authors":"Amar Rao , Mariem Aloulou , Vishal Dagar , Ashutosh Yadav","doi":"10.1016/j.inteco.2025.100669","DOIUrl":"10.1016/j.inteco.2025.100669","url":null,"abstract":"<div><div>This study examines whether renewable energy adoption unconditionally contributes to economic outcomes in developing countries, or whether it can, under certain institutional conditions, impede economic progress. Analyzing panel data from 45 developing countries (2000–2020) using Driscoll–Kraay standard errors, we find a statistically significant negative association between an increasing renewable energy share and both GDP growth and GDP per capita. Crucially, institutional quality plays a pivotal moderating role. While stronger institutions, such as control of corruption and rule of law, mitigate negative impacts on per capita income and employment, they paradoxically appear to exacerbate the negative effect on overall GDP growth, suggesting a more transparent internalization of transition costs in better-governed environments. Furthermore, our findings demonstrate significant heterogeneity across income levels: low-income countries experience positive economic effects from renewable energy adoption, whereas lower-middle-income countries face more pronounced negative impacts. These results challenge the uniformly positive narrative of green growth, underscoring that the energy transition involves significant economic trade-offs critically dependent on a nation’s institutional framework and developmental stage. Policymakers must adopt context-specific strategies to navigate these complexities effectively.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100669"},"PeriodicalIF":0.0,"publicationDate":"2025-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145880130","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-20DOI: 10.1016/j.inteco.2025.100670
María Isabel Luna Kanematsu , Manuel Monge , Juan Infante
This study analyzes employment sentiment dynamics in the Euro Area during recessions using long memory models and time–frequency causality tests. Results show strong persistence in expectations and evidence of bidirectional causality with recession indicators. Employment sentiment serves as a short- and medium-term predictor of recessions, while downturns have lasting effects on labor market perceptions. These findings highlight the relevance of sentiment indicators for macroeconomic forecasting and policy design.
{"title":"Employment sentiment behavior during European economic crises: Time trends and persistence analysis","authors":"María Isabel Luna Kanematsu , Manuel Monge , Juan Infante","doi":"10.1016/j.inteco.2025.100670","DOIUrl":"10.1016/j.inteco.2025.100670","url":null,"abstract":"<div><div>This study analyzes employment sentiment dynamics in the Euro Area during recessions using long memory models and time–frequency causality tests. Results show strong persistence in expectations and evidence of bidirectional causality with recession indicators. Employment sentiment serves as a short- and medium-term predictor of recessions, while downturns have lasting effects on labor market perceptions. These findings highlight the relevance of sentiment indicators for macroeconomic forecasting and policy design.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100670"},"PeriodicalIF":0.0,"publicationDate":"2025-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145836494","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-18DOI: 10.1016/j.inteco.2025.100666
Charlie Joyez
We study how disruptions propagate through global value chains (GVCs) and how network structure conditions their effects. Using Eora country–industry data for 189 countries and 26 industries (1996–2015), shocks are defined by a distribution-based rule; exposure counts disrupted upstream/downstream partners, and redundancy counts non-disrupted pre-existing links. We estimate fixed-effects impact models—where robustness is smaller contemporaneous deterioration conditional on exposure—and a grouped-time complementary log–log hazard—where resilience is faster return to the pre-shock level. Two findings emerge. First, exposure propagates, depressing output, value added, and exports, and slowing recovery. Second, redundancy mitigates these effects, offsetting the impact and raising the recovery hazard. As an illustration, high-technology activities appear less sensitive on impact and recover faster than low-technology ones, an advantage explained by higher redundancy despite deeper connections. These results suggest that strengthening robustness and resilience requires deepening GVC integration through strategic redundant linkages, rather than retreating from openness.
{"title":"Connectivity and contagion: How industry networks shape the transmission of shocks in global value chains","authors":"Charlie Joyez","doi":"10.1016/j.inteco.2025.100666","DOIUrl":"10.1016/j.inteco.2025.100666","url":null,"abstract":"<div><div>We study how disruptions propagate through global value chains (GVCs) and how network structure conditions their effects. Using Eora country–industry data for 189 countries and 26 industries (1996–2015), shocks are defined by a distribution-based rule; exposure counts disrupted upstream/downstream partners, and redundancy counts non-disrupted pre-existing links. We estimate fixed-effects impact models—where robustness is smaller contemporaneous deterioration conditional on exposure—and a grouped-time complementary log–log hazard—where resilience is faster return to the pre-shock level. Two findings emerge. First, exposure propagates, depressing output, value added, and exports, and slowing recovery. Second, redundancy mitigates these effects, offsetting the impact and raising the recovery hazard. As an illustration, high-technology activities appear less sensitive on impact and recover faster than low-technology ones, an advantage explained by higher redundancy despite deeper connections. These results suggest that strengthening robustness and resilience requires deepening GVC integration through strategic redundant linkages, rather than retreating from openness.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100666"},"PeriodicalIF":0.0,"publicationDate":"2025-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145786742","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","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.inteco.2025.100668
Bernardo Maggi
We model the Stability and Growth Pact (SGP) efficiency criterion for managing tax revenues within a stochastic optimal control problem and analyze the role of uncertainty stemming from unexpected public expenditure. We employ a functional analysis approach based on the Riccati equation, specifically tailored for this stochastic setting, and assess the stability properties of the model. We have the following results: (i) the optimal tax revenue is a nonstationary process in a long-run cointegration equilibrium with long-term public debt, which is a nonstationary process, too; (ii) the long-run equilibrium is not viable during a prolonged downturn of the economic cycle; (iii) a monetary policy responding to fiscal shocks may postpone the noncompliance with the SGP; (iv) the probability of noncompliance with the SGP based on a logistic regression model is increasing with the extent of political uncertainty, and declines as the upper limit for the socially sustainable average tax rate rises. Our analysis shows that structural reforms should be directed to mitigate the cost of uncertainty in public expenditure and improve the quality of public services.
{"title":"Assessing the effect of uncertainty in policy decisions on the sustainability of the Stability and Growth Pact: A functional analysis approach","authors":"Bernardo Maggi","doi":"10.1016/j.inteco.2025.100668","DOIUrl":"10.1016/j.inteco.2025.100668","url":null,"abstract":"<div><div>We model the Stability and Growth Pact (SGP) efficiency criterion for managing tax revenues within a stochastic optimal control problem and analyze the role of uncertainty stemming from unexpected public expenditure. We employ a functional analysis approach based on the Riccati equation, specifically tailored for this stochastic setting, and assess the stability properties of the model. We have the following results: (<em>i</em>) the optimal tax revenue is a nonstationary process in a long-run cointegration equilibrium with long-term public debt, which is a nonstationary process, too; (<em>ii</em>) the long-run equilibrium is not viable during a prolonged downturn of the economic cycle; (<em>iii</em>) a monetary policy responding to fiscal shocks may postpone the noncompliance with the SGP; (<em>iv</em>) the probability of noncompliance with the SGP based on a logistic regression model is increasing with the extent of political uncertainty, and declines as the upper limit for the socially sustainable average tax rate rises. Our analysis shows that structural reforms should be directed to mitigate the cost of uncertainty in public expenditure and improve the quality of public services.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100668"},"PeriodicalIF":0.0,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145733323","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","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.inteco.2025.100667
Salem Boubakri , Cyriac Guillaumin
The goal of this study is to examine the extent and dynamics of regional financial integration among the Gulf Cooperation Council (GCC) countries by analysing local stock market returns through various risk premia related to both regional stock and exchange markets. Our approach employs the International Capital Asset Pricing Model (ICAPM), which incorporates the degree of financial integration when pricing market risk premia. Additionally, we introduce a regional currency basket, the Khaleeji, to establish a reference currency for the region and to prospect the twin objective: reducing the peg to the US dollar and fostering regional monetary cooperation. Our key findings reveal that GCC stock markets are influenced by both regional and local financial shocks and crises. Long-term analysis demonstrates that the regional risk premium is significant for GCC countries, with stronger cooperation potentially improving regional risk-sharing. The results further suggest that the level of regional financial integration varies across countries, reflecting a partial integration among GCC countries. The growing importance of regional risk premia and financial integration may stimulate increased financial cooperation within the GCC, ultimately leading to enhanced economic integration.
{"title":"Measuring financial integration in GCC stock markets: Dynamics, risk premia, and the path to enhanced cooperation","authors":"Salem Boubakri , Cyriac Guillaumin","doi":"10.1016/j.inteco.2025.100667","DOIUrl":"10.1016/j.inteco.2025.100667","url":null,"abstract":"<div><div>The goal of this study is to examine the extent and dynamics of regional financial integration among the Gulf Cooperation Council (GCC) countries by analysing local stock market returns through various risk premia related to both regional stock and exchange markets. Our approach employs the International Capital Asset Pricing Model (ICAPM), which incorporates the degree of financial integration when pricing market risk premia. Additionally, we introduce a regional currency basket, the <em>Khaleeji</em>, to establish a reference currency for the region and to prospect the twin objective: reducing the peg to the US dollar and fostering regional monetary cooperation. Our key findings reveal that GCC stock markets are influenced by both regional and local financial shocks and crises. Long-term analysis demonstrates that the regional risk premium is significant for GCC countries, with stronger cooperation potentially improving regional risk-sharing. The results further suggest that the level of regional financial integration varies across countries, reflecting a partial integration among GCC countries. The growing importance of regional risk premia and financial integration may stimulate increased financial cooperation within the GCC, ultimately leading to enhanced economic integration.</div></div>","PeriodicalId":13794,"journal":{"name":"International Economics","volume":"185 ","pages":"Article 100667"},"PeriodicalIF":0.0,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145786741","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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