Economic Shocks Research Articles

HOUSING SUPPORT POLICIES IN PANDEMIC TIMES AND INTERRELATIONS WITH INSTITUTIONAL TRUST: A MIXED-METHODS APPROACH

Housing was crucial during the COVID-19 pandemic, as “staying at home” was the first line of defense against the virus. To reduce the economic downturn’s impact on housing security, preventive and supportive measures were developed, such as moratoria on rents and mortgages. This paper aims to analyze the opinions of tenants and indebted homeowners about the housing support policies implemented during the pandemic crisis and explore the relation with the level of trust in institutions — an aspect not yet studied. A mixed-methods approach is used based on quantitative and qualitative data from a nationwide online survey conducted in 2021. Quantitative data was analyzed using the software SPSS, and qualitative data was analyzed through thematic analysis. Thematic analysis of 377 answers to open questions (e.g., “What is your opinion on the exceptional financial regime for payment of rents?”) shows that homeowners’ opinions (positive or negative) are mainly supported by their perceptions of the effectiveness of measures introduced to protect families from economic shocks resulting from the pandemic. For tenants, besides effectiveness, opinions are also determined by evaluation of the quality-of-service delivery and responsiveness. Variance analysis shows that tenants with a positive opinion tend to present higher levels of trust in public institutions compared to those with an unfavorable opinion. The study shows that housing support measures during COVID-19 in Portugal were met with mixed trust levels, with positive views linked to higher institutional trust and negative perceptions tied to concerns over fairness, efficiency, and long-term impacts. It concludes by emphasizing the importance of effective policy design and implementation in times of crisis and the psychosocial consequences of not achieving envisioned aims.

Oil price shocks and bond risk premia: Evidence from a Panel of 15 Countries

We study the effect of oil price shocks on bond risk premia. Based on Baumeister and Hamilton (2019), we identify the different sources of oil price shocks using a structural vector autoregressive (SVAR) model of the global market for crude oil. These structural factors are then used as unspanned factors in an affine term structure model based on the representation of Joslin et al. (2014). This is done for a total of 15 countries. Unspanned factors are responsible for most of the variability in bond risk premia for short holding periods, while spanned factors dominate the variance decomposition for longer holding periods. In both cases, global oil supply and global economic activity are clearly the most important unspanned shocks. A historical decomposition around the outbreak of the COVID-19 crisis shows the clear influence of global economic activity shocks during the months of February and March 2020, increasing bond risk premia significantly.

Economic impacts of a drastic gas supply shock and short-term mitigation strategies

The Russian invasion of Ukraine on February 24, 2022 entailed the threat of a drastic and sudden reduction of natural gas supply to the European Union. This paper presents a techno-economic analysis of the consequences of a sudden gas supply shock to Austria, one of the most dependent countries on imports of Russian gas. Our analysis comprises (a) a detailed assessment of supply and demand side countermeasures to mitigate the immediate shortfall in Russian gas imports, (b) a mapping of the net reduction in gas supply to industrial sectors to quantify direct economic shocks and expected relative reductions in gross output and (c) the quantification of higher-order economic impacts through using a dynamic out-of-equilibrium input–output model. Our results show that potential economic consequences can range from relatively mild to highly severe, depending on the implementation and success of counteracting mitigation measures. We find that securing alternative gas imports, storage management, and incentivizing fuel switching represent the most important short-term policy levers to mitigate the adverse impacts of a sudden import stop.

Using AI in the informal currency market: evidence from Cuba

ABSTRACT This article explains the various steps of a novel methodology designed to analyse the informal currency market and calculate a parallel exchange rate (ER). We utilize artificial intelligence algorithms for Natural Language Processing to extract data from social network groups and classified websites. The methodology has been implemented since 2021 amidst Cuba’s complex financial and political landscape. Given that the official exchange rate remains fixed and overvalued, the calculated ER has become vital for assessing the real-time effects of regulatory changes, economic shocks, and policies. We conduct a statistical and econometric analysis using vector autoregressive models and spillover indexes to validate the economic and financial consistency of the informal market’s time series.

AN EMPIRICAL EXAMINATION OF THE VALIDITY OF GENDER-INDEXED PHILLIPS CURVE IN TURKIYE

The potential existence and structure of the relationship between inflation and unemployment is a frequently examined topic in the literature. A.W.H. Phillips (1958) explored the correlation between these two significant economic variables in the context of the United Kingdom, highlighting the trade-off relationship between them. This seminal work has led various economists to rigorously investigate the same phenomenon across different countries and country groups. The primary reason for this intense scrutiny is the assertion that monetary policies implemented in response to economic shocks may push these two variables in opposite directions. In this regard, the significant shocks experienced in Turkey in recent years concerning inflation and unemployment have made it particularly intriguing to test the validity of the Phillips Curve for Turkey. The aim is to provide economic decision-makers with findings that can guide them in formulating more realistic, original, and valid policy decisions. This study tests the validity of the Phillips Curve relationship for Turkey. Utilizing monthly data from 2005 to 2023, the unemployment rates are modeled separately for male and female unemployment rates, distinguishing this study from others. The analysis employs the Johansen Cointegration Test and concludes that the Phillips Curve theory holds true for Turkey.

Harnessing nature-based solutions for economic recovery: A systematic review

Nature-based solutions (NbS) involve working with nature to address societal challenges in ways that benefit communities and biodiversity locally. However, their role supporting economic recovery from crises, such as those arising from conflicts or pandemics remains underexplored. To address this knowledge gap, we conducted a systematic review of 66 reviews on the economic impact of nature-based interventions. Most demonstrated positive outcomes for income and employment, though those with critical appraisal of underlying studies reported more mixed outcomes. These varied results were influenced by factors such as the balance between short-term and long-term gains, market conditions, regional effects, reliance on subsidies, and discrepancies between expected and actual economic benefits. National-scale economic growth assessments were scarce. Half of the cases featured nature-based food production investments, with much evidence from sub-Saharan Africa, East Asia and the Pacific. The few reviews comparing NbS with alternatives found that NbS delivered equal or better economic outcomes. NbS also provided broader benefits like food and water security, flood protection and community empowerment. We identified key factors influencing the delivery of benefits and trade-offs, finding that NbS must adhere to best practice standards, with community involvement being critical for equitable outcomes. Well-designed NbS can create diverse job opportunities at different skill levels, diversify income, and improve resilience, offering a rapid, flexible response to economic shocks that can be targeted at deprived communities. By integrating traditional, local and scientific knowledge, NbS can enable eco-innovation, and drive the transition to a clean and efficient circular economy, with high economic multipliers spreading benefits throughout economies. The evidence underscores the need to incorporate NbS in investment programs to concurrently address economic, environmental, and societal challenges. However, improved monitoring of economic, social and ecological outcomes and the development of comprehensive accounting systems are needed to better track public and private investments in NbS.

Reflections of Economic Shocks and Price of Crude Oil on Gold Price Volatility within Asian Nations

The focus of this study is to examine the effects of economic shocks along with the crude oil price on gold prices in Asian countries. This study utilizes a regression analysis to measure the relationship between the macroeconomic indicators, crude oil price, and gold price in six selected nations from 1990 until 2022. The validity of the data was diagnostically checked by performing a VIF procedure, autocorrelation test, and normality test on residual, and data were analyzed via EViews software. The analysis showed mixed findings, however, a major variable that positively affects the fluctuation of the gold price is “the crude oil price” and it reflects global economic stability in the six countries. A sudden rise in crude oil prices might trigger conflicts in oil-exporting countries and limit access to material sources. This situation may force investors to move their funds into a safe-haven commodity like gold. The fluctuations in crude oil prices are not only a response to current market conditions but also alarming a lot more fundamental problems in an economy, which include approaching economic recessions, currency devaluation and a major financial crisis. For practical implications, this study suggests that policymakers pay extra attention to this commodity besides other economic indicators like inflation, interest and currency rates, and a GDP rate to ensure a sustainable economic condition. To the best of the authors’ knowledge, this study is the first that examines the economic shocks along with crude oil prices pre-and-post COVID-19 pandemic focusing on a few Asian countries.

Models of the Impact of Socio-Economic Shocks on Higher Education Development

This article is devoted to the analysis of the impact of socio-economic shocks on the dynamics of higher education development. It is substantiated that, on the one hand, higher education influences the development of society and the economy, on the other hand, the development trends of a country provide both opportunities and limitations for its development. An algorithmic model for studying the impact of social and economic shocks on the development of the higher education system (HES) has been developed. To diagnose the relationship between higher education and the socio-economic development of Ukraine and Slovakia, the following indicators were used: GDP per capita, the Human Development Index, school enrollment, tertiary, and net migration. The presence of nonlinear trends in the change in indicators has been shown and portraits of the socio-economic development of the countries have been constructed. To assess the impact of socio-economic shocks on the HES, the time-series decomposition method and cross-spectral analysis were used. The time-series decomposition allowed us to identify cyclical components of indicators, based on applying cross-spectral analysis, and the most significant local harmonics and the lag of their influence on the occurrence of shocks in the HES were determined. The use of the developed models allows us to predict periods of shock points in the HES depending on shocks in the tendencies of GDP per capita and net migration.

Real Exchange Rate Depreciation and Domestic Tax Revenue Performance in Kenya

Purpose: Taxation plays a critical role in raising the resources needed for financing government activities in developing countries. On the other hand, the volatility of real exchange rates (RERs) has generated significant concern among academics and policymakers in view of its effects on macroeconomic variables such as tax revenue generation. This study therefore focused on real exchange rate depreciation on domestic tax revenue performance in Kenya. The study was guided Theory of Constraints. Methodology: The study employed an explanatory research design. Secondary data was collected from the CBK, KRA, and the World Bank. In this study time series data ranging from 2003 – 2023 was used to analyze the determinants of domestic tax revenue performance in Kenya. The hypotheses were tested at a significance level of .05 using the multiple regression analysis. A multivariate time series ARDL regression analysis model was used to analyze the data. Results: The study ARDL model concluded that Real exchange rate depreciation led to a notable decrease in domestic tax revenue performance, with β = -0.223945 and p = 0.000 < 0.05. This effect is intensified when considering the lagged impact, where a one-period lagged depreciation results in an even greater reduction in tax revenue performance, β = -1.927412 and p = 0.0004 < 0.05. Conclusion: The study recommended that government of Kenya should stabilize the exchange rate and prevent excessive depreciation by fostering a favorable trade balance and maintaining investor confidence. Additionally, future research could focus on the effects of fiscal Policy Changes on domestic tax revenue performance. Also, future studies could examine Impact of Global Economic Shocks on Domestic Tax Revenue.

Diversification and the Resource Curse: An Econometric Analysis of GCC Countries

This research explores the effects of significant global economic shocks, such as the 2008 Global Financial Crisis and the 2020 COVID-19 pandemic, on GDP growth in the Gulf Cooperation Council (GCC) nations. Employing a dynamic generalized method of moments (GMM) model, the analysis highlights the strong momentum effect of lagged GDP growth, where past performance plays a critical role in shaping current economic outcomes. The findings also reveal that natural resources continue to positively influence short-term growth, but with diminishing returns over time, supporting the resource curse hypothesis and underscoring the need for broader structural reforms to ensure long-term sustainability. In addition, the results show that external investments flowing into the country, trade balance, and inflation emerge as key drivers of economic growth. While moderate inflation is positively associated with economic expansion, unemployment exerts a significant negative effect on GDP growth, particularly in models that account for country-specific characteristics. This emphasizes the need for labor market reforms to improve employment rates and support sustainable development. The role of gross capital formation, particularly in both the dynamic GMM and random effects models, further underscores the importance of strategic domestic investment, especially during periods of global disruption. These findings emphasize the critical need for economic diversification in the GCC. Policymakers should focus on attracting foreign investment, managing inflation, enhancing human capital, and boosting domestic investment to mitigate the adverse effects of the resource curse and secure sustainability. While market capitalization and oil rents may stimulate short-term growth, their long-term sustainability remains uncertain without greater diversification. Both external and domestic investments emerge as critical drivers of long-term growth, while persistent challenges such as inflation and unemployment continue to pose risks to economic stability. The study highlights the need to reduce reliance on oil and leverage human capital to build more resilient economies capable of adapting to future challenges. By offering dynamic, empirical insights into the balance between resource reliance and sustainable growth, this research adds valuable insights to the policy discussion on economic diversification in the GCC. Policymakers are urged to prioritize FDI, inflation management, domestic capital formation, and human capital development to mitigate vulnerabilities and ensure sustainable economic growth in the face of ongoing global uncertainties.

Firm interconnectedness and resilience: evidence from the Italian manufacturing

Abstract This article explores how firm interconnectedness determines firm-level resilience. We argue that firms that engage in outward foreign direct investment are more interconnected, and therefore better equipped to deal with structural and economic shocks, than firms that are not engaged in outward foreign investment. Interconnectedness is measured along two dimensions; cross-border firm linkages and embeddedness in interconnected regions. We use a sample of 13,000 Italian manufacturing firms during the period 2008–2011. We find a positive association between firm interconnectedness and resilience. Moreover, we find the firms that operate in more interconnected regions to be more resilient than firms that operate in relatively isolated regions. Our results offer new insights into the complex interaction between firm and regional interconnectedness.

The impacts of climate change on violent conflict risk: a review of causal pathways

Abstract The potential impacts of climate change on violent conflict are high on the agenda of scholars and policy makers. This article reviews existing literature to clarify the relationship between climate change and conflict risk, focusing on the roles of temperature and precipitation. While some debate remains, substantial evidence shows that climate change increases conflict risk under specific conditions. We examine four key pathways through which climate affects conflict: (i) economic shocks, (ii), agricultural decline, (iii) natural resources competition, and (iv) migration. Key gaps include limited long-term data, insufficient integrated studies, and the inadequate understanding of causal mechanisms, necessitating transdisciplinary research that addresses social vulnerability and underlying pathways

Heterogeneous biased expectations of young and old individuals: macroeconomic effects and policy implications

Abstract This paper examines the effects of heterogeneous biased expectations between the young and old on business cycles and explores its policy implications. Empirical findings reveal that individuals, particularly the young, can have more optimistic or pessimistic views about the future state of the economy compared to the data-generating measure. This study relates these results to the learning-from-experience literature, which suggests that individuals, particularly the young, place greater weight on recent observations when forming their expectations. Incorporating household weighting schemes into a life-cycle learning model, I show that household sensitivity to recent observations amplifies the effects of economic shocks. However, the amplification effects become less extensive as the population ages due to the lower sensitivity of the old. My simulation results indicate that a 10 percentage point increase in the old population ratio leads to a 16 percent decrease in output volatility. Regarding policy implications, this paper suggests that the government spending multiplier declines by approximately 10 percent when the old population ratio rises by 10 percentage points due to weak amplification effects. Moreover, the weakened output effects deteriorate the welfare of the population, particularly that of the young.

Innovations for Holistic and Sustainable Transitions

Energy system planning has evolved from a narrow focus on engineering and supply works towards addressing more complex, multifactorial challenges. Increasingly challenged by climate change, extreme events, economic shocks, and altered supply demand patterns, the analysis of energy systems requires holistic approaches based on data-driven models, taking into account key socio-economic factors. We draw insights from reviewing the literature, indicating the need to cover the following major gaps: the shift to transdisciplinary approaches, incorporating environmental system analysis; resilient and sustainable energy designs based on flexible portfolios of renewable mixes; the integration of socio-economic aspects, economic analyses and behavioural models to ensure energy systems are not only technically sound but socially acceptable and viable; the need for stakeholder engagement considering the human angle in energy security and behavioural shifts. Responding to these pressing challenges and emerging needs, the Global Climate Hub (GCH) initiative, operating under the UN Sustainable Development Solutions Network, offers a conceptual framework, leveraging transdisciplinary approaches. In this Concept Paper, we present for the first time the idea of the GCH as a framework that we believe has the potential to address the modern holistic needs for energy system analysis and policymaking. By setting the conceptual/theoretical ground of our suggested approach, we aim to provide guidance for innovative combinations of cutting-edge models, socio-economic narratives, and inclusive interaction with relevant stakeholders for the development and the long-term implementation of sustainable pathways.

Dynamics of persistence in Brazilian economic uncertainty, expectation, and confidence indexes

This study examines the persistence dynamics in Brazilian economic uncertainty, confidence, and expectation indexes, in both business and consumer sides of the economy. Using rolling window estimations of the fractional integration parameter, we assess how economic turbulence influences the persistence of these indexes. We find that economic uncertainty in Brazil is non-stationary but mean-reverting, with its persistence only transitorily affected by economic and political crises. Interestingly, confidence and expectation indexes displayed hysteretic behavior, with multiple persistence regimes linked to crises. These results may be informative for policymakers about the perceptions of the public and businessmen to economic shocks and crises.

A study on the evolution of financial inclusion and financial stability in India based on the previous research works: A review paper

The study examines the relationship between financial stability and inclusion in the context of two significant economic shocks to India: the demonetization and the COVID-19 outbreak. The first section of the paper discusses the rise of financial inclusion and its importance in a country where a sizable percentage of the population lives in rural areas. Ensuring access to formal banking and financial services, or financial inclusion, is essential for reducing poverty, creating jobs, and fostering economic progress. Financial inclusion and financial stability are strongly related. Financial stability is the capacity to endure unanticipated financial shocks. This study centers on the effects of demonetization in 2016, which caused a cash crunch and made people rethink financial inclusion programs, which hastened their implementation. Similar to this, lockdown measures during the COVID-19 pandemic forced a move towards digital financial inclusion, which increased the appeal of online financial services. The necessity of stability and financial inclusion for sustainable growth in a large country like India is emphasized in the conclusion. Ensuring that everyone, particularly those from low-income backgrounds, has access to financial services promotes social cohesion and a strong economy. In the end, inclusive practices' financial stability promotes national progress.

In Search of the Causes of the Globalization Backlash: Methodological Considerations on Post-treatment Bias

We study the implications of post-treatment bias in the context of the globalization backlash. We discuss whether horse-race regressions can inform about the relative role of economic versus cultural drivers. We make three methodological points: (1) if and insofar as cultural variables are post-treatment with respect to economic factors, the estimates of the effect of economic shocks on voting are biased in regressions that include cultural controls (and vice versa); (2) for the same reason, such horse-race regressions do not allow to accurately estimate the relative role of economic versus cultural factors; (3) one cannot infer mediation effects from changes in regression coefficients for a given factor of interest before and after including post-treatment controls. We accompany the methodological discussion with empirical evidence on the relevance of post-treatment bias in studies of the globalization backlash, both by replicating and expanding on earlier studies, and by presenting novel cross-country results on the culture-economy nexus.

Tested by the COVID-19 economic shock: peace-positive entrepreneurship and intergroup collaboration in post-conflict business recovery

ABSTRACT Establishing economic collaboration between previously antagonistic groups during post-conflict business recovery advances peacebuilding by nurturing intergroup ties. However, we have a limited understanding of how post-conflict intergroup economic collaboration develops and how it is sustained. We address these gaps from the perspective of peace-positive entrepreneurship. Specifically, an ecosystem approach that we apply directs analysis to dynamic entrepreneurial action in the local context. To examine the role of intergroup interactions in decision-making of entrepreneurs in post-conflict business recovery and in response to the economic disruption caused by the COVID-19 pandemic, we conducted fieldwork on two micro-economies in Bosnia and Herzegovina. Our findings demonstrate that entrepreneurs’ engagement across ethnic lines was a main facet of resource mobilisation strategies that enabled them to (re)establish and develop market presence post-conflict. Likewise, intergroup economic collaboration was a lynchpin of entrepreneurs’ effective response to the COVID-19 economic shock. This path-dependent analysis of entrepreneurial action shows that intergroup economic collaboration is not simply a side-effect of post-conflict business recovery and development. Rather, intergroup economic collaboration also needs to be actively pursued by entrepreneurs attuned to the local context. Intergroup economic collaboration can be instrumental in business (re)engagement in the post-conflict economy, generating wider benefits to peacebuilding.

Economic shocks and employment shifts across industrial sectors in English regions

This paper examines changes in employment and job allocation across various industrial sectors in English regions over the years 2009–2021. The aim is to investigate regional resilience by analysing the impact of economic shocks on the make-up and productivity of English regions via dynamic shift-share analysis. The evidence reveals that employment in key industries across English regions remained largely unaffected by economic shocks, also due to the COVID-19 pandemic which prevented occupational shifts through furloughing and essential worker selection. But we also find that while comparative lack of specialisation insulated many English regions from the more damaging aspects of exogenous shocks, the resulting economic turmoil in these regions impacted key sectors differently. The findings contribute to our understanding of regional economic resilience and how it is influenced by industrial diversity, productivity, and economic policy.

Transformation of the Rural Nonfarm Economy During Rapid Urbanization and Structural Transformation in Developing Regions

This article reviews the past 25 years of empirical research on the rural nonfarm economy (RNFE) in developing countries; that literature has evolved in ways that track and mirror the rural transformation itself. Since 2000, rapid urbanization, structural transformation, and a sharp series of economic, climate, and disease shocks have influenced trajectories in the RNFE. It has grown to become, on average, the predominant source of income for rural households in developing countries. Both segments of the RNFE—activities linked to agricultural value chains as well as those unrelated to the agricultural sector—have grown. Understanding how each component of the RNFE influences rural incomes, employment, resilience, women, youth, and farming and natural resource management practices is, therefore, more important than ever.