Impact Of Shocks Research Articles

The COVID-19 Pandemic Impact on the Remittances and Major Economic Factors of Nepal: A Retrospective Assessment

The COVID-19 epidemic has had a significant impact on Nepal, primarily due to the closure of businesses in key migrant labor destinations such as the Gulf countries, Malaysia, and South Korea. Remittances account for 26% of Nepal's GDP, but they have dropped significantly since COVID-19. This study examines the impact of a negative shock to remittances on macroeconomic variables and makes policy recommendations. The analysis finds that a drop in remittances correlates with slower growth in consumption (2.5%) and foreign exchange reserves (17.7%) over a 20-year period, using both quantitative and qualitative data. The result shows that the Nepalese migrant crisis, exacerbated by the economic downturn in destination countries, has led to a substantial decline in remittance inflows, causing a 15.33% monthly decrease. This poses a threat to Nepal's economy, affecting consumption, GDP growth, and key macroeconomic variables. The results thus emphasize the importance of immediate relief and bolstering economic recovery initiatives by investigating potential outcomes of the pandemic's impact on key economic indicators.

Inflation-targeting central bank responses to exchange rate shocks: evidence from Latin America

ABSTRACT This paper examines the impact of real exchange rate shocks on policy interest rates in the five major inflation-targeting economies in LATAM. Using a SVAR model with identification based on sign and short-run restrictions, we find that monetary policy reacts to real exchange rate shocks across all five countries. Specifically, interest rates rise directly in response to a positive real exchange rate shock (appreciation). A subsequent reversal occurs after a few quarters, with statistical significance observed in three countries. Additionally, shocks to the policy rate are demonstrated to effectively induce a real depreciation of the exchange rate.

Quantifying the Impact of Risk on Market Volatility and Price: Evidence from the Wholesale Electricity Market in Portugal

This research aims to identify suitable procedures for determining the size of risks to predict the tendency of electricity prices to return to their historical average or mean over time. The goal is to quantify the sensitivity of electricity prices to different types of shocks to mitigate price volatility risks that affect Portugal’s energy market. Hourly data from the beginning of January 2016 to December 2021 were used for the analysis. The symmetric and asymmetric GARCH model volatility, as a function of past information, help to eliminate excessive peaks in data fluctuations. The asymmetric model includes additional parameters to separately obtain the impact of positive and negative shocks on volatility. The MSGARCH model is estimated to be in two states, allowing for transitions between low- and high-volatility states. This approach effectively represents the significant impact of shocks in a high-volatility state, indicating an acknowledgment of the lasting effects of extreme events on financial markets. Furthermore, the MSGARCH model is designed to obtain the persistence of shocks during periods of elevated volatility. Accurate price forecasting aids power producers in anticipating potential price trends and allows them to adjust their operations by considering the overall stability and efficiency of the electricity market.

RETRACTED ARTICLE: Examining the impact of global uncertainty shocks on the digital economy's role in China's energy transition and green economic recovery

RETRACTED ARTICLE: Examining the impact of global uncertainty shocks on the digital economy's role in China's energy transition and green economic recovery

Eco-Friendly Cork-Polyurethane Biocomposites for Enhanced Impact Performance: Experimental and Numerical Analysis.

Cork composites are byproducts from wine stopper production, resulting from the agglomeration of cork granules with a thermoset resin. The resulting compound is a versatile and durable material with numerous industrial applications. Due to its unique properties, such as low-density, high-strength, excellent energy absorption, and good thermal and acoustic insulators, cork composites find room for application in demanding industries such as automotive, construction, and aerospace. However, agglomerated cork typically has a polyurethane matrix derived from petrochemical sources. This study focuses on developing eco-friendly porous polyurethane biocomposites manufactured with the used cooking oil polyol modified with cork. Since cork and polyurethane foam are typically used for impact shock absorption, the manufactured samples were subjected to impact loading. The assessment of crashworthiness is performed through 100 J impact tests. A finite element numerical model was developed to simulate the compression of these new composites under impact, and the model validation was performed. The highest specific absorbed energy was obtained for petrochemical polyol composites with the 3% addition of natural or modified cork. The research conducted in this study showcased the feasibility of substituting certain petrochemical components used for the synthesis of the polyurethane matrix with ecological waste vegetable oil components.

Stock-oil comovements through fear, uncertainty, and expectations: Evidence from conditional comoments

This paper investigates the role of sentiment as a potential driver of the novel stock-oil (represented by the S&P 500 and West Texas Intermediate futures) dynamics in the aftermath of the 2008 global financial crisis (GFC). We study the impact of both sentiment shocks and fluctuations, on the stock-oil time-varying conditional comoments, using the time-varying parameter vector autoregression (TVP-VAR), and the nonlinear autoregressive distributed lag (NARDL), respectively. The findings show that the increasing (asymmetric) effect of sentiments, accounts for the novel post-GFC stock-oil dynamics. As a result, a proactive regulatory framework is needed to shield oil futures against the ever-increasing speculation and financialization.

The Impact of Oil Shocks on Systemic Risk of the Commodity Markets

The Impact of Oil Shocks on Systemic Risk of the Commodity Markets

The impact of monetary policy shocks — Do not rule out central bank information effects or economic news

This paper reassesses the impact of monetary policy and central bank information shocks while accounting for the influence of economic news. We regress a set of monetary policy surprises on a measure of economic news and incorporate these new instruments into an SVAR model. Furthermore, we distinguish between the two shocks via sign restrictions on the instruments’ impulse response functions. Our findings indicate significantly stronger and more enduring economic effects for monetary policy shocks, while the economic effects of central bank information shocks are weaker, if not vanish entirely. Nevertheless, persistent financial effects prevent us from completely dismissing the existence of central bank information effects. Consequently, it is important to account for both the effects of central bank information shocks and economic news in monetary policy settings.

The impact of shocks and policies on debt-to-GDP ratio dynamics: a multisectoral approach

The impact of shocks and policies on debt-to-GDP ratio dynamics: a multisectoral approach

Anticipatory action for drought in the Sahel: an innovation for drought risk management or a buzzword?

Anticipatory action is an approach that combines early warning information with flexible, pre-positioned funds to trigger actions that mitigate the impact of predictable shocks on the most vulnerable people. Historically, drought is the climatic hazard that led to the highest and most severe humanitarian impacts in the Sahel. This region, according to climate projections, will be one of the most deeply affected by climate change in future years, leading to considerable changes to societies, economies, as well as impacting rural communities. While this negative projection may lead to further increases in humanitarian consequences, recent experiences from integrating anticipatory action for drought into humanitarian practice hold positive prospects. This article will review current experiences on anticipatory action for drought in the Sahel and shed light on whether this approach has brought innovation in local disaster risk management. Through the review of recent initiatives in Burkina Faso, Chad and Niger, this paper highlights key advancements as well as gaps and challenges pertaining to key components of anticipatory action and disaster risk management, namely: (1) data, risk analysis and early warning; (2) funding; (3) preparedness and community engagement; (4) learning, coordination and partnership; (5) policies and institutional frameworks. Even in challenging environments like in the Sahel, anticipatory action for drought can become an integral component of standard disaster risk management and financing strategies. However, this process will require more robust evidence about which ingredients of anticipatory action approaches lead to the desired result.

The impact of oil price shocks in the global market on some indicators of the Iraqi economy for the period (2004-2020)

The Iraqi economy is characterized as a rentier, unilateral economy that relies almost entirely on the oil commodity, while other productive sectors constitute a small percentage of the composition of the gross domestic product Which made it vulnerable to external shocks represented by fluctuations in oil prices in the global market and an imbalance in its production structure and as a result of the economic and political conditions that Iraq went through as well as fluctuations in global oil prices. It suffered from a weakness in infrastructure, and it greatly affected the Iraqi economy in terms of gross domestic product, the general budget, unemployment, etc. Therefore, it is necessary to know the effects that these shocks have on some indicators of the Iraqi economy, and this is considered an urgent necessity to explore future prospects. This research aims to study the impact of oil price shocks in the global market on some indicators of the Iraqi economy for the period (2004-2020)

Estimating financial integration in Europe: How to separate structural trends from cyclical fluctuations

We construct a new indicator of de facto financial integration for the EU. The resulting indicator is pro-cyclical as it evolves along the cyclical pattern of economic activity in the European Union. It is then appended to a set of relevant financial and macroeconomic variables, within a FAVAR framework, to allow us to separate the impact of cyclical boom-bust shocks from structural integration shocks. Increasing structural financial integration tends to improve risk absorption and reduce income disparities among European countries. However, our analysis suggests that most of the movements in the indicator reflect business cycle dynamics, not proper integration. Given the estimated beneficial effects of stronger structural financial integration, these results highlight the need to develop further policies to foster it in the EU.

Climate change and the influence of monetary policy in China

ABSTRACT We investigate whether climate change affects the efficiency of monetary policy. We use temperature shocks, calculated as temperature deviations from historical average temperatures, to proxy climate change, and utilize a threshold vector autoregression model (TVAR) to estimate the impact of expansionary and tight monetary shocks on economic output under high and low regimes of temperature shocks. Our results characterize a climate change regime-dependent monetary policy. Expansionary monetary policy is less efficient and the negative impact of tight monetary policy is enhanced, when climate change is severe. The results can be explained by the climate-induced credit constraint of commercial banks. Higher temperature shocks lead to increases in banks’ non-performing loan ratios, which results in larger credit constraints of banks. Banks tend to be more prudent in credit expansion, and the bank credit channel of monetary policy transmissions is weakened.

The Co-volatility of Uncertainty Shock on Chinese Exchange Rate: Based on Time-frequency Domain and Time-varying Method

In recent years, with the global epidemic, the Russia-Ukraine conflict, the great power game, and so on events, the international political and economic environment has become more and more unstable, the USDCNY exchange rate fluctuates significantly, and the external uncertainty risk shocks negatively hit the foreign exchange market. Based on this, this article expands global uncertainty risk shocks into four dimensions: global geopolitical risk, U.S. economic policy uncertainty, Chinese economic policy uncertainty, and VIX index, in addition to adding international WTI crude oil and gold price as additional variables, which are significantly correlated with both, to study the linkage among uncertainty shocks, commodity volatility and USDCNY exchange rate from the time-frequency domain. Furthermore, we analyze the time-varying spillover effects among variables at different frequency scales by decomposing the data into multiple scales using the Maximum Overlap Discrete Wavelet Transform (MODWT). Findings reveal that uncertainty factors and commodity prices exert distinct influence mechanisms on the USDCNY exchange rate under different cycles of frequency fluctuations. At various time-frequency domain volatility scales, VIX and WTI generate significant risk spillovers over the USDCNY exchange rate. Moreover, when global major events occur, time-varying spillover effects of variables are also heterogeneous. The research findings presented in this paper can provide valuable insights for policymakers and investors regarding the impact of international uncertainty shocks on the Chinese exchange rate across various short, medium, and long frequencies. This understanding can aid in managing uncertainty risks in decision-making processes, ultimately facilitating the efficient functioning of the foreign exchange market.

A DSGE model approach to examining the impact of the Russian–Ukrainian War and oil shocks on the Moroccan economy

AbstractThis study explores the impact of oil shocks on the Moroccan economy using a dynamic stochastic general equilibrium (DSGE) model. The DSGE simulations reveal that these shocks, exacerbated by the war in Ukraine, led to a contraction in the output gap, consumption, investment, and savings, as well as increased inflation. These results highlight the vulnerability of the Moroccan economy to external shocks, particularly those linked to energy prices. They underline the need for Morocco to diversify its energy sources and reduce its dependence on oil imports. Furthermore, our results suggest that economic policies should focus on mitigating the effects of these shocks. Future research could seek to refine this model by incorporating other factors likely to influence the Moroccan economy, such as changes in global demand or specific government policies.

Climate and sovereign risk: The Latin American experience with strong ENSO events

Using monthly panel data over the period 2007–2019 for seven Latin American countries, we empirically test the impact of climate shocks, here strong ENSO events (El Niño Southern Oscillations), on sovereign risk. Local Projections are computed to assess the dynamic response of sovereign spreads to ENSO events. Results show that strong El Niño and La Niña shocks lead to a significant increase in sovereign spreads, but with different timing. Strong El Niño shocks are associated with a significant short-term increase in sovereign spreads, while strong La Niña events are associated with a delayed but significant increase in sovereign spreads after a short-term decrease. Thus, our results suggest a potential asymmetry in the effect of these strong ENSO events on sovereign risk. We also highlight high volatility in the dynamics of sovereign spreads, which may reflect an overreaction of investors faced with the high degree of uncertainty generated by the economic and financial consequences associated with strong ENSO events. Complementary time-series estimates suggest that Costa Rica and Peru are especially subject to these effects. Overall, our results provide a warning about the fact that, in the case of Latin American countries, weather shocks associated with strong ENSO events have adverse macroeconomic and financial consequences that can lead to an increase in sovereign risk, hinder their government's ability to act as a ‘climate rescuer’ of last resort, and may be aggravated in the future by climate change.

Impact of climate risk shocks on global food and agricultural markets: A multiscale and tail connectedness analysis

We examine the time-frequency nexus between climate change, agricultural and food markets over normal and extreme market conditions by employing advanced methods such as quantile cross-spectral analysis and wavelet quantile correlation. To identify how climate change affects food and agricultural market price returns, we examine daily data from January 1, 2019, to May 9, 2022, using two climate change proxies: European CO2 emissions and MSCI World Climate Paris Aligned Net indices, four global food market indices, and four agricultural commodities. Our results reveal significant insights into the impact of CO2 emissions and environmental policy on these markets, emphasizing the nuanced nature of these effects across different market conditions and time frames. The results suggest that, in the long run, environmental policies contribute positively to agricultural and food markets, while the impact of CO2 emissions manifests as predominantly negative. This research provides valuable contributions to understanding the intricate dynamics between climate change, environmental policies, and the financial aspects of food and agricultural markets.

Unequal ground: oil booms and income inequality in the USA

AbstractThis paper examines the impact of oil price and quantity shocks on income inequality in the USA. Using micro income data, we construct measures of pre‐tax money income inequality at the state level for the period 1980–2017. We find that a $10 increase in oil price increases inequality, measured by the ratio of pre‐tax income of the 90th percentile to 10th percentile (p90/p10), by 3.8 percentage points in states with high levels of oil endowments per capita. The increase in capital income to households at the top of the distribution drives the observed change in inequality. In addition to price shocks, we study the impact of quantity shocks that arise from oil discoveries. Quantity shocks have no effect on the overall income distribution.

Food insecurity, environment, institutional quality, and health outcomes: evidence from South Asia

BackgroundFood insecurity and environmental degradation pose significant threats to health outcomes in South Asia, necessitating effective policy interventions. Therefore, this study aims to examine the impact of food insecurity and environmental degradation on health outcome indicators amidst global inflationary shocks and institutional quality arrangements. Additionally, it aims to explore the intricate moderating role of institutional quality on the relationship between food insecurity, endogenous variables, and external shocks.MethodIn alignment with the study’s objectives, a set of panel data spanning from 2000 to 2021 is compiled for South Asia. The study introduces a novel variable representing inflationary shock, crafted through the integration of inflation datapoints and the application of the generalized autoregressive conditional heteroskedasticity model. Additionally, a distinctive aggregate institutional quality index is formulated, drawing from six key measures of the Worldwide Governance indicators. To scrutinize the effects of food insecurity, environmental degradation, and other explanatory variables, the study employs the two-step system generalized method of moment technique, offering a robust analytical approach to uncover complex relationships and dynamics in the region.ResultsThe results indicate that the prevalence of undernourishment, inequality in per capita calorie intake, and CO2 emissions significantly reduce life expectancy and increase mortality rates. Additionally, it shows that per capita kilocalorie supply, per capita GDP, per capita health expenditures, and urbanization are statistically significant for increasing life expectancy and decreasing mortality rates. The findings reveal that inflationary shocks severely affect food insecurity and environmental factors, exerting further pressure on contemporary life expectancy and mortality rates. In rebuttal, the institutional quality index is found to have significant effects on increasing and decreasing life expectancy and mortality rates, respectively. Furthermore, the institutional quality index is effective in moderating the nexus between food insecurity, environmental degradation, and health outcomes while also neutralizing the negative impact of inflationary shocks on the subject.ConclusionThe results verify triple health constraints such as food insecurity, environmental factors, and economic vulnerability to global shocks, which impose severe effects on life expectancy and mortality rates. Furthermore, poor institutional quality is identified as a hindrance to health outcomes in South Asia. The findings suggest specific policy implications that are explicitly discussed.

Volatility connectedness on the central European forex markets

We perform a comprehensive assessment of volatility connectedness between the currencies of Central European (CE) countries using high-frequency data from 2009 to 2022. We provide evidence of asymmetries in connectedness that are dominated by negative volatility, especially during periods of economic distress. We also detect statistically significant economic or political events that lead to increased volatility connectedness. Plus, we document the impact of global shocks, not local ones. Further, the existing lag in the response of the spillover index to stressful events offers an opportunity to effectively hedge foreign exchange risk and to use the CE currencies as hedging tools. Finally, in terms of market-specific factors, liquidity dominates uncertainty as a connectedness driver. Our results are robust with respect to volatility measures and provide direct policy implications for portfolio composition and hedging.