## Joint IMF-FCDO Conference on Lower-Income Countries Navigating Global Change: Insights and Policy Directions from Macro Research for Development

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---

### Conference overview and key outcomes
- The joint IMF-FCDO Conference marked 13 years of collaboration under the Macroeconomic Research in Low-Income Countries (MRLIC) program and gathered over 100 participants, including researchers, policymakers, and development partners.
- Conference format: panel discussions and path-finding sessions to review MRLIC achievements and outline areas for future research and partnerships.
- Opening remarks by IMF Managing Director Kristalina Georgieva and FCDO Chief Economist Dennis Novy highlighted pressures on LICs including declining aid, high debt burdens, and digital readiness gaps, and stressed the importance of capacity-building collaborations.
- Independent evaluation of MRLIC (presented by S. Devarajan and S. O’Connell) concluded the program “is unquestionably a highly successful project” that “exceeded all expectations,” documenting:
  - over 200 working papers
  - 100+ refereed publications
  - 16 toolkits
  - uptake in more than 120 IMF country reports
- Closing remarks by Deputy Managing Director N. Clarke and UK Executive Director V. Poon emphasized the need for greater investment in data and research and the pressing need for additional donors given significant ODA budget reductions across advanced economies.

### Major themes and path-finding session messages
- Fiscal and financial challenges
  - Rising debt in LICs has not consistently translated into higher investment or growth (M. Aguiar).
  - Shifts in financial flows underscore the need for more adaptive financing strategies (S. Mallick).
- New technology and trade
  - Domestic barriers often constrain trade more than tariffs or external market access; recommended focus on reducing internal distortions and improving connectivity (A. Khandelwal).
  - Firms often underuse technologies they possess—the “utilization gap”; closing it could yield productivity gains (D. Comin).
- New data, tools, and methods
  - Importance of granular data, centralized data hubs, robust privacy frameworks, and institutional partnerships to strengthen LIC analytical capacity (N. Limodio).
  - Presentation of the LIC Integrated Policy Framework tailoring FX intervention, capital flow management, and macroprudential tools to country-specific contexts (S. Basu).
- Strengthening resilience and sustainability
  - Climate adaptation requires private action supported by well-designed public policies addressing market failures and financing constraints (K. Jack).
  - Well-managed migration can generate fiscal and structural benefits despite brain-drain concerns (M. Clemens).
  - Incorporating distributional and labor-market heterogeneity can enhance resilience and equity (L. Kolovich).
- Policy panel takeaways
  - Practical implications for LIC policymaking include addressing fragile-state challenges, rising external pressures, limited LIC-specific innovation, and difficulty prioritizing long-term development needs (panelists: C. Adams, M. Atingi-Ego, R. Glennerster, D. Lagakos; moderator A. Aemro Selassie).

### Country applications of MRLIC tools and models
- Vietnam (DIGNAR application)
  - Vietnam’s export-led growth delivered strong performance over two decades; sustaining growth to reach high-income status by 2045 will require structural reforms and increased public infrastructure investment.
  - IMF Selected Issues paper analyzes labor and capital market inefficiencies and discusses reforms to close structural gaps and raise productive efficiency, including technological advancements such as artificial intelligence.
- Liberia (DIGNAR and DIGNAD applications)
  - IMF Selected Issues Paper welcomed by authorities and the Board in November 2025; paper contains two sections: expanding public infrastructure and how building resilience to natural disasters affects growth and debt sustainability.
  - Key messages: need for increased public investment and improved revenue mobilization after years of insufficient infrastructure development since the civil war and the 2010 debt relief.
  - With external support declining, the report stresses a multipronged strategy: higher capital spending, better public investment management, more efficient tax collection, and complementary fiscal reforms.
  - DIGNAR and DIGNAD simulations show scaling up public investment, boosting efficiency, raising tax revenues, and reducing untargeted expenditures can foster growth while maintaining debt sustainability; climate adaptation investments and fiscal reforms strengthen resilience and reduce inequality.
- Vanuatu (DIGNAD application)
  - DIGNAD used in a cost-benefit analysis of ex-ante public investment in climate-resilient infrastructure (Annex VIII to the 2025 Article IV Consultation for Vanuatu).
  - In presence of natural disaster risks, resilient infrastructure investment:
    - reduces damages when disasters occur
    - supports stronger economic recovery and long-term growth
    - lowers post-disaster reconstruction costs
    - eases public financing needs and strengthens fiscal space by reducing public debt and mitigating distortions associated with fiscal instruments

### Working papers — key findings and implications
- Patterns of Invoicing Currency in Global Trade in a Fragmenting World Economy (E. Boz et al.)
  - Introduces a panel dataset on global trade invoicing currency covering 132 countries (including over 20 LICs) from 1990 to 2023; adds new information on the Chinese renminbi.
  - Five key findings:
    - The US dollar remains the dominant currency, with global invoicing shares broadly stable.
    - Renminbi use has expanded gradually beyond Asia, though it remains modest.
    - Countries not aligned with the US still rely heavily on the dollar, although dependence has fallen in a few cases.
    - Since 2021, the link between a country’s geopolitical distance from a currency issuer and its use of that currency has grown more negative, signaling rising polarization.
    - No robust evidence that policy initiatives to reduce dollar reliance in oil exports have been effective.
- External Shocks and Monetary Policy Trade-offs in Low-Income Countries (J. Passadore et al.)
  - Presents an Open Economy HANK model tailored to LIC features (hand-to-mouth households, subsistence consumption of tradable goods).
  - Calibrated to a representative LIC and illustrated with an external price shock producing a consumption-led recession, higher inflation, and a decline in real wages.
  - Consumption inequality rises as poorer households cannot insure against the shock.
  - Monetary policy cannot meaningfully improve poorer households’ welfare because gains are offset by adverse effects on real wages and labor demand; alternative monetary responses yield similar results.
  - Fiscal transfers emerge as a more effective tool for redistributing resources across households.
- Monetary Policy Transmission to Household Credit: Evidence from Uganda’s Credit Registry Data (M. Conesa Martinez et al.)
  - Uses more than 632,000 household loans issued by all commercial banks between 2017 and 2023.
  - Finds household credit, accounting for over 50 percent of new loan accounts, responds to monetary policy: rate hikes lead to higher lending rates and reduced loan size and maturity.
  - Stronger transmission among banks with lower liquidity and capital and those holding more government securities.
  - Effects more pronounced for fixed-rate loans than for floating-rate loans.
  - Results support the presence of a bank lending channel in Uganda, similar to advanced economies.
- Earthquakes and Emerging Market Sovereign Bond Spreads (R. Arezki et al.)
  - Uses monthly data for 96 emerging and developing economies between 2012 and 2023.
  - Shows earthquakes increase sovereign spreads only where institutions are weak; in low-capacity countries (many low-income), spreads jump and remain high.
  - In stronger states, markets view shocks as temporary and respond calmly.
  - Implication: building fiscal capacity and credibility insures against financial aftershocks of disasters.
- The Macroeconomic Impact of Earthquakes on Growth: A Tale from Two Datasets (R. Arezki et al.)
  - Compares EM-DAT (high-damage events) and USGS (full geophysical record).
  - When only high-damage events are counted (EM-DAT), earthquakes appear macroeconomically benign.
  - When the full USGS record is used, growth slows sharply and scars persist, especially in LICs with limited fiscal and institutional capacity.
  - Past optimism about recovery often reflected data omissions rather than resilience.
- Unbalanced Trade 2.0 (A. Cuñat and R. Zymek)
  - Persistent trade imbalances can have lasting real income effects when scale economies are concentrated in the trade sector.
  - A trade surplus can expand the trade sector, raising productivity and real income; a trade deficit can lower both.
  - Under plausible calibrations, the mechanism can significantly redistribute gains from trade away from deficit and toward surplus economies.
  - Discusses policy options to address underproduction of tradables when traded production is scale intensive.
- Agricultural Distortions and International Migration (B. Britos, M. A. Hernandez, D. Trupkin)
  - Theoretical framework identifies two channels: distortions push most productive farmers to emigrate, lowering domestic productivity; misallocation lowers incomes and incentivizes out-migration.
  - Counterfactuals using Guatemalan microdata show reducing distortions to benchmark levels would:
    - decrease emigration by 35% of Guatemalans currently in the US
    - boost agricultural productivity by 30%
    - increase welfare by 3.4%
  - High-distortion areas have limited financial access, poor road connectivity, and weak government presence; policy implications for LICs include promoting financial inclusion, infrastructure investment, and institutional strengthening.

### External presentations and dissemination (selected)
- Bilateral Trade in Services dataset (BiTS) presented by R. Zymek at the 13th IMF Statistical Forum; dataset compiles official bilateral services trade flows and has a companion paper demonstrating applications.
- Navigating Cross-border Policy Challenges in a Dynamic World – Emerging Data Gaps: P. Topalova panelist at the IMF 13th Statistical Forum on November 19; focused on data challenges faced by lower-income countries and highlighted MRLIC toolkits and projects addressing data gaps.
- Does Climate Change Lead to Structural Transformation? (A. Drabo) presented at the Inclusive Growth in Mozambique conference in Maputo on November 12-13, 2025:
  - Droughts reduce agricultural employment and shift labor toward industry and services in short, medium, and long term; droughts lower agricultural value-added growth relative to services for one year.
  - Floods reduce employment and value added in services short term and lead to mid-term reallocation of labor from agriculture to services.
  - Certain adaptation strategies can mitigate withdrawal of workers from agriculture after climate shocks.
- Robust Inference via Heteroskedasticity in Linear Models (O. F. Akbal) presented at the 5th Sailing the Macro Workshop in Siracusa, Italy, on September 5-7, 2025:
  - Proposes a new methodology for inference in simple linear models, illustrated with applications to fuel-price passthrough in Sierra Leone, remittances’ effect on consumption in the Philippines, and exchange-rate passthroughs.

### Discussions with experts, additional presentations, and key statistics (Section 2)
- Discussions with experts and academics provided feedback on the research presented.
- Global Linkages and Global Nowcasting (O. F. Akbal; co-author D. Giannone)
  - Event: 2025 Örebro Workshop on Macro- and Financial Econometrics, November 3-4, 2025, Sweden.
  - Contribution: model estimates missing quarterly GDP series by leveraging global and regional economic interconnections.
  - Key statistic: 34% of economies worldwide publish only annual GDP statistics.
  - Policy implication: model useful for estimating more frequent GDP measures where only annual statistics are published, enabling improved nowcasting and policy assessment.
- Capital Allocation and Firm Dynamics in Small Open Economies (F. Camelo; Washington Area International Finance Symposium, September 26, 2025)
  - Empirical approach: uses balance of payments data to identify capital inflow booms in 85 countries between 1975 and 2019.
  - Key findings:
    - Capital inflow booms are associated with persistent increases in private credit and temporary output booms.
    - Capital inflow booms are associated with sustained declines in total factor productivity (TFP).
    - Firm-level data for 30 countries show individual firms experience strong but short-lived booms following inflow episodes.
    - Significant reallocation of capital and debt toward firms with higher marginal revenue product of capital (MRPK).
  - Interpretation: small open economy firm-dynamics model with heterogeneity and financial frictions; general equilibrium adjustments through firm entry and exit are essential to replicate aggregate TFP response.
- Blog: Even as Global Uncertainty Surges, Economic Sentiment Remains Positive (H. Ahir, N. Bloom, D. Furceri)
  - Main point: Despite rising geopolitical rifts and trade tensions, global economic uncertainty has surged, yet sentiment about future economic prospects remains positive.
  - Evidence base: findings from the authors’ NBER paper, The World Uncertainty Index.
- Sovereign Risk in a Warming World: Unraveling the Domestic Yield Curve Response (A. Drabo and K. Kpodar; IMF RES presentation session, October 28, 2025)
  - Research focus: impact of natural disasters and climate vulnerability on the domestic sovereign yield curve; distinct transmission channels identified.
  - Data and methods:
    - Uses a newly compiled dataset on domestic treasury bill and bond yields.
    - Employs fixed-effects and local projection difference-in-difference estimations.
  - Key findings:
    - Evidence of a climate premium in the pricing of domestic government securities.
    - Natural disasters significantly steepen the yield curve for short-term maturities.
    - Main transmission channels from natural disasters are heightened fiscal stress and monetary policy stance.
    - Effect of climate vulnerability is more pronounced in economies with shallower financial systems.
  - Policy implication: underscores the importance of integrating climate risk into debt management and fiscal policy frameworks.

*Information compiled by Hites Ahir (hahir@imf.org) and Ana Cepeda (acepedavalor@imf.org) with inputs from the authors; views expressed do not necessarily represent the views of the International Monetary Fund (IMF) or UK’s Foreign, Commonwealth and Development Office (FCDO).*

### Section 1

### Joint IMF-FCDO Conference on Lower-Income Countries Navigating Global Change: Insights and Policy Directions from Macro Research for Development

### Conference overview and key outcomes
- A joint IMF-FCDO Conference marked 13 years of collaboration under the Macroeconomic Research in Low-Income Countries (MRLIC) program.
- The event gathered over 100 participants, including researchers, policymakers, and development partners.
- Conference format: panel discussions and path-finding sessions to review MRLIC achievements and outline areas for future research and partnerships.
- Opening remarks:
  - IMF Managing Director Kristalina Georgieva and FCDO Chief Economist Dennis Novy highlighted pressures on LICs including declining aid, high debt burdens, and digital readiness gaps, and stressed the importance of capacity-building collaborations.
- Independent evaluation of MRLIC (presented by S. Devarajan and S. O’Connell) concluded the program “is unquestionably a highly successful project” that “exceeded all expectations,” documenting:
  - over 200 working papers
  - 100+ refereed publications
  - 16 toolkits
  - uptake in more than 120 IMF country reports
- Closing remarks by Deputy Managing Director N. Clarke and UK Executive Director V. Poon emphasized the need for greater investment in data and research and noted the pressing need for additional donors given significant ODA budget reductions across advanced economies.

### Major themes and path-finding session messages
- Fiscal and financial challenges
  - Rising debt in LICs has not consistently translated into higher investment or growth (M. Aguiar).
  - Shifts in financial flows underscore the need for more adaptive financing strategies (S. Mallick).
- New technology and trade
  - Domestic barriers often constrain trade more than tariffs or external market access; recommended focus on reducing internal distortions and improving connectivity (A. Khandelwal).
  - Firms often underuse technologies they possess—the “utilization gap”; closing it could yield productivity gains (D. Comin).
- New data, tools, and methods
  - Importance of granular data, centralized data hubs, robust privacy frameworks, and institutional partnerships to strengthen LIC analytical capacity (N. Limodio).
  - Presentation of the LIC Integrated Policy Framework tailoring FX intervention, capital flow management, and macroprudential tools to country-specific contexts (S. Basu).
- Strengthening resilience and sustainability
  - Climate adaptation requires private action supported by well-designed public policies addressing market failures and financing constraints (K. Jack).
  - Well-managed migration can generate fiscal and structural benefits despite brain-drain concerns (M. Clemens).
  - Incorporating distributional and labor-market heterogeneity can enhance resilience and equity (L. Kolovich).
- Policy panel takeaways
  - Practical implications for LIC policymaking include addressing fragile-state challenges, rising external pressures, limited LIC-specific innovation, and difficulty prioritizing long-term development needs (panelists: C. Adams, M. Atingi-Ego, R. Glennerster, D. Lagakos; moderator A. Aemro Selassie).

### Country applications of MRLIC tools and models
- Vietnam (DIGNAR application)
  - Vietnam’s export-led growth delivered strong performance over two decades; sustaining growth to reach high-income status by 2045 will require structural reforms and increased public infrastructure investment.
  - IMF Selected Issues paper analyzes labor and capital market inefficiencies and discusses reforms to close structural gaps and raise productive efficiency, including technological advancements such as artificial intelligence.
- Liberia (DIGNAR and DIGNAD applications)
  - IMF Selected Issues Paper welcomed by authorities and the Board in November 2025; paper contains two sections: expanding public infrastructure and how building resilience to natural disasters affects growth and debt sustainability.
  - Key messages: need for increased public investment and improved revenue mobilization after years of insufficient infrastructure development since the civil war and the 2010 debt relief.
  - With external support declining, the report stresses a multipronged strategy: higher capital spending, better public investment management, more efficient tax collection, and complementary fiscal reforms.
  - DIGNAR and DIGNAD simulations show scaling up public investment, boosting efficiency, raising tax revenues, and reducing untargeted expenditures can foster growth while maintaining debt sustainability; climate adaptation investments and fiscal reforms strengthen resilience and reduce inequality.
- Vanuatu (DIGNAD application)
  - DIGNAD used in a cost-benefit analysis of ex-ante public investment in climate-resilient infrastructure (Annex VIII to the 2025 Article IV Consultation for Vanuatu).
  - In presence of natural disaster risks, resilient infrastructure investment:
    - reduces damages when disasters occur
    - supports stronger economic recovery and long-term growth
    - lowers post-disaster reconstruction costs
    - eases public financing needs and strengthens fiscal space by reducing public debt and mitigating distortions associated with fiscal instruments

### Working papers — key findings and implications
- Patterns of Invoicing Currency in Global Trade in a Fragmenting World Economy (E. Boz et al.)
  - Introduces a panel dataset on global trade invoicing currency covering 132 countries (including over 20 LICs) from 1990 to 2023; adds new information on the Chinese renminbi.
  - Five key findings:
    - The US dollar remains the dominant currency, with global invoicing shares broadly stable.
    - Renminbi use has expanded gradually beyond Asia, though it remains modest.
    - Countries not aligned with the US still rely heavily on the dollar, although dependence has fallen in a few cases.
    - Since 2021, the link between a country’s geopolitical distance from a currency issuer and its use of that currency has grown more negative, signaling rising polarization.
    - No robust evidence that policy initiatives to reduce dollar reliance in oil exports have been effective.
- External Shocks and Monetary Policy Trade-offs in Low-Income Countries (J. Passadore et al.)
  - Presents an Open Economy HANK model tailored to LIC features (hand-to-mouth households, subsistence consumption of tradable goods).
  - Calibrated to a representative LIC and illustrated with an external price shock producing a consumption-led recession, higher inflation, and a decline in real wages.
  - Consumption inequality rises as poorer households cannot insure against the shock.
  - Monetary policy cannot meaningfully improve poorer households’ welfare because gains are offset by adverse effects on real wages and labor demand; alternative monetary responses yield similar results.
  - Fiscal transfers emerge as a more effective tool for redistributing resources across households.
- Monetary Policy Transmission to Household Credit: Evidence from Uganda’s Credit Registry Data (M. Conesa Martinez et al.)
  - Uses more than 632,000 household loans issued by all commercial banks between 2017 and 2023.
  - Finds household credit, accounting for over 50 percent of new loan accounts, responds to monetary policy: rate hikes lead to higher lending rates and reduced loan size and maturity.
  - Stronger transmission among banks with lower liquidity and capital and those holding more government securities.
  - Effects more pronounced for fixed-rate loans than for floating-rate loans.
  - Results support the presence of a bank lending channel in Uganda, similar to advanced economies.
- Earthquakes and Emerging Market Sovereign Bond Spreads (R. Arezki et al.)
  - Uses monthly data for 96 emerging and developing economies between 2012 and 2023.
  - Shows earthquakes increase sovereign spreads only where institutions are weak; in low-capacity countries (many low-income), spreads jump and remain high.
  - In stronger states, markets view shocks as temporary and respond calmly.
  - Implication: building fiscal capacity and credibility insures against financial aftershocks of disasters.
- The Macroeconomic Impact of Earthquakes on Growth: A Tale from Two Datasets (R. Arezki et al.)
  - Compares EM-DAT (high-damage events) and USGS (full geophysical record).
  - When only high-damage events are counted (EM-DAT), earthquakes appear macroeconomically benign.
  - When the full USGS record is used, growth slows sharply and scars persist, especially in LICs with limited fiscal and institutional capacity.
  - Past optimism about recovery often reflected data omissions rather than resilience.
- Unbalanced Trade 2.0 (A. Cuñat and R. Zymek)
  - Persistent trade imbalances can have lasting real income effects when scale economies are concentrated in the trade sector.
  - A trade surplus can expand the trade sector, raising productivity and real income; a trade deficit can lower both.
  - Under plausible calibrations, the mechanism can significantly redistribute gains from trade away from deficit and toward surplus economies.
  - Discusses policy options to address underproduction of tradables when traded production is scale intensive.
- Agricultural Distortions and International Migration (B. Britos, M. A. Hernandez, D. Trupkin)
  - Theoretical framework identifies two channels: distortions push most productive farmers to emigrate, lowering domestic productivity; misallocation lowers incomes and incentivizes out-migration.
  - Counterfactuals using Guatemalan microdata show reducing distortions to benchmark levels would:
    - decrease emigration by 35% of Guatemalans currently in the US
    - boost agricultural productivity by 30%
    - increase welfare by 3.4%
  - High-distortion areas have limited financial access, poor road connectivity, and weak government presence; policy implications for LICs include promoting financial inclusion, infrastructure investment, and institutional strengthening.

### External presentations and dissemination
- Bilateral Trade in Services dataset (BiTS) presented by R. Zymek at the 13th IMF Statistical Forum; dataset compiles official bilateral services trade flows and has a companion paper demonstrating applications.
- Navigating Cross-border Policy Challenges in a Dynamic World – Emerging Data Gaps: P. Topalova panelist at the IMF 13th Statistical Forum on November 19; focused on data challenges faced by lower-income countries and highlighted MRLIC toolkits and projects addressing data gaps.
- Does Climate Change Lead to Structural Transformation? (A. Drabo) presented at the Inclusive Growth in Mozambique conference in Maputo on November 12-13, 2025:
  - Droughts reduce agricultural employment and shift labor toward industry and services in short, medium, and long term; droughts lower agricultural value-added growth relative to services for one year.
  - Floods reduce employment and value added in services short term and lead to mid-term reallocation of labor from agriculture to services.
  - Certain adaptation strategies can mitigate withdrawal of workers from agriculture after climate shocks.
- Robust Inference via Heteroskedasticity in Linear Models (O. F. Akbal) presented at the 5th Sailing the Macro Workshop in Siracusa, Italy, on September 5-7, 2025:
  - Proposes a new methodology for inference in simple linear models, illustrated with applications to fuel-price passthrough in Sierra Leone, remittances’ effect on consumption in the Philippines, and exchange-rate passthroughs.

*Source: Joint IMF-FCDO Conference on Lower-Income Countries and IMF research and country analyses (December 2025).*

### Section 2

### dec2025 - Section 2

### Discussions with experts and academics
- Discussions with experts and academics provided valuable feedback on the research presented in the following items.

### External Presentation: Global Linkages and Global Nowcasting
- Presenter: O. F. Akbal.
- Co-author: D. Giannone.
- Event: 2025 Örebro Workshop on Macro- and Financial Econometrics.
- Event dates and location: November 3-4, 2025, Sweden.
- Contribution: Developed a model that estimates missing quarterly GDP series by leveraging global and regional economic interconnections.
- Key statistic: 34% of economies worldwide publish only annual GDP statistics.
- Policy implication: Model is an especially valuable contribution for estimating more frequent GDP measures where only annual statistics are published, enabling improved nowcasting and policy assessment.

### External Presentation: Capital Allocation and Firm Dynamics in Small Open Economies
- Upcoming working paper author: F. Camelo.
- Event: Washington Area International Finance Symposium.
- Event date: September 26, 2025.
- Empirical approach: Uses balance of payments data to identify capital inflow booms in 85 countries between 1975 and 2019.
- Key findings:
  - Capital inflow booms are associated with persistent increases in private credit and temporary output booms.
  - Capital inflow booms are associated with sustained declines in total factor productivity (TFP).
  - Firm-level data for 30 countries show individual firms experience strong but short-lived booms following inflow episodes.
  - There is significant reallocation of capital and debt toward firms with higher marginal revenue product of capital (MRPK).
- Interpretation and model:
  - Findings are interpreted through a small open economy firm-dynamics model featuring heterogeneity and financial frictions.
  - General equilibrium adjustments—through shifts in firm entry and exit—are essential to replicating the observed aggregate TFP response.
- Policy relevance: Understanding reallocation and TFP dynamics is important for assessing the long-run effects of capital inflows and for designing financial and macroprudential policies in small open economies.

### Blog: Even as Global Uncertainty Surges, Economic Sentiment Remains Positive
- Authors: H. Ahir, N. Bloom, and D. Furceri.
- Title: Even as Global Uncertainty Surges, Economic Sentiment Remains Positive.
- Main point: Despite rising geopolitical rifts and trade tensions, global economic uncertainty has surged, yet sentiment about future economic prospects remains positive.
- Evidence base: Draws on findings from the authors’ NBER paper, The World Uncertainty Index.

### Presentation: Sovereign Risk in a Warming World: Unraveling the Domestic Yield Curve Response
- Authors/presenters: A. Drabo and K. Kpodar.
- Event: IMF RES presentation session.
- Event date: October 28, 2025.
- Research focus: Impact of natural disasters and climate vulnerability on the domestic sovereign yield curve; distinct transmission channels identified.
- Data and methods:
  - Uses a newly compiled dataset on domestic treasury bill and bond yields.
  - Employs fixed-effects and local projection difference-in-difference estimations.
- Key findings:
  - Evidence of a climate premium in the pricing of domestic government securities.
  - Natural disasters significantly steepen the yield curve for short-term maturities.
  - Main transmission channels from natural disasters are heightened fiscal stress and monetary policy stance.
  - Effect of climate vulnerability is more pronounced in economies with shallower financial systems.
- Policy implication: Results underscore the importance of integrating climate risk into debt management and fiscal policy frameworks.

---


_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/dec2025.pdf_