Despite significant progress in recent decades, labor markets across the world remain divided along gender lines. Female labor force participation has remained lower than male participation, gender wage gaps are high, and women are overrepresented in the informal sector and among the poor. In many countries, legal restrictions persist which constrain women from developing their full economic potential. While equality between men and women is in itself an important development goal, women's economic participation is also a part of the growth and stability equation. In rapidly aging economies, higher female labor force participation can boost growth by mitigating the impact of a shrinking workforce. Better opportunities for women can also contribute to broader economic development in developing economies, for instance through higher levels of school enrollment for girls.
Economic thinking must evolve to account for a shift in how nations pursue security, growth, and influence
As governments intervene more, evidence shows that the benefits are modest and depend on thoughtful design
The region’s central banks have built significant credibility over two decades, anchoring price expectations and bolstering resilience against external shocks
Governments can protect vulnerable households, keep businesses open, and preserve price signals without straining public finances
Resilience, supervision, and international coordination are essential to safeguarding global financial markets as new AI tools enable attackers
Fiscal pressures in developing countries make stronger domestic revenue systems more important than ever
This paper examines the short- and medium-term effects of the 2018–19 China-U.S. tariff increases on the trade and investment flows of ASEAN member economies. Using granular trade data, we demonstrate that several ASEAN countries experienced a disproportionate growth in exports of products that were targeted by these tariffs. To further explore the dynamic and often immediate responses of international capital flows to these trade policy shifts, we leverage a novel firm-level FDI database that allows us to identify surges in sectoral investment inflows. Among ASEAN countries, Vietnam stands out as the one where FDI in targeted sectors grew notably faster during 2018–19, likely contributing to its observed export gains over the medium term. At the same time, our analysis reveals that trade gains in targeted products have not universally translated into stronger overall export performance across ASEAN. More generally, while trade reallocation may yield short- and medium-term gains, these gains can be offset over time by the higher long-term aggregate losses associated with trade fragmentation.
We quantify barriers to cross-border banking within the euro area and their consequences for credit allocation and output. Using loan-level data from the European credit registry (AnaCredit) and group structures (RIAD), we estimate barriers to relationship formation, loan pricing, and banks’ branching decisions at the country-pair level. We find that barriers to cross-border relationships between banks and firms and cross-border bank entry are large while wedges on interest rates and loan quantities are comparatively small. The estimated edges are strongly associated with differences in national banking regulations, measured using a novel dataset on regulatory distances. We embed our estimates into a quantitative spatial general equilibrium model with heterogeneous banks and firms subject to cross-border frictions in relationship formation, loan pricing, and bank entry. Partially relaxing frictions predicts sizable and heterogeneous output gains across euro area countries. These gains are primarily driven by increases in capital and labor rather than improvements in allocative efficiency.
This paper examines the drivers of wage growth in Europe and assesses whether the 2022–23 inflation surge has altered wage-setting dynamics, using cross-country macro evidence for 26 European economies, agreement-level collective bargaining data for Spain, and estimates of minimum and public sector wage spillovers. We find that the slope of the wage Phillips curve has not materially changed since the pandemic—labor market slack continues exerting a restraining influence on wage growth. However, postpandemic wage growth was higher than predicted by historical relationships, reflecting the outsized inflation shock and a higher sensitivity of wages to past inflation. Wage-setting is found to differ markedly across regions. In Central, Eastern, and Southeastern European Economies (CESEE), wage formation remains more backward-looking, with past inflation playing a dominant role, whereas in Advanced Economies (AEs) inflation expectations are more important. In AEs, the recent wage response followed a sequential pattern: the wage drift rose early as employers granted ad hoc increases, while negotiated wages adjusted with a lag as collective agreements were renewed and workers recouped accumulated real wage losses. Micro evidence from Spain shows that institutional features of collective bargaining conditionally amplify inflation pass-through: CPI indexation clauses, sector-level bargaining, and shorter contract duration are each associated with stronger wage responses to past inflation. In parallel, minimum wage pass-through has strengthened markedly in CESEE since 2015, while public sector wages dampened aggregate wage growth in AEs but amplified it in CESEE during 2022–24. Taken together, these findings suggest that while the core Phillips curve mechanism remains intact, future inflation shocks could generate more persistent wage pressures where wage-setting is more backward-looking, inflation compensation becomes institutionalized (including through indexation that interacts with downward nominal rigidity), or discretionary minimum and public sector wage policies add impetus.
Government securities-backed repo markets constitute a key funding source for market participants in many jurisdictions. A number of recent stress episodes, e.g., in US and UK repo markets, has led to renewed efforts to strengthen the resilience of repo markets. This notably includes a push to increased central clearing via central counterparties (CCPs) which may come via market incentives or in the form of mandatory clearing. Central clearing is commonly considered as a key tool to increase transparency and understanding of markets and improve the risk management practices of market participants. This paper provides a brief overview of post trade-arrangements in select government securities repo markets and offers a structured analysis of potential benefits and risks of bringing repo markets onto centrally cleared platforms from a CCP perspective. The paper lists a set of key considerations that CCPs—and indirectly—policy makers could take into account when exploring the expansion of repo clearing services or opting for a repo clearing mandate. Aside from considerations pertaining to access modalities to repo clearing services, default management and market structure-related aspects are of key importance. Together, these factors ensure that the transition of repo transactions from a decentralized, uncleared set-up to central clearing is conducive to more resilient repo and ultimately government bond markets.
Fiscal policy has re-emerged as a central tool of macroeconomic stabilization, yet the way governments communicate fiscal choices remains poorly understood. This paper provides the first systematic analysis of fiscal communication across the G7 from 2000–2024. Using a new dataset of budget documents, ministerial speeches, and press communiqués, we examine the clarity, thematic content, and rhetorical tone of official fiscal statements through computational text-analysis methods. We uncover a structured but fragmented communication architecture. Technical documents emphasize sustainability and constraints; speeches underscore growth, fairness, and investment; and press releases distill policy packages into succinct signals. Despite rising expectations of transparency, fiscal language remains complex and often optimistically framed. These patterns reflect institutional design, political incentives, and macroeconomic conditions. Our findings highlight fiscal communication as an underappreciated dimension of economic governance, one that shapes expectations, conditions credibility, and warrants deeper integration into fiscal policy analysis.
High-debt euro area economies face fiscal consolidation in a low-growth environment. We use a Heterogeneous Agent New Keynesian model to assess how consolidation composition shapes aggregate and distributional outcomes in a representative high-debt economy. The status quo is not neutral: delay generates its own costs through lower investment, higher debt service, and damage to constrained households. For a given fiscal effort, expenditure-based consolidation achieves faster debt reduction with lower growth and distributional costs than revenue-based consolidation. As a complementary exercise, pairing the expenditurebased path with growth-enhancing structural reforms further improves outcomes by lifting real wages, a channel that disproportionately benefits hand-to-mouth households. Across both strategies, modest well targeted transfers to low-income households can substantially mitigate distributional costs at minimal fiscal expense while supporting aggregate demand.
Rwanda’s economy remains resilience in the face of multiple shocks. The authorities under the 36-month Policy Coordination Instrument (PCI), completed in December 2025, sustained a strong track record of policy implementation which anchored macroeconomic stability. However, sustaining development ambitions while building buffers has proven more challenging given tighter financing conditions. The war in the Middle East only compounds these challenges. As a result, with Rwanda facing a protracted balance-of-payments need, the authorities have requested a 38‑month Extended Credit Facility (ECF) arrangement to provide temporary financing and a credible policy anchor to support orderly adjustment. The authorities consider the ECF to be the most suitable instrument to address their needs at this juncture.
This paper shows that separating persistent (permanent) temperature changes from transitory weather fluctuations can reshape our understanding of the macroeconomic costs of warming. Using a Kalman filter state-space decomposition, it separates temperature into a permanent component and transitory weather fluctuations, and links the permanent component to trend output using a panel cointegration and error-correction framework. A one-degree Celsius higher permanent temperature is associated with a significant decline in the long-run level of output, with full adjustment unfolding over multiple decades to a century. Decomposing aggregate output into population and output per capita reveals that the long-run output losses operate primarily through demographic adjustment in the full sample, while in advanced economies, both long-run output per capita and population decline as the climate warms. Economies with higher capital intensity and more durable capital stocks experience larger long-run per capita output losses. These findings suggest that long-run economic vulnerability to persistent warming is more broadly distributed across rich and poor countries than the short-run weather literature implies, reflecting differences in capital structure. They complement rather than contradict the well-established finding that developing countries are more exposed to short-run weather shocks.
This paper examines the firm-level impact of state aid in France from 2016–23 and how targeting affects economic outcomes. Using firm-level data and a difference-in-differences approach, we find that aid is most effective for young firms, improving real outcomes while also crowding in private debt financing. Size-based targeting, by contrast, has limited impact. R&D support is particularly effective for young firms in high-tech sectors, and energy aid has the strongest effects in manufacturing, pointing to its potential role in helping firms reduce emissions and facilitating the green transition.
Economic thinking must evolve to account for a shift in how nations pursue security, growth, and influence
As governments intervene more, evidence shows that the benefits are modest and depend on thoughtful design
The region’s central banks have built significant credibility over two decades, anchoring price expectations and bolstering resilience against external shocks
Governments can protect vulnerable households, keep businesses open, and preserve price signals without straining public finances
Resilience, supervision, and international coordination are essential to safeguarding global financial markets as new AI tools enable attackers
Fiscal pressures in developing countries make stronger domestic revenue systems more important than ever
This paper examines the short- and medium-term effects of the 2018–19 China-U.S. tariff increases on the trade and investment flows of ASEAN member economies. Using granular trade data, we demonstrate that several ASEAN countries experienced a disproportionate growth in exports of products that were targeted by these tariffs. To further explore the dynamic and often immediate responses of international capital flows to these trade policy shifts, we leverage a novel firm-level FDI database that allows us to identify surges in sectoral investment inflows. Among ASEAN countries, Vietnam stands out as the one where FDI in targeted sectors grew notably faster during 2018–19, likely contributing to its observed export gains over the medium term. At the same time, our analysis reveals that trade gains in targeted products have not universally translated into stronger overall export performance across ASEAN. More generally, while trade reallocation may yield short- and medium-term gains, these gains can be offset over time by the higher long-term aggregate losses associated with trade fragmentation.
We quantify barriers to cross-border banking within the euro area and their consequences for credit allocation and output. Using loan-level data from the European credit registry (AnaCredit) and group structures (RIAD), we estimate barriers to relationship formation, loan pricing, and banks’ branching decisions at the country-pair level. We find that barriers to cross-border relationships between banks and firms and cross-border bank entry are large while wedges on interest rates and loan quantities are comparatively small. The estimated edges are strongly associated with differences in national banking regulations, measured using a novel dataset on regulatory distances. We embed our estimates into a quantitative spatial general equilibrium model with heterogeneous banks and firms subject to cross-border frictions in relationship formation, loan pricing, and bank entry. Partially relaxing frictions predicts sizable and heterogeneous output gains across euro area countries. These gains are primarily driven by increases in capital and labor rather than improvements in allocative efficiency.
This paper examines the drivers of wage growth in Europe and assesses whether the 2022–23 inflation surge has altered wage-setting dynamics, using cross-country macro evidence for 26 European economies, agreement-level collective bargaining data for Spain, and estimates of minimum and public sector wage spillovers. We find that the slope of the wage Phillips curve has not materially changed since the pandemic—labor market slack continues exerting a restraining influence on wage growth. However, postpandemic wage growth was higher than predicted by historical relationships, reflecting the outsized inflation shock and a higher sensitivity of wages to past inflation. Wage-setting is found to differ markedly across regions. In Central, Eastern, and Southeastern European Economies (CESEE), wage formation remains more backward-looking, with past inflation playing a dominant role, whereas in Advanced Economies (AEs) inflation expectations are more important. In AEs, the recent wage response followed a sequential pattern: the wage drift rose early as employers granted ad hoc increases, while negotiated wages adjusted with a lag as collective agreements were renewed and workers recouped accumulated real wage losses. Micro evidence from Spain shows that institutional features of collective bargaining conditionally amplify inflation pass-through: CPI indexation clauses, sector-level bargaining, and shorter contract duration are each associated with stronger wage responses to past inflation. In parallel, minimum wage pass-through has strengthened markedly in CESEE since 2015, while public sector wages dampened aggregate wage growth in AEs but amplified it in CESEE during 2022–24. Taken together, these findings suggest that while the core Phillips curve mechanism remains intact, future inflation shocks could generate more persistent wage pressures where wage-setting is more backward-looking, inflation compensation becomes institutionalized (including through indexation that interacts with downward nominal rigidity), or discretionary minimum and public sector wage policies add impetus.
Government securities-backed repo markets constitute a key funding source for market participants in many jurisdictions. A number of recent stress episodes, e.g., in US and UK repo markets, has led to renewed efforts to strengthen the resilience of repo markets. This notably includes a push to increased central clearing via central counterparties (CCPs) which may come via market incentives or in the form of mandatory clearing. Central clearing is commonly considered as a key tool to increase transparency and understanding of markets and improve the risk management practices of market participants. This paper provides a brief overview of post trade-arrangements in select government securities repo markets and offers a structured analysis of potential benefits and risks of bringing repo markets onto centrally cleared platforms from a CCP perspective. The paper lists a set of key considerations that CCPs—and indirectly—policy makers could take into account when exploring the expansion of repo clearing services or opting for a repo clearing mandate. Aside from considerations pertaining to access modalities to repo clearing services, default management and market structure-related aspects are of key importance. Together, these factors ensure that the transition of repo transactions from a decentralized, uncleared set-up to central clearing is conducive to more resilient repo and ultimately government bond markets.
Fiscal policy has re-emerged as a central tool of macroeconomic stabilization, yet the way governments communicate fiscal choices remains poorly understood. This paper provides the first systematic analysis of fiscal communication across the G7 from 2000–2024. Using a new dataset of budget documents, ministerial speeches, and press communiqués, we examine the clarity, thematic content, and rhetorical tone of official fiscal statements through computational text-analysis methods. We uncover a structured but fragmented communication architecture. Technical documents emphasize sustainability and constraints; speeches underscore growth, fairness, and investment; and press releases distill policy packages into succinct signals. Despite rising expectations of transparency, fiscal language remains complex and often optimistically framed. These patterns reflect institutional design, political incentives, and macroeconomic conditions. Our findings highlight fiscal communication as an underappreciated dimension of economic governance, one that shapes expectations, conditions credibility, and warrants deeper integration into fiscal policy analysis.
High-debt euro area economies face fiscal consolidation in a low-growth environment. We use a Heterogeneous Agent New Keynesian model to assess how consolidation composition shapes aggregate and distributional outcomes in a representative high-debt economy. The status quo is not neutral: delay generates its own costs through lower investment, higher debt service, and damage to constrained households. For a given fiscal effort, expenditure-based consolidation achieves faster debt reduction with lower growth and distributional costs than revenue-based consolidation. As a complementary exercise, pairing the expenditurebased path with growth-enhancing structural reforms further improves outcomes by lifting real wages, a channel that disproportionately benefits hand-to-mouth households. Across both strategies, modest well targeted transfers to low-income households can substantially mitigate distributional costs at minimal fiscal expense while supporting aggregate demand.
Rwanda’s economy remains resilience in the face of multiple shocks. The authorities under the 36-month Policy Coordination Instrument (PCI), completed in December 2025, sustained a strong track record of policy implementation which anchored macroeconomic stability. However, sustaining development ambitions while building buffers has proven more challenging given tighter financing conditions. The war in the Middle East only compounds these challenges. As a result, with Rwanda facing a protracted balance-of-payments need, the authorities have requested a 38‑month Extended Credit Facility (ECF) arrangement to provide temporary financing and a credible policy anchor to support orderly adjustment. The authorities consider the ECF to be the most suitable instrument to address their needs at this juncture.
This paper shows that separating persistent (permanent) temperature changes from transitory weather fluctuations can reshape our understanding of the macroeconomic costs of warming. Using a Kalman filter state-space decomposition, it separates temperature into a permanent component and transitory weather fluctuations, and links the permanent component to trend output using a panel cointegration and error-correction framework. A one-degree Celsius higher permanent temperature is associated with a significant decline in the long-run level of output, with full adjustment unfolding over multiple decades to a century. Decomposing aggregate output into population and output per capita reveals that the long-run output losses operate primarily through demographic adjustment in the full sample, while in advanced economies, both long-run output per capita and population decline as the climate warms. Economies with higher capital intensity and more durable capital stocks experience larger long-run per capita output losses. These findings suggest that long-run economic vulnerability to persistent warming is more broadly distributed across rich and poor countries than the short-run weather literature implies, reflecting differences in capital structure. They complement rather than contradict the well-established finding that developing countries are more exposed to short-run weather shocks.
This paper examines the firm-level impact of state aid in France from 2016–23 and how targeting affects economic outcomes. Using firm-level data and a difference-in-differences approach, we find that aid is most effective for young firms, improving real outcomes while also crowding in private debt financing. Size-based targeting, by contrast, has limited impact. R&D support is particularly effective for young firms in high-tech sectors, and energy aid has the strongest effects in manufacturing, pointing to its potential role in helping firms reduce emissions and facilitating the green transition.
