Macro-Financial Impacts of Foreign Digital Money
with A. Copestake, E. Papageorgiou, S. J Peiris, U. Rawat, B. Tan
Economics Letters, Volume 255, September 2025, 112458, https://doi.org/10.1016/j.econlet.2025.112458
How does disaster risk impact fiscal sustainability and inequality?
with D. Park, J. Beirne, G. S. Uddin
Economic Modelling, Volume 151, October 2025, 107220 https://doi.org/10.1016/j.econmod.2025.107220
Climate Change and Carbon Policy: A Story of Optimal Green Macroprudential and Capital Flow Management
Energy Economics, Vol 146, May 2025, 108501, https://doi.org/10.1016/j.eneco.2025.108501
Green targeted lending operations in the Euro Area
with B. Lucey and G. S Uddin
Economics Letters, Vol 243, October 2024, 111893, https://doi.org/10.1016/j.econlet.2024.111893
Central Bank Digital Currency and Cryptocurrency in Emerging Markets
International Economics, Vol 181, March 2025, 100577, https://doi.org/10.1016/j.inteco.2024.100577
Public Spending and Inclusive Growth: A Cross-Country Empirical Analysis (with D. Park, B. Hasan, J. Beirne, G. S. Uddin), (A draft available upon request) (Presented at RES Multilateral Surveillance Seminar (IMF), Bank of Korea, OECD) (R&R at Journal of International Money and Finance)
Abstract: We investigate the effects of different components of government spending on inclusive growth. More specifically, we consider the inclusive impact of government spending on environmental protection, health, education, and social protection, all of which can conceivably promote inclusive growth. For our empirical analysis, we employ panel regressions and local projections using a comprehensive database of 191 countries spanning the period from 1980 to 2023. Our evidence indicates that equity-promoting government spending reduces income inequality, as measured by the Gini index, and improves human development indicators. Moreover, our analysis reveals that poorer households benefit disproportionately, suggesting that targeted fiscal expenditures can promote equity. Notably, the inclusive effects are most pronounced in advanced economies, where robust fiscal frameworks support and amplify such effects. In contrast, emerging and developing economies experience more modest gains. Overall, the findings highlight the importance of well-designed public spending programs for equitable growth. Finally, we conduct state-dependent local projections and regional sub-sample analysis.
Transition Risk Uncertainty and Robust Optimal Monetary Policy (under revision, a previous version in IMFS-Working Paper)
Abstract: Climate change has become one of the most prominent concerns globally. In this paper, we study the transition risk of greenhouse gas emission reduction in structural environmental-macroeconomic DSGE models. First, we analyze the uncertainty in model prediction on the effect of unanticipated and pre-announced carbon price increases. Second, we conduct optimal model-robust policy in different settings. We find that reducing emissions by 40% causes 0.7% - 4% output loss with 2% on average. Pre-announcement of carbon prices affects the inflation dynamics significantly. The central bank should react slightly less to inflation and output growth during the transition risk. With optimal carbon price designs, it should react even less to inflation, and more to output growth.
Macrofinancial Implications of Foreign Crypto Assets for Small Developing Economies (with A. Copestake, E. Papageorgiou, B. Tan), IMF Fintech Note 2023/012
Abstract: To explore risks associated with digital money, this Fintech Note simulates the hypothetical large-scale adoption of crypto assets in a model of a small open economy. The model highlights that a foreign-currency denominated stablecoin can amplify currency substitution and capital outflows in response to negative shocks. Monetary policy transmission is also weakened, forcing the central bank to adjust interest rates more aggressively in response to shocks. Capital flow management measures—if they do not constrain crypto flows—further incentivize households to hold foreign stablecoins for circumvention purposes, exacerbating the negative effects of crypto adoption on the macroeconomy. This underscores that widespread crypto adoption can weaken policymakers’ available options for mitigating external shocks and potentially increase cross-country spillovers
Macro-Financial Impacts of Foreign Digital Money (with A. Copestake, E. Papageorgiou, S. J Peiris, U. Rawat, B. Tan), IMF Working Paper No. 2023/249
Abstract: We develop a two-country New Keynesian model with endogenous currency substitution and financial frictions to examine the impact on a small developing economy of a stablecoin issued in a large foreign economy. The stablecoin provides households in the domestic economy with liquidity services and an additional hedge against domestic inflation. Its introduction amplifies currency substitution, reducing bank intermediation and weakening monetary policy transmission, worsening the impacts of recessionary shocks and increasing banking sector stress. Capital controls raise stablecoin adoption as a means of circumvention, increasing exposure to spillovers from foreign shocks. Unlike a domestic CBDC, a ban on stablecoin payments can alleviate these effects.
Disaster Risk, Inequality, and Fiscal Sustainability (with D. Park, J. Beirne, G. S. Uddin), ADB Economics Working Paper Series No. 750 | November 2024
Abstract: In this paper, we study the implications of climate change on fiscal sustainability and inequality. First, using rich panel data, we show that rising climate-related disaster risks increase government debt and harm fiscal sustainability. We also find that the adverse effect of disaster risks is larger for low-income households, exacerbating inequality. Second, we construct a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) model to examine the implications of the distributional effect of natural disaster risk. The model features two kinds of households and a fiscal authority. We show that disaster risk has recessionary effects and also causes inequality among households to widen. More specifically, the model indicates that ”Hand to Mouth” agents suffer a drop in consumption that is three times larger than that of the Ricardian households. Importantly, we observe a significant rise in sovereign debt due to disaster risk, which poses a challenge to policymakers. Lastly, targeted transfers are recommended but progressive taxes entail a significant fiscal cost.
Energy Prices and Household Heterogeneity: Monetary Policy in a Gas-TANK (by Jenny Chan, Sebastian Diz, Derrick Kanngiesser) Slides
Mitigating Policies for Pollutant Emissions in a DSGE for the Brazilian Economy (by Marcos Valli Jorge, Angelo M Fasolo, Silvio Michel de Azevedo Costa) Slides