RESEARCH

Economic complexity reduces 10-year yield spreads by about 61 basis points.

Short-term yields (<3 years) show no significant impact from economic complexity.

Economic complexity is a top predictor of sovereign yield spreads.

Effects of climate change vulnerability and preparedness on the cost of debt across countries with varying baseline levels of sovereign risk (specially for short-term debt) are highly asymmetric.

Climate vulnerability currently has a stronger influence on sovereign risk than the occurrence of actual disasters.

Economic complexity (trade) is largely explained by investment in R&D and Training in the manufacturing sector.

Policy should focus on intangible assets rather than on (solely) selecting specific products for trading.

Similar to "vulnerable growth" there is "vulnerable funding"

Vulnerable funding acts as an intermediary from financial conditions in the US to growth in the rest of the world

Macro-prudential policies at this intermediate step are fundamental

Weather shocks impact heterogeneously European electricity markets

We provide a tool to monitoring the dissimilar effects over time and according to the size of the shock

Financial and macroeconomic variables predict the lowest quantiles of GDP growth

Predicting-power of both variables changes according to the crisis (i.e. the nature of the shock, GFC vs. Covid)

Financial integration is beneficial for financial stability, at least considering the period post-GFC

Energy markets design (i.e. in Europe, marginal price) generates large asymmetries in the transmission of fuel price shocks to electricity markets

This should be addressed. Extreme transmission (documented here) put at risk the operation of wholesale markets

Economic complexity (EC) reduces the likelihood of fiscal crises

Policy makers should focus on EC as a way to construct more resilient economies

The perception of corporate exposure to political risk propagates across firms (it is not purely idiosyncratic)

It's a good idea to view the firms' network as a system and to monitor systemic risk

In our work, we demonstrate how this can be done

We document a positive relationship between investment and cash flow for green energy firms, which resemble financially constrained firms.

We show that while brown energy firms channel higher cash flow toward dividends and equity repurchases, green and constrained firms prioritize debt repayment and investment, highlighting the need for stronger financial sources to support the energy transition.

Market liquidity is extremely non-linear, for most stocks is irrelevant, but for a few is determinant

It shouldn't be treated as a linear- or linearizable- factor

The country where a stock is listed is more relevant than its sector (for risks analysis)

There are considerable asymmetries between sectors and countries

Analyzing individual firms offers far better insights than relying on aggregate country-indexes 

The definition of "risk" is fundamental for analyzing risk transmission across commodity markets

Different implications if we use volatility, semi-volatility, skewness, kurtosis , etc., as our poxy for risk

We identify Denmark, Finland, Sweden, and Germany as the most vulnerable to natural gas price shocks during the market distress episodes of 2021-2022.

This, despite their small but non-zero shares of natural gas in electricity generation.

We also show that higher market integration reduces vulnerability. 

We investigate how systemic liquidity affects asset prices across market states.

We find equity returns’ exposure to liquidity risk depends on whether markets are in particularly good or bad states.

We show liquidity is irrelevant in normal times, with search-for-yield and flight-to-liquidity explaining the extremes.

FX markets are very asymmetric, a devaluation and a revaluation are far from similar phenomena

When measuring risk-transmission in FX markets, always use an asymmetric risk proxy (i.e. quantiles)

Natural gas impacts electricity markets in all US hubs asymmetrically

In times of scarcity, the shocks transit much stronger, which could destabilize the market

Market design (i.e. marginal price) should be revisited and improved

A new daily macro-financial uncertainty measure is provided

Our measure virtually replicates IRFs from previous, more complex methods

Our measure reduces information and computational costs

Spillovers from the US to the rest of the G7 are highly asymmetric 

Diversification benefits are considerable reduced during high-risk episodes

Risk propagation has remained stable over the last decade 

Equity market uncertainty is a major systemic-risk factor for the global banking system.

We study how US policy and equity market uncertainties affect domestic and global stock returns.

During financial distress, uncertainty shocks lower stock returns across markets.