Economics and Finance Ph.D. Candidate at Curtin University. Interested in Macroeconomics, Monetary Economics, Financial Economics and Economic Development.
revise & resubmit, Journal of Money, Credit and Banking
Abstract [+] [–] The increase in dollarisation in Cambodia has been contrary to the general belief that macroeconomic and political stability help reduce dollarisation. We provide so far the first explanation for this counterfactual phenomenon. In doing so, this paper develops a cash-in-advance model by including a dollar pricing index to amplify the network effects of using a foreign currency (denoted dollar). The dollar pricing index, a proportion of an economy denominated by the dollar, reduces the dollar’s transaction cost, thus increasing its usage in the economy. This increased use of the dollar further improves the experience of using it, hence results in higher usage of dollar in the price quotation. The positive interaction of using the dollar as a unit of account and a means of payment causes dollarisation continues to rise, even though the economy has achieved low inflation and political stability.
revise & resubmit, International Review of Finance
Abstract [+] [–] We provide the first study on how COVID-19 vaccine rollout affects Australian financial markets. To examine the heterogeneous and asymmetric effects of vaccination rate on financial markets, we adopt the quantile-on-quantile regression (QQR). We also use the novel quantile copula coherency developed by Baruník and Kley (2019) to detect longer (e.g. monthly or yearly) reactions of financial markets or distinguish the mixed market reactions to short- and long-persistent impacts from vaccine rollout. We find that relative short-term impacts of lagged vaccination rates on quantiles of the returns of the ASX200 stock price and foreign exchange (FX) are stable against fluctuations of the Dow Jones stock price index or FX return at various quantiles. Therefore, the vaccination policy implemented in Australia homogeneously affects financial markets at quantiles. Moreover, our study properly detects short- and long-lived significant reactions of the stock price index and FX returns to the vaccine rate variation.
Abstract [+] [–] This paper develops a theoretical model to investigate how inflation expectations — whether anchored or unanchored — affect international tourist demand. Departing from traditional models that assume tourists respond passively to observed prices, we incorporate behavioural macroeconomic insights to capture how perceived inflation risk influences travel decisions. In our framework, unanchored expectations lead tourists to overstate future destination prices, generating nonlinear declines in real tourism demand. By contrast, anchored expectations — consistent with credible inflation-targeting regimes — stabilise demand by reducing perceived price uncertainty. The model highlights the importance of macroeconomic credibility in shaping forward-looking tourism behaviour and provides theoretical support for inflation targeting as a complementary policy instrument in tourism-dependent economies.
Abstract [+] [–] We study the impact of negative interest rate policy (NIRP) on corporate debt structure using a difference-in-differences design applied to a panel of over 54,000 firms across 127 countries. We find that firms in NIRP jurisdictions systematically reallocate from short-term to long-term debt---a pattern we term ``borrow long, dump short''---consistent with locking in historically low long-term borrowing costs. This maturity rebalancing is most pronounced among smaller, older, highly leveraged, and less liquid firms. Notably, aggregate leverage remains stable on impact but rises significantly when negative rates persist. To rationalise these findings, we develop a DSGE model calibrated to the euro area that identifies two transmission channels: a signalling channel through which NIRP compresses real long-term yields, inducing immediate maturity rebalancing; and a reserve-carry channel through which the deposit rate floor affects bank net worth and credit rapidly reshape debt maturity composition. Our results demonstrate that NIRP can rapidly reshape the maturity composition of corporate debt, but its effect on aggregate leverage depends on policy persistence and credible forward guidance.
Abstract [+] [–] We examine how monetary tightening affects bank stability, and whether the response varies with bank cost efficiency. Using annual data for 3,903 banks in 95 countries over 1996--2024, we measure efficiency with a stochastic metafrontier and identify policy shocks using Taylor-rule deviations (and, in IV, central bank independence). Fixed-effects estimates and local projections show that a one-standard-deviation tightening initially raises Z-scores and reduces non-performing loan growth, but stability weakens at medium horizons as borrower distress builds up. This medium-run deterioration is notably smoother for high-efficiency banks, consistent with stronger risk control. Tightening also compresses net interest margins---most persistently for efficient banks---while credit growth responses are heterogeneous. A parsimonious efficiency-augmented New Keynesian DSGE model with fast risk management and slow distress dynamics reproduces the sign reversal and the cross-bank smoothing pattern.
Abstract [+] [–] Using a sample of 130 countries over the period 2004-2019, we revisit the developmental impact of foreign direct investment (FDI), but novelly examine the role of research and development (R&D) within this framework. Unlike previous literature, we make causality statements by using bilateral investment treaties as an innovative instrument for FDI, in the development equations. We find that, compared to FDI, expenditure on R&D has a more pronounced impact on development outcomes – through increasing growth and human development while reducing poverty and inequality. We also find that countries that spend more on R&D are less dependent on FDI for development. This suggests that R&D and FDI are substitutes in the development process with the results showing varying FDI and R&D thresholds at which the substitution takes place. We also find a diminishing effect of FDI on development. Further to this, we find that R&D complements FDI only when FDI reaches a threshold level, and then begins to hurt development – at this stage there is sufficient R&D expenditure which possibly suggest sufficient adaptive capacity.
(with Elikplimi K. Agbloyor, Lei Pan and Alfred Yawson)
Under review
Abstract [+] [–] This paper examines the impact of per capita CO2 emissions on banking stability in emerging markets and developing economies (EMDE). To identify the causal effect of carbon emissions on the stability of banking system, we use plausibly exogenous source of variations in energy use as an instrumental variable (IV) for CO2 emissions. Our results show an inverted U-shaped relationship between per capita CO2 emissions and banking stability. We also find that industrialization can be a potential channel through which per capita CO2 emissions affect banking stability. Our results are robust to alternative specifications, sample-splitting and have important implications for policy on banking stability.
(with Elikplimi K. Agbloyor, Lei Pan and Dennis Nsafoah)
Under review
Abstract [+] [–] Using data for 132 countries from 2000 to 2023, we investigate whether there is a systematic ratings bias against African countries based on the ratings provided by the major credit ratings agencies using machine learning techniques. This is not a trivial question as estimates of the costs of this potential subjectivity are in excess of $75 billion. Following the COVID-19 pandemic and Russia-Ukraine war, African countries argued that the major credit ratings were very quick to downgrade them. Our empirical analysis offers some credence to the arguments of African countries. We find that during this period, African countries received more adverse ratings compared to other countries. Further, the ratings of African countries were less stable as more non-African countries did not experience changes in their ratings. Indeed, our findings show that the difference or gap in the credit ratings of African countries compared to non-African countries widened after 2015. The results from our machine learning predictions in the full sample, we do not find evidence of a credit ratings bias against African countries as the African dummy does not rank as a top predictor of credit ratings. However, after controlling for sample selection bias, we find strong evidence of a credit ratings bias against African countries. The African dummy increased in importance and was now the number 3 predictor of credit ratings. The African dummy ranked ahead of many important economic, social, political and institutional variables as a predictor of credit ratings.
Abstract [+] [–] We develop a single-period behavioral–macro portfolio model with CRRA utility and Prelec probability weighting to study how inflation expectations affect risk-taking. Expected inflation uniformly lowers real returns, shifting the opportunity frontier downward via a pure wealth effect. Under decreasing absolute risk aversion, higher expected inflation reduces the optimal risky share, while stronger overweighting of the good state increases it by distorting perceived state payoffs. The model yields closed-form comparative statics and a simple geometry for joint inflation–behavioral effects on portfolio choice. Policy implication: credible, transparent monetary communication can anchor real-return expectations and temper swings in risk-taking.
