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Economic Resilience and Vulnerability: Concepts and Indices
Get PDFThis paper examines the concepts and indices of economic resilience and vulnerability. The central notion in clarifying both resilience and vulnerability is that of an adverse shock. If a shock does not alter the growth path of an economy or cause a recession, the economy is considered “resilient.” Resilience refers to an economy’s ability to return to its pre-shock growth trajectory. A resilient economy, after experiencing a shock, resumes its long-term growth path. Endogenous growth can strengthen economic resilience, and resilient economies tend to experience sustainable growth. Macroeconomic stability and effective institutions are two principal indicators of economic resilience. Resilience stems largely from economic policymaking, while vulnerability is related to the inherent structural characteristics of an economy that expose it to adverse shocks. Export concentration, dependence on strategic imports and external financing, as well as geographical vulnerability, constitute the main indicators of economic vulnerability. The greater the capacity to respond to shocks, the lower the vulnerability. The paper explores the indices of economic resilience, including Briguglio, Centennial group and Oxford FM Global. In vulnerability indices, the paper discusses the Briguglio vulnerability index, Guillamount and OECD indices
Municipal waste management in the post-pandemic period: Deficiencies and risks revealed by public external audit—A focus on Constanța county (Romania)
Get PDFBackground and aim: The article investigates the systemic deficiencies and risks in Romania’s municipal waste management system during the post-pandemic period, focusing on the role of external public audit missions conducted by the Romanian Court of Accounts. The main objective is to assess the risk of infringement procedures against Romania due to persistent non-compliance with EU environmental directives. Scope and limitations: The research concentrates on the period 2015–2021, with particular emphasis on the case of Constanța County, and is limited to the analysis of official audit reports and regulatory frameworks. Methods: The study employs a qualitative methodology based on document analysis, comparative evaluation of legal frameworks, and synthesis of audit findings, with emphasis on compliance, infrastructure, and institutional performance. Results: Findings highlight significant shortcomings: delayed closure of non-compliant landfills, insufficient implementation of selective collection and recycling, lack of a functional electronic traceability system, and weak monitoring by central and local authorities. Constanța County illustrates critical infrastructural and contractual deficiencies that compromise EU compliance targets. Conclusions: Romania remains at high risk of EU sanctions due to poor waste management performance, limited strategic coordination, and underuse of European funding. Originality: The article provides an integrated perspective by linking external audit findings to broader systemic vulnerabilities in the post-pandemic context. Practical implications: The study offers actionable recommendations for improving compliance, strengthening administrative capacity, and ensuring alignment with EU circular economy goals, thus supporting policymakers and practitioners in sustainable waste governance
Artificially created scarcity: How AI turns abundance into shortage
Get PDFThe diffusion of general-purpose artificial intelligence (AI) systems is collapsing the marginal cost of cognition, coordination, and capital formation. This abundance of intelligence is simultaneously re-pricing the three residual scarcities that still constrain human welfare: atmospheric carbon space, human labor hours, and irreversible time. Using a unified production–climate–welfare model, we show that (i) AI accelerates decarbonization by driving the cost curve of clean technologies below that of fossil fuels; (ii) labor markets bifurcate into a vanishing low-skill wage sector and an expanding high-skill rent sector, generating a transfer problem that can only be solved by AI dividends; and (iii) the option value of future consumption rises as AI compresses the calendar time needed to unlock large-scale decarbonization, longevity, and existential-risk mitigation. The conjunction of these effects drives the Ramsey rule for optimal climate policy to its mathematical limit: the social discount rate (SDR) must converge to zero. We provide empirical calibration using the latest IPCC scenarios, large-language-model energy-intensity data, and labor-share forecasts through 2100. A zero SDR reconciles inter-generational equity with intra-generational efficiency and unlocks a portfolio of “long-horizon public goods” (LHPGs)—from atmospheric restoration to asteroid defense—that markets at positive discount rates chronically under-supply
The role of the local councils in the Malawi Vision 2063 through the lens of Medium Implementation Plan - MIP-1, the Malawi Secondary Cities Plan, the Special Economic Zones Act and the Real Estate Management Act
Get PDFThis study strived to analyse the level and extent of involving local government authorities in the development of the Malawi Secondary Cities Plan and its associated legislative instruments. The findings of the study demonstrate lack of coordination between the central and local government authorities leading to an obvious decimal or no progress at all. Local councils must take an active role through its association and demand more involvement for the betterment of the general citizenry
Information from the cash flow statements and sustainable bank lending: insights from the wood-based sector in Bulgaria
Get PDFAs sustainability becomes a core concern for financial institutions, the integration of environmental, social, and governance (ESG) considerations into lending practices is reshaping credit assessment criteria, especially in resource-intensive industries. This paper explores how information derived from cash flow statements influences sustainable bank lending decisions within the wood-based sector in Bulgaria. By focusing on the intersection of financial transparency and corporate sustainability, the study highlights the importance of cash flow data in evaluating a company’s financial resilience, investment in sustainable practices, and long-term viability. Our study investigates how cash flow indicators such as operating cash flows, capital expenditures, and liquidity metrics interact with ESG disclosures to support or hinder access to green financing. The paper contributes to the growing dialogue on sustainable finance by emphasizing the role of traditional financial statements in complementing ESG information. Implications for regulators and financial institutions are also discussed, with recommendations for integrating cash flow-based and non-financial metrics into sector-specific credit risk frameworks
What is the interest rate pass-through under surplus liquidity in the banking sector?
Get PDFThis paper examines the interest rate pass-through in an economy with structurally high banking sector liquidity, using North Macedonia as a case study. Persistent surplus liquidity limits commercial banks’ reliance on central bank and interbank funding, potentially weakening the transmission of monetary policy. Employing a dynamic autoregressive distributed lag and error-correction (ARDL/ECM) framework augmented with a liquidity variable, we estimate the two stages of the transmission process - from the policy rate to the interbank rate, and from the interbank to lending rates. The results show that high liquidity dampens both the strength and speed of pass-through by reducing interbank rate responsiveness and moderating lending rate adjustments. These findings suggest that in banking systems with structural liquidity surpluses, conventional interest rate policy may be insufficient, underscoring the need for complementary instruments to enhance monetary transmission effectiveness
Shaping Future FTAs - Lessons from the Investment Provisions in India's TEPA with EFTA
Get PDFThis paper critically examines the investment-related provisions of the India-EFTA Trade and Economic Partnership Agreement (TEPA), signed on 10 March 2024 focusing on its ambitious commitment to mobilise $100 billion in foreign direct investment (FDI) and generate one million direct jobs over 15 years in India.
Using global aggregate FDI flows and India’s remittance-level FDI data, this study evaluates the feasibility of meeting TEPA’s targets, highlighting discrepancies in FDI measurement, definitional ambiguities, and the predominance of financial over Real FDI. This analysis highlights the limited investment by EFTA countries, particularly Switzerland and Norway, in recent years.
The study reveals that a significant portion of reported FDI includes acquisitions and reinvested earnings, rather than fresh equity inflows or greenfield investments. This raises questions about achieving employment targets, especially in the manufacturing sector, given the global employment scale and trends of Swiss companies.
This study critiques the lack of clarity in several provisions of TEPA, which are unexpected and unacceptable in an international agreement, and warns against overreliance on generic FDI inflows.
The study wonders whether this was due to the hurry to beat the announcement of India’s general elections. Evidence shows that the EFTA did not wish to lose another opportunity, as had happened
before the 2014 elections. Nevertheless, the study notes that the EFTA introduced safety clauses to hedge against failure. This was understandable because the EFTA had consented to the
commitments only to secure an agreement that would provide tariff-free access to the Indian market.
If one goes by TEPA’s provisions regarding third-country investments through the EFTA, India would be receiving global FDI flows rather than EFTA investments. The mechanism for applying remedial
measures available to India, in case the targets are not met, is good only on paper and not in practice. In effect, they only enable the EFTA to prolong the period of meeting the targets for much longer than 20 years and/or to have the targets revised downwards.
By treating FDI as an end in itself, TEPA ignores the conventional wisdom of bartering market access for technology and other benefits.
This study calls for precise definitions, strategic prioritisation of sectors aligned with India’s developmental goals, and the establishment of robust monitoring mechanisms. India must proactively shape the operational framework of the Investment Sub-Committee to be set up under TEPA to safeguard its interests and ensure that TEPA delivers tangible benefits to India.
Ultimately, this study positions TEPA as a test case for India’s evolving FDI strategy and urges the Indian policymakers to balance quantitative targets with the qualitative outcomes. It advocates for a
more nuanced, evidence-based approach to future investment treaties that prioritise technology transfer, joint ventures, and indigenous enterprise development.
We hope this study will serve as a timely input for India’s ongoing FTA negotiations with the EU and New Zealand, and for preparing the work plan of the Investment Sub-Committee to be set up under
TEPA
Network Contagion Dynamics in European Banking: A Navier-Stokes Framework for Systemic Risk Assessment
Get PDFThis paper develops a continuous functional framework for analyzing contagion dynamics in financial networks, extending the Navier-Stokes-based approach to network-structured spatial processes. We model financial distress propagation as a diffusion process on weighted networks, deriving a network diffusion equation from first principles that predicts contagion decay depends on the network's algebraic connectivity through the relation , where is the second-smallest eigenvalue of the graph Laplacian and is the diffusion coefficient. Applying this framework to European banking data from the EBA stress tests (2018, 2021, 2023), we estimate interbank exposure networks using maximum entropy methods and track the evolution of systemic risk through the COVID-19 crisis. Our key finding is that network connectivity declined by 45\% from 2018 to 2023, implying a 26\% reduction in the contagion decay parameter. Difference-in-differences analysis reveals this structural change was driven by regulatory-induced deleveraging of systemically important banks, which experienced differential asset reductions of 17\% relative to smaller institutions. The networks exhibit lognormal rather than scale-free degree distributions, suggesting greater resilience than previously assumed in the literature. Extensive robustness checks across parametric and non-parametric estimation methods confirm declining systemic risk, with cross-method correlations exceeding 0.95. These findings demonstrate that post-COVID-19 regulatory reforms effectively reduced network interconnectedness and systemic vulnerability in the European banking system
Beyond Borders: How Economic Shocks Propagate Through Space and Networks
Get PDFThis paper develops a unified theoretical and empirical framework for analyzing treatment effects that propagate through both spatial proximity and network connections. Building on the continuous functional approach in \citet{kikuchi2024dynamical} and the Navier-Stokes foundation in \citet{kikuchi2024navier}, I introduce network channels as continuous internal degrees of freedom, deriving both spatial diffusion and network contagion from common first principles rooted in conservation laws and stochastic processes. The framework resolves three fundamental challenges in modern econometrics: how spatial and network effects interact (the mixed effect), how treatment effects evolve in general equilibrium, and how network structure affects system fragility.
I show that the mixed spatial-network effect emerges naturally at second order in perturbation theory, creating synergistic amplification when geographic proximity and network similarity align. The theoretical analysis yields three main contributions. First, I derive explicit expressions for the mixed effect functional, showing it equals the mutual information between spatial and network coordinates—a purely information-theoretic measure with no free parameters. Second, I extend the analysis to general equilibrium, proving that endogenous price and employment adjustments amplify partial equilibrium estimates by factors between 1.8 and 2.5 depending on market structure. Third, I connect network structure to system fragility through entropy production rates, providing operational measures of how consolidation affects shock dissipation speeds and cascade probabilities.
The empirical application uses county-level wage data (2018-2023) to analyze minimum wage spillovers across 3,142 U.S. counties and 274 industry classifications. Four main findings emerge. First, the mixed spatial-network effect accounts for 40 percent of total treatment propagation, with point estimate 0.043 (s.e. 0.008), statistically significant and economically large. This implies retail workers in Nevada counties near the California border experience wage increases 43 percent larger than the sum of pure spatial spillover (from proximity alone) and pure network effect (from industry connections) would predict. Second, spatial decay parameters increase from 0.01 per mile for pure geographic spillovers to 0.02 when network effects are included, demonstrating that networks concentrate rather than disperse spatial impacts. Third, general equilibrium amplification factors range from 1.8 (dispersed markets) to 2.5 (concentrated markets), implying substantial bias in partial equilibrium policy evaluation. Fourth, entropy-based fragility measures predict out-of-sample shock propagation with , outperforming standard network centrality metrics ().
These findings have direct policy implications. Minimum wage policies should account for network amplification: optimal state-level minimum wages are 15-20 percent lower when accounting for general equilibrium feedbacks through supply chains and labor mobility networks. Financial regulation should monitor entropy production rates as early warning indicators: systems approaching critical fragility thresholds (entropy production declining by more than 30 percent) require preemptive intervention before cascades materialize. Regional development policies should leverage spatial-network synergies: infrastructure investments yield highest returns in regions with strong geographic clustering and dense economic networks
Aggregating Trade Shocks: From Local Labor Markets to National Outcomes
Get PDFWe leverage a novel spatial IV approach to develop a reduced-form estimator that maps local trade shocks into aggregate outcomes, accounting for inter-regional spillovers. For the China shock in the U.S., we find strong evidence for employment spillovers at the local level, which appear to propagate through input-output linkages rather than labor mobility. They shift the shock’s employment ramifications away from the Pacific and North Atlantic towards the South Atlantic region. For aggregate employment, our model rationalizes the 30% difference between Autor et al. (2013) and the structural follow-up literature but implies that it is insignificant from a statistical standpoint