Contact: lei.pan@curtin.edu.au Economics Discipline Curtin University Perth, WA 6102, Australia
Publications
The role of remittances and FDI for the current account: the case of Cambodia
with Veasna Kheng and Xiaodong Fan, Journal of Money, Credit and Banking, accepted.
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This paper develops a small open economy real-business cycle model to examine the dynamics of Cambodian current account.
Differing from previous studies, our model incorporates both net foreign direct investment (FDI) and remittances as additional sources of macroeconomic fluctuations.
Our results reveal that these two factors, especially FDI, account for more than 50% of the variations in the current account.
Additionally, the model mimics well the actual trajectory of the Cambodia's current account, suggesting that the nature of the discount factor - whether endogenous or exogenous - does not play a crucial role in explaining the external balances.
This paper examines how exchange rate flexibility impacts the allocation of labor across firms.
Specifically, we investigate how labor-intensity or capital-intensity in production affects employment decisions under various exchange rate flexibilities.
In a simple theoretical model, we show that firms utilizing more labor-intensive production technologies are more likely to expand their employment when the exchange rate becomes less flexible.
In contrast, firms employing more capital-intensive technology tend to hire more workers when the exchange rate is more flexible.
We test our theory using extensive firm-level data from China and provide robust evidence supporting the theoretical predictions.
The impacts of energy poverty on a range of development goals have been widely examined in the literature;
however, how energy poverty affects public health has yet to be studied. Using annual data for a broad panel of 175 countries over the period 2000 to 2018, this paper investigates the effect of energy poverty on public health.
To identify the causal effect of energy poverty on public health and tackle the issue of endogeneity,
we rely on Oster's (2019) bound analysis and the system generalized method of moments (GMM) estimation.
Our results show that energy poverty has a detrimental effect on public health. We also find that living standards can serve as a channel through which energy poverty influences health, and that countries with higher standards of living weaken the negative effect of energy poverty on public health.
Our results are robust across various specifications and measures of health indicators.
Our findings have important implications for policies in public health and transitions to renewable energy.
Many studies address the convergence in per capita CO2 emissions. However, whether countries with lower initial per capita emission levels can “catch up” with more emission-intensive countries is unknown.
Utilising historical CO2 emission data from 1907, this study investigates whether the per capita CO2 emissions of seven developing Asian economies; namely, China, Indonesia, India, Myanmar, the Philippines, Taiwan, and Thailand, catch up with or converge toward that of the US in the long run.
We simultaneously examine the existence of per capita CO2 emissions convergence and the statistical contribution of the emissions drivers using the most recently developed covariate augmented Dickey-Fuller test, which allows for endogenous structural breaks.
The main results show firm evidence of catching-up or relative/absolute convergence between the Asian economies and the US in terms of per capita CO2 emissions.
Emissions drivers such as population and real GDP per capita growth may encourage the Asian economies to achieve and to maintain the long-run convergence toward the reference country.
This paper analyses spillover dynamics, hedging performance, and portfolio optimisation across tourism, cryptocurrency, and Fintech markets, while accounting for traditional financial markets within a time-varying connectedness framework.
We document strong time-varying spillovers, peaking during COVID-19, with traditional finance acting as the main shock transmitter and tourism as the dominant recipient.
Cryptocurrencies provide the cheapest but least effective hedge, whereas tourism assets hedge crypto exposure more efficiently, albeit with higher downside risk.
Dynamic portfolio weight strategies outperform hedge ratio strategies, and the minimum connectedness portfolio (MCoP) achieves the highest risk-adjusted returns.
Diebold–Mariano tests show no significant differences in return predictability, but Jobson–Korkie results confirm that MCoP and minimum correlation portfolio (MCP) significantly outperform minimum variance portfolio (MVP) in Sharpe ratios.
Downside risk metrics indicate that MCoP delivers superior returns at the expense of deeper drawdowns.
These findings underscore the value of connectedness-based strategies for portfolio design in increasingly integrated markets.
Theoretically, it is well argued that environmental factors affect the growth of the tourism industry; however, from an empirical perspective, some gaps still exist in the literature.
We empirically examine the effect of carbon dioxide (CO2) and particulate matter (PM2.5) emissions on tourist arrivals in a panel of G20 countries.
Using annual data from 1995 to 2014 and a series of panel data models, our results suggest that the growth of both CO2 and PM2.5 emissions adversely affects international tourist arrivals.
The results also show that the observed effect of CO2 emissions is more pronounced in developed economies, while the effect of PM2.5 emissions is stronger for developing economies.
Given these findings, our study provides and discusses a number of policy and practical implications.
Cross-country capital flows have been widely studied in the literature; however, why some countries may form more similar foreign investment portfolios than others has not been investigated.
Using data for a broad panel of countries during the period 2002–2015, we adopt gravity equations to estimate cross-country foreign portfolio investment patterns.
The main empirical results reveal that countries are more likely to form similar foreign portfolio investment patterns if:(i) countries are geographically closer; (ii) countries share the same official language; and (iii) countries adopt fixed exchange rate regimes.
We examine the impact of foreign direct investment (FDI) on financial inclusion.
To identify the causal effect of FDI on financial inclusion, we use plausibly exogenous source of variations in bilateral investment treaties (BITs) as a novel instrumental variable (IV) for net FDI inflows.
Using annual data for a broad panel of 90 countries over the period 2004 to 2017, our results show that FDI improves financial inclusion both for "access to finance" and "use of financial services".
This impact is more pronounced for relatively poor countries and developing countries compared to rich and developed countries.
We also find that higher financial market development and quality institutions improve financial inclusion directly.
Moreover, financial market development and institutional quality can serve as potential channels and moderating variables through which FDI affects financial inclusion.
Our results are robust to various estimations and sample splitting, and have important implications for policy on financial inclusion.
The interplay between the stock market and the real economy is crucial in the various channels through which financial markets drive economic growth.
In the current study, we investigate the effects of this relationship on the Chinese economy, which is the fastest growing and largest emerging economy in the world.
The methodology incudes unit root testing in the presence of structural breaks and the Autoregressive distributed lag (ARDL) model.
The results of the analysis showed that the global financial crisis from 2007 to 2012 had a significant impact on both the real sector and the financial sector in China.
Our findings also suggest that the Shanghai A share market has had a long-run negative association with the real sector of the economy; however, the magnitude of impact has been miniscule.
These findings indicate that this negative relationship is proof of the so-called existence of irrational prosperity in the stock market and the economic bubble in China's financial sector.
The findings did not show any evidence of a relationship between the stock market and the real economy in the short run.
Toda Yamamoto causality test showed that economic growth has spurred the development of the Shenzhen B share market.
Furthermore, the equally weighted index showed that stock market liquidity and stock market sectoral indices were alternative measures of stock market activities.
The results were robust to the alternative measures of stock market activities.
The results also indicate that state-owned monopolies play an important role in China's economic performance because they stimulate the economy in the short run.
one of the 72 most cited articles at Economic Modelling
selected for celebrating Economic Modelling as a top 20 economics journal in 2023
This paper examines the factors that predict an IMF bailout.
In doing so, we use a large dataset from 1993 to 2021 with 6550 observation and 138 features and adopt recent advances in machine learning and artificial intelligence models such as tree-based, boosting and artificial neural network techniques.
We find that apart from traditional indicators such as debt and macroeconomic factors, agricultural, energy, health and social factors are strong predictors of an IMF bailout.
These factors have hitherto not received much attention in the literature.
We examine hot-debated but underexplored questions of whether and how green strategies affect corporate green revenues.
Using a generalized Difference-in-Differences (DiD) framework, we find that green strategies significantly enhance corporate green revenues in the presence of China’s Emission Trading Scheme (ETS) pilot.
This is consistent with the Porter Hypothesis.
Our mechanism analyses document that green strategies increase green revenues by improving green quality and catalyzing environmentally friendly transformation.
This study has important implications for policymakers and practitioners, offering new insights into the intended consequences and real outcomes of environmental regulations.
This paper develops a dynamic Ramsey-Cass-Koopmans (RCK) model to analyse the macroeconomic impact of terrorism-induced fear on tourism and growth.
We introduce a behavioural mechanism where households’ utility from tourism consumption is distorted by a time-varying security perception index, Θ(t), which declines following terrorist attacks.
This fear channel reduces savings and investment, slowing capital accumulation and long-run growth.
Our model also incorporates government intervention through public safety investment aimed at restoring confidence.
We evaluate three scenarios: i) one-time shock; ii) persistent fear; and iii) policy-driven recovery, and simulate their effects on capital, consumption, and welfare.
Our results show that persistent fear leads to the greatest welfare loss, while rapid policy-driven recovery can paradoxically destabilize investment if not properly calibrated.
Our paper highlights the trade-offs in post-terrorism policy design and offers new theoretical insights into how behavioural responses to insecurity can shape macroeconomic trajectories in tourism-dependent economies.
Employing fixed and random effects estimation techniques on five-year-non-overlapping-averaged data, covering 1980 through 2019, this study, firstly, investigates, empirically, the potential bi-causal relationship between international tourist arrivals and the importation of consumables/merchandises, in the case of 45 sovereign islands.
The economic growth implication of a concurrent pursuit of tourism expansion and merchandise imports is also examined.
The study further investigates how over-reliance on imported merchandise to feed international tourists, and over-specialisation in the tourism sector, affect the tourism-led-growth hypothesis in the case of these islands.
Results from the study show that an increase in arrivals of international tourists significantly leads to an increase in the importation of consumable merchandises, and vice versa.
In addition, an importation of merchandises to sustain international tourist arrivals is significantly observed not to be detrimental to the economic growth of these islands.
However, the results further reveal that over-reliance on imported merchandises for the sake of international tourists, as well as over-specialisation in tourism with the help of imported merchandises, both exert significant detrimental net effects on the economic growth of islands across the globe.
The findings hold policy guidelines for the pursuit of tourism-led and merchandise-import-led growth strategies among global islands.
This paper examines the tourism markets’ convergence hypothesis across South Korea’s major source markets.
In doing so, we use monthly data of visitor arrivals over the period July 1995 to June 2019 and adopt a novel quantile unit root tests that allows for multiple structural breaks via a Fourier expansion series.
Our results indicate that seven countries out of ten show firm convergence tendencies at most of the quantiles, and two countries have weak but significant converging trends at some quantiles.
This paper examines the impact of access to electricity on financial development.
In doing so, we use average slope of terrain as an instrument for electrification rate.
Using panel data for 44 countries in Sub-Saharan Africa over the period 2000 to 2018, the results suggest that more people having access to electricity can promote financial development.
In addition, mobile phone and commercial bank branches diffusion serve as potential channels through which access to electricity affects financial development.
Our results are robust to sample-splitting and different estimation techniques.
The results have important implications for policies in overcoming barriers to electricity access.
We examine the house prices convergence across twelve OECD countries over the period 1905-2016.
Using novel quantile unit root tests which allow for smooth breaks via a Fourier expansion series, we find that nine countries show the presence of relative house price convergence at all the quantiles.
Focusing on several specific quantiles, eleven countries have significant convergence tendencies.
Moreover, there are four definite patterns related to shocks on the relative house prices across quantiles.
This paper examines the causes of falling labour share in OECD and non-OECD countries since the 1980s by using Karabarbounis and Neiman’s (2014) labour share model.
While both groups of countries experience an elasticity of substitution between capital and labour, the factors driving down labour share are different.
In OECD countries, export and volatility are key drivers, but in non-OECD countries, the significant factors are financial openness and the capital’s relative price.
Overall, technological advancement – as reflected by declining capital’s relative price - coupled with globalisation and low economic risk are key factors in explaining a long-term decline of labour share world- wide.
This paper investigates the portfolio diversification possibilities between BRICS and the US stock market.
Using bootstrap full-sample Granger causality and bootstrap rolling-window sub-sample Granger causality tests, we did not find evidence supporting the causal linkage between BRICS and the US stock markets; time-varying causality was observed for particular sub-samples.
Our findings imply that BRICS stock markets can provide diversification possibilities for US investors most of the time; however, such opportunities become extremely limited during crisis periods.
We also find that stock markets are more likely to be causally linked if they have similar business conditions, excess returns and size premiums.
The COVID-19 pandemic has inflicted significant damage to the world economy, and the tourism and leisure industry is no exception.
This paper investigates the effect of COVID-19 pandemic, vaccine rollouts and government policy responses on Australia's tourism and leisure industry.
To do so, we use data on stock market performances of the travel and leisure industry as key indicators.
Our findings show that while vaccine rollouts help for a partial recovery of the travel and leisure industry, full and speedy recovery remains a challenge under stringent policies related to COVID-19 safety suggesting the enormous magnitude of the task ahead in terms of policy responses.
Using annual data from 1971 to 2014, we examine stochastic conditional convergence in per capita energy consumption for 26 low income, lower middle-income and upper-middle-income African countries.
To do so, we use panel unit root tests that allow for cross-sectional dependence and structural breaks as well as the recently developed univariate Residual Augmented Least Squares-Lagrange multiplier (RALS-LM) unit root test with structural breaks.
Although for most countries our evidence suggests stochastic conditional convergence, we find divergence for four countries including DR Congo, Senegal, Egypt and Botswana.
Consistent with the neoclassical growth models we also examine the catch-up rate between energy consumption levels of African economies and that one of China and investigate its convergence properties.
As African economies continue to grow, regional energy consumption disparity narrows, African energy consumption levels will catch up to the ones in China.
This article presents findings from the first study to examine the direct effects of financial development on tourism.
Using a unique historical dataset for Germany covering 1870 to 2016, we apply an autoregressive distributional lag (ARDL) model with structural breaks.
To identify the lead–lag relationship between financial development and tourism, we adopt the wavelet coherence method and the most recently developed Shi et al. (2020) time-varying causality test.
The ARDL results suggest that, on average, financial development is associated with an increase in tourist arrivals.
The wavelet coherence results unveil a significant positive correlation between financial development and tourism in both short- and medium-terms, and financial development leads to tourism growth in Germany.
Moreover, the causality results indicate that the positive effect of financial development on tourism is most evident from 2009 onward.
Our study provides important implications for policymakers.
Working Papers
The dollarisation paradox in Cambodia: network externalities matter
with Veasna Kheng and Justin Mckinley, Journal of Money, Credit and Banking, revise and resubmit.
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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.
US sneezing and Australian colds: economic spillovers in both conventional and unconventional monetary policy times
with Richard Adjei Dwumfour and Mark N. Harris, Macroeconomic Dynamics, revise and resubmit.
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We provide new evidence on U.S. monetary policy spillovers to Australia using an integrated time–frequency connectedness framework.
Spillovers primarily transmit through the interestrate (policy-rate) channel, followed by asset prices (with the consumer discretionary sector as the main conduit) and the exchange rate.
Spillovers are highly time-varying, peaking at the onset of COVID-19 and again during the global financial crisis and the European sovereign debt crisis.
Linking these spillovers to the real economy, we show that an identified U.S. tightening is followed by a tightening in Australia’s monetary policy stance and generates contractionary and disinflationary effects on Australian output and inflation, consistent with transmission via imported financial conditions and the domestic policy reaction.
Finally, we show that ignoring spillovers yields a price puzzle under recursive VAR identification, while using spillover-based surprises as external instruments removes the puzzle and recovers theory-consistent responses.
SSRN's Top Ten download list (Oct-2023)
Best Paper Award - Highly commended, Curtin University, 2022
Presented at: The Bank of France (Paris); International Conference on Empirical Economics (Pennsylvania State University at Altoona, USA); Xi'an Jiaotong-Liverpool University research seminar series; Doctoral Students and Early Career Researchers (DSECR) Colloquium (Curtin University, Perth); Curtin University research seminar series; University of Ghana (Finance Research Lab) research seminar series
Does monetary tightening improve banking stability? The role of bank cost efficiency
with Richard Adjei Dwumfour and Mark N. Harris, under review.
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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.
Scheduled presentation: Bank of Ghana seminar series (April, 2026)
Borrow long, dump short: how do firms game negative interest rates?
with Richard Adjei Dwumfour, Dennis Nsafoah and Mark N. Harris, under review.
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We examine how negative interest rate policy (NIRP) affects corporate capital structure.
Using a difference-in-differences design on a panel of over 58,000 firms in 127 countries, we find that firms exposed to NIRP reduce short-term debt and increase long-term debt, consistent with locking in unusually low long rates.
The reallocation is strongest among smaller, older, highly levered, and less liquid firms.
Total leverage is largely unchanged at first, but rises when NIRP persists beyond five years.
A stylised maturity-choice model shows that frequent rollover makes short-term borrowing costly when refinancing frictions are present, pushing firms toward longer maturities.
A DSGE model calibrated to the euro area reproduces the maturity shift and delayed leverage response through a compressed long-term yield and a reserve-carry tax that weakens net worth early in the regime.
Overall, NIRP quickly changes debt maturity, while leverage depends on policy design and expected duration.
Presented at: 39th Annual Australian PhD Conference in Economics and Business (Sydney)
Who pays the inflation tax? cash constraints, inequality, and the optimal policy mix, under review.
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This paper studies optimal monetary–fiscal design in a two-period overlapping-generations economy with segmented asset-market access.
Ricardian households save in capital but must finance a fraction of retirement consumption with money (cash-inadvance), while Keynesian households are financially excluded and save only in money.
The government chooses money growth and a capital income tax on Ricardians, rebating both seigniorage and tax revenue as lump-sum transfers to Keynesian retirees.
Closed-form steady-state results show that higher money growth lowers capital accumulation and, under mild conditions, increases old-age consumption inequality.
In contrast, a higher capital tax can raise the steady-state capital stock and compress inequality through a transfer-and-liquidity channel.
A Ramsey planner balances capital deepening against redistribution and selects an interior inflation rate with a strictly positive capital tax.
Calibration to Australia illustrates the trade-offs quantitatively.
Public capital, markups, and labor-share dynamics, under review.
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This paper studies how debt-financed public investment affects labor’s share of income when public capital is sector-biased.
We build a tractable two-sector general-equilibrium model with monopolistic competition and constant markups.
Government issues oneperiod debt to finance public capital, which augments productivity with higher exposure in the capital-intensive sector.
Public capital affects the aggregate labor share through: i) a within-sector factor-price channel operating via the rental–wage ratio and ii) a betweensector market-share channel operating via relative prices and expenditure shares.
We derive a closed-form decomposition and sufficient conditions under which both channels reduce the labor share.
Calibrated to U.S. annual data (1970–2019), the model’s impulse responses show that a debt-financed investment shock raises public capital and real wages, shifts demand toward the capital-intensive sector, and generates a temporary decline in the aggregate labor share.
A gravity-based theory of bilateral portfolio choice, under review.
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This paper develops a unified theory of bilateral portfolio similarity grounded in gravitytype information frictions and exchange-rate stabilization.
We construct a Bayesian portfoliochoice framework in which investors from countries i and j allocate wealth to a common set of risky assets under heterogeneous signal structures and bilateral currency regimes.
The model shows that portfolio dissimilarity admits a closed-form gravity representation, increasing in bilateral distance and decreasing in peg strength.
We extend the analysis to a multivariate asset environment, a dynamic Bayesian learning structure with autoregressive signals, and an endogenous exchange-rate regime in which governments optimally choose Λij to trade off monetary autonomy against risk-sharing gains.
The theory rationalizes persistent cross-country heterogeneity in foreign-asset shares and provides welfare-based predictions for bilateral monetary integration.
Policy implications follow for regional currency arrangements, information infrastructure, and financial-integration strategies.
Growth under institutional risk: tax evasion, public service volatility, and capital allocation, under review.
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This paper develops a continuous-time growth model in which weak public institutions shape households’ choices over tax evasion, sectoral allocation, and capital accumulation.
Two forms of institutional risk matter: volatility in tax enforcement and uncertainty in the quality of education services.
Because preferences are logarithmic and technologies are linear, the model admits closed-form solutions for optimal evasion, the allocation of capital across sectors, and the resulting growth rate.
The analysis shows how enforcement risk and instability in public service delivery depress investment in the high-productivity sector and lower long-run growth.
An extension incorporates productivity spillovers from education quality, which further amplifies the adverse effects of institutional volatility.
The framework highlights how the reliability of public inputs—not only their level—plays a central role in shaping incentives for private investment.
Institutions, exchange rate flexibility and firm employment
with Qingyuan Du, Rong Hu, Yanhui Huang and Meihua Wang, under review.
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In this paper, we investigate the effect of exchange rate regime choices on firm employment under varying degrees of institutional quality.
Our theoretical analysis shows that firms tend to hire more workers under a flexible exchange rate regime when institutional quality is relatively low.
Conversely, as institutional quality improves, firms may increase employment when the exchange rate is more stable.
To test our theoretical predictions, we construct an industry-level exchange rate flexibility index and examine how its flexibility influences Chinese firms' employment across different levels of institutional quality.
Our empirical results strongly support the theoretical predictions.
From policy rates to prices: financing costs and the price puzzle in Australia, under review.
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This paper revisits the price puzzle in Australia: inflation often rises in the quarters immediately following an exogenous domestic monetary tightening.
We build a small open-economy New Keynesian DSGE model in which the policy shock is a domestic innovation to the Taylor rule.
The model combines (i) a workingcapital cost channel that makes marginal costs interest-rate sensitive, (ii) a balancesheet financial accelerator that widens effective spreads when net worth falls, and
(iii) an endogenous uncovered interest rate risk premium that can mute—or temporarily overturn—the standard exchange-rate appreciation channel.
Calibrated to Australian data and expenditure shares, the model reproduces a negative outputgap response alongside a positive impact response of CPI inflation.
An impact decomposition shows that the working-capital wedge is the main driver, while exchange-rate and financial wedges provide economically important amplification.
The results suggest that a domestic price puzzle can arise as a structural outcome in a financially open economy, with implications for policy design and communication.
CEO multiple crisis imprints and firm cash holdings
with Wenjun Liu, June Cao and Ran Zhang, International Review of Financial Analysis, reject and resubmit.
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Rather than focus on early-life natural disasters (Bernile et al., 2017), this study investigates how multiple pandemic imprints throughout a CEO's career affect their behaviours.
Drawing on imprinting theory, we provide robust evidence that companies led by CEOs who experience SARS tend to have lower cash holdings.
However, the imprinting effects become insignificant when CEOs experience more severe and multiple pandemics (i.e., SARS and COVID-19).
We document a nonmonotonic relationship between the severity and intensity of CEOs' pandemic imprints throughout their careers and their propensity for adopting agressive financial strategies.
Our study extends Bernile et al. (2017) and enriches the literature on CEO imprints by investigating the impact of multiple pandemic experiences at the CEO's career stage rather than early-life on their behaviours.
When carry crowds: endogenous foreign exchange crash risk and capital inflows, under review.
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We develop a tractable model of foreign portfolio inflows into emerging-market local-currency assets when exchange-rate crash risk is endogenous to positioning.
A representative investor funds a carry trade at a global rate and chooses the inflow position under mean-variance preferences.
The exchange rate features normal shocks and a crash jump whose probability rises with inflows.
Under a rare-crash approximation, the investor's objective is quartic in the position and the first-order condition is cubic, delivering closed-form characterization and conditions for uniqueness.
When carry amplification dominates locally but fragility dominates globally, non-concavity generates multiple stationary points and sudden-stop-type regime switching.
We study the policy instrument-a wedge on foreigners' after-cost return-and show how they reduce inflows, dampen tail risk, and can eliminate multiplicity.
The green rivalry threat: evidence from peers' green strategies
with Zijie Huang and June Cao, Journal of Business Finance and Accounting, revise and resubmit.
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We examine whether and how firms subject to stringent environmental regulation have a peer effect on unconstrained firms’ green innovations.
Using a generalized difference-in-differences model, we find that unconstrained firms significantly increase their green innovations in response to the heightened green innovations of constrained firms after China’s Emission Trading Scheme (ETS) pilot.
We document the competitive threat as the underlying mechanism, consistent with the rivalry-based theory.
Our heterogeneity analyses show that peer effects are more pronounced among non-ETS firms characterized by leader status, high public scrutiny, higher financial constraints, more institutional investors, and under-investment.
We further find that these peer effects significantly increase non-ETS firms’ economic performance and green revenues.
Our research offers valuable insights and ex-ante evidence for policymakers and practitioners to further develop decarbonization regulation.
Presented at: The Annual Conference of the British Accounting Review (Harvard Faculty Club); The Global Conference of the British Accounting Review (Cape Town, South Africa); The AFAANZ Annual Conference (Auckland, New Zealand; Outstanding Reviewer Award); Curtin University research seminar series
A $75 billion dollar question: do African countries suffer a systematic sovereign credit ratings bias?
with Elikplimi Kolma Agbloyor, Richard Adjei Dwumfour and Dennis Nsafoah, under review.
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This paper examines whether African countries face a systematic bias in sovereign credit ratings.
Using long-term sovereign ratings from Fitch and Moody’s for 132 countries over 2000–2023, we apply machine-learning classification techniques—including random forests, bagging, and gradient boosting—to predict rating outcomes based on economic, institutional, and financial fundamentals.
Feature-importance analyses allow us to assess whether an African location dummy independently influences ratings.
We find that institutional quality and financial development are the dominant global predictors of sovereign ratings.
However, African countries exhibit persistently lower average ratings, greater downgrade intensity during the COVID-19 and Russia–Ukraine shocks, and less rating stability.
While Africa is not among the top predictors in the full sample, its importance rises markedly after 2015 and becomes one of the strongest predictors once sample-selection biases are addressed.
The results provide evidence consistent with a location-based rating penalty, with implications for sovereign borrowing costs and market access in Africa.
Presented at: CSAE Conference 2025: Economic Development in Africa (University of Oxford, UK); University of Ghana inter-college lecture series
Do energy sentiment predict oil price shocks? A machine learning analysis
with Mohammad Abdullah, Sahib Hossain and Aviral Kumar Tiwari, Journal of Forecasting, revise and resubmit.
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This study explores the use of energy sentiment as a predictive tool for forecasting oil price shocks by developing a Twitter-based energy sentiment index derived from 1,911,631 tweets.
The sentiment index is utilized to predict three types of oil price shocks: demand, supply, and risk shocks, through various machine learning algorithms.
Among these, the XGBoost model is found to outperform other models, achieving prediction accuracies of 60.20%, 62.00%, and 92.60% for demand shock, supply shock, and risk shock, respectively.
Further model interpretation using Explainable AI reveals that the developed energy sentiment indicators contribute 29.33% to the oil price shock prediction, demonstrating the significant role of sentiment data in forecasting oil price fluctuations.
These findings highlight the potential of leveraging real-time social media sentiment for improving oil price prediction models.
When risk-off hits: foreign-currency bank funding and amplification in a small open economy, under review.
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This paper develops a small open New Keynesian DSGE model with a financial accelerator and a banking sector that borrows abroad in foreign currency and faces a leverage constraint.
A “risk shock” is modeled as an increase in the cross-sectional dispersion of entrepreneurial idiosyncratic risk, which raises default probability and monitoring losses and thereby widens the external finance premium.
The banking block links this domestic tightening to global risk conditions and external leverage through an endogenous foreign funding premium, while currency mismatch erodes bank net worth when the exchange rate depreciates.
Calibrated impulse responses show that a one-standard-deviation risk shock generates a sharp and persistent contraction in investment and output, and that amplification is substantially stronger when leverage is higher, monitoring frictions are more severe, or capital flows are more procyclical.
The framework provides a transparent laboratory for evaluating macroprudential and capital-flow management policies.
Digital adoption, population ageing, and age-specific structural change: A two-sector model with mobility frictions, under review.
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This paper develops a tractable two-sector model to study how population ageing interacts with digital adoption to shape age-specific structural change.
The labour force consists of young and old workers. Each sector combines the two age groups through a CES technology, while imperfect reallocation is captured by a logit sector-choice block that generates age-specific mobility wedges.
Digital adoption affects older workers through two channels: it raises their sector-specific effective productivity and lowers their relative barrier to switching sectors.
The model yields a closed-form “sorting” restriction that links a weighted difference in age-specific employment log-odds to primitives (age-augmenting technologies and mobility wedges).
We derive sharp sign conditions under which digital adoption reduces age segmentation and under which ageing pushes older workers toward or away from a sector.
A simple planner problem shows that optimal adoption rises with ageing when adoption removes more misallocation in older economies.
Human capital: "travel broadens the mind"
with Veasna Kheng and Xiaodong Fan, under review.
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This paper develops a simple theoretical model to explain the impact of international travel on human capital development.
Empirically, using a fixed-effects instrumental variable estimator as the primary analytical approach, the study investigates a panel dataset covering 64 countries from 1995 to 2019.
The findings reveal that international travel, measured through tourism openness, has a significant positive effect on human capital.
These results underscore the importance of global human mobility---encompassing migration, international educational exchange, and tourism---in fostering the development and dissemination of knowledge, culture, and technology.
When inflation expectations meet probability weighting: a behavioral–macro portfolio framework
with Richard Adjei Dwumfour, under review.
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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.
How did financial markets react to the COVID-19 vaccine rollout? Fresh evidence from Australia
with Takashi Matsuki, International Review of Finance, revise and resubmit.
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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.
Foreign direct investment and development and the role of research and development
with Richard Adjei Dwumfour and Mark N. Harris, under review.
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Using a sample of 130 countries over the period 2004-2019, we revisit the development impact of foreign direct investment (FDI), but novelly examine the role of research and development (R&D) within this framework.
To allow us to make causality statement, we use bilateral investment treaties (BITs) 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 however, 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.
What drives green growth? ESG risks, green innovation, and productive capacity in the OECD countries
with Buhari Dogan, Yifei Cai, Emad Kazemzadeh and Sudeshna Ghosh, under review.
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This paper studies what drives green growth in 18 OECD countries from 2003 to 2022 using green GDP as the main measure.
We focus on productive capacities, economic complexity, green technology, economic policy uncertainty, ESG uncertainty, and energy use.
To capture nonlinear and state-dependent effects, we apply quantile-based and wavelet methods.
We find that stronger productive capacities and higher economic complexity support green growth, especially once countries reach higher development states.
A larger share of green technology patents also boosts green GDP after it passes a certain threshold.
By contrast, higher economic policy and ESG uncertainty reduce green growth, in particular when green performance is already weak.
Changes in energy use are positively linked to green GDP, but the long-run gains depend on cleaner and more efficient energy supply.
The results suggest that stable policies, green innovation, and structural upgrading are central for sustained green growth.
Crossing the threshold: why finance and growth diverge? under review.
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Why do economies with similar fundamentals display persistently different levels of financial development and growth?
This paper builds a three-sector continuous-time generalequilibrium model in which financial development is an endogenous stock that raises allocative efficiency, while intermediation faces fixed operating costs and congestion losses.
The interaction generates multiple steady states: a low-finance trap, an unstable threshold, and a high-finance regime.
A simple phase diagram clarifies the mechanism and policy levers that eliminate traps.
Inflation anchoring and behavioural tourism demand
with Richard Adjei Dwumfour, Tourism Economics, revise and resubmit.
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This paper develops a behavioural open-economy model to explain how inflation expectations influence international tourist demand.
Unlike conventional frameworks that treat inflation as exogenous, our model embeds expectations directly in tourists’ forward-looking decisions.
When expectations are unanchored, perceived destination costs rise disproportionately, producing nonlinear declines in real tourism demand; when expectations remain anchored, spending stabilises.
Extending the model to include cost rigidity and exchange rate flexibility shows that low credibility regimes amplify volatility as inflation pessimism links with depreciation risk.
Our framework rationalises recent anomalies—such as sharp demand contractions in high inflation economies like Turkey in 2022—and complements empirical findings showing weak direct price elasticities in long-haul markets.
Book Chapters
The role of private equity investments in infrastructure projects with Richard Adjei Dwumfour, Elikplimi Agbloyor and Ali Sheikhbahaei, 2026, The Routledge Handbook of Infrastructure Finance, J. Yindenaba Abor, J. Macomber, T. Arun, & V. Murinde (Eds.), (1st ed., pp. 240-260). Routledge.
This chapter examines the evolving role of private equity (PE) in global infrastructure investment, addressing its contributions, challenges, and outlook.
As governments face fiscal constraints, PE has emerged as a crucial funding source, enabling large-scale infrastructure projects across sectors like energy, transportation, and telecommunications.
The analysis highlights PE's role in accelerating project timelines, enhancing operational efficiency, and closing funding gaps, particularly through public–private partnerships (PPPs).
However, the alignment of short-term profit motives with the long-term needs of public infrastructure poses challenges alongside regulatory and political risks.
The chapter also explores the impact of environmental, social, and governance (ESG) trends and regulatory shifts on PE's strategic direction, emphasising sustainable infrastructure as a growth area.
Concluding with a forward-looking perspective, this study underscores PE's transformative potential in infrastructure while advocating balanced policies to safeguard the public interest.