The Unassuming Economist

From a paper by Oleg Gurshev and Lucas van der Velde

“We examine the contribution of supply and demand shocks to income inequality in a panel setting. Leveraging the newly created Global Repository of Income Dynamics, we study the relationship between unanticipated supply and demand shocks and income inequality, distinguishing between domestic and international (US) shocks. Our results show that shocks originating in the United States, on average, increase income dispersion in other developed countries: demand shocks tend to produce stronger reactions than supply shocks. We explore different transmission channels: trade, financial and expectations. The trade channel appears particularly relevant for supply shocks. Comparing these external shocks with domestic counterparts, we find that domestic demand shocks exhibit similar dynamics, while domestic supply shocks are associated with declines in income inequality.”

From a paper by Jean-Francois Verne:

“This study considers the nonlinear relationship between GDP growth and unemployment in France (1975–2024) using a logistic smooth transition regression (LSTR) model. Findings reveal a threshold unemployment rate of 7.93%, above which the traditional Okun’s law holds (GDP growth reduces unemployment). Below this threshold, an inverted Okun’s law emerges, where economic growth coincides with rising unemployment. This is explained by technological advancements, skill mismatches, and delayed employment adjustments. The results indicate that macroeconomic policies based on linear assumptions are limited in their capacity to address unemployment challenges effectively. Recognizing these nonlinear dynamics is crucial for designing effective labor market policies that account for asymmetries in economic fluctuations.”

From a paper by Ichrak Dridi and Mohamed Malek Belhoula:

“Following the global financial crisis, the interconnection between financial stability and inflation stability has gained increasing recognition, challenging the notion that these objectives are mutually exclusive. This study empirically examines whether central banks, through the adoption of Full-Fledged Inflation Targeting (FFIT), can enhance stock market efficiency in emerging economies. Utilizing data from 36 emerging markets over the period 1995:Q1 to 2024:Q1, we employ Propensity Score Matching to mitigate self-selection and omitted variable biases. Our findings demonstrate that FFIT significantly improves stock market efficiency, with effects emerging after three quarters and persisting for at least two years, as substantiated by Staggered Difference-in-Differences analysis. These results remain robust across multiple sensitivity tests. Mediation analysis confirms that FFIT enhances efficiency primarily through reduced inflation and interest rate volatility and strengthened institutional credibility. Furthermore, results reveal that IT adoption also enhanced efficiency during the Global Financial Crisis and COVID-19, albeit with a lower amplitude compared to the full-sample analysis. By stabilizing inflation expectations and providing transparent policy guidance, FFIT enables investors to incorporate macroeconomic fundamentals into their decision-making, thereby enhancing market transparency and improving stock market efficiency.”

From a paper by Mihaela Simionescu:

“The Covid-19 pandemic enhanced economic issues like income/wealth inequality and inflation, with negative consequences that should be managed properly by policymakers. The relationship between inflation and economic inequality has been extensively studied, primarily through the lens of income disparities. However, the implications for wealth inequality, a more potent determinant of economic opportunity, social mobility, and political influence, remain under-explored. This study bridges this gap by empirically investigating the nonlinear association between inflation and income/wealth inequality, as proxied by top/bottom income/wealth shares in the EU in the period 1990–2022. The findings reveal a non-linear, U-shaped, association between inflation/expected inflation and top/bottom wealth and income shares for the overall EU, while inflation has no significant impact on the Gini index. However, there are few countries for which the U pattern is not validated. In addition, in general, joining the Eurozone decreased income and wealth inequality, and did not affect the wealth and income of the bottom 50% of the population. To elucidate the underlying mechanisms, a pathway analysis is conducted, suggesting that self-employment plays a pivotal role in transmitting the effects of inflation to income/wealth inequality. Moreover, immigration has a partial mediation effect in the relationship between wealth inequality and education.”

From a paper by Floris Bukman:

“Military coups are a persistent feature of global politics, with nearly 90 incidents recorded worldwide between 1996 and 2023, particularly in Sub-Saharan Africa and Asia. Such events typically disrupt economic performance, causing declines in GDP growth, high inflation rates, reduced foreign direct investment (FDI), and increased unemployment. However, the severity and duration of these economic outcomes vary significantly across countries. This thesis addresses this gap by investigating whether institutional quality, measured by government effectiveness, moderates the short- to medium-term economic impacts of coups. Using a fixed-effects panel regression model covering all UN member states from 1996 to 2023, the findings suggest that countries with stronger institutions are better able to mitigate the typically negative economic effects of coups. These countries experience faster GDP growth recoveries, particularly evident in the second year after the coup and, in some contexts, as early as the first year. For inflation, FDI, and unemployment, the moderating effect of institutional quality was not statistically significant. By emphasising the important role of institutional quality following political instability, this research provides new insights into why some countries experience less severe economic impact and recover more quickly from military coups than others, and it offers directions for future research.”