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Motivated by the negative effect of external shocks on the domestic economy, this study explores the role of financial sector development in absorbing the effect of external shocks on macroeconomic volatility in Nigeria.

Autoregressive distributed lag and fully modify ordinary least square are used to examine the moderating effect of financial development in the link between external shocks and macroeconomic volatilities in Nigeria between 1986Q1 and 2019Q4. External shock is proxy using oil price shock, and financial development is proxy by domestic credit to the private sector and market capitalisation. At the same time, macroeconomic volatility is proxy by output and inflation volatilities. Macroeconomic volatilities are generated using generalised autoregressive conditional heteroskedasticity (GARCH 1,1).

The results indicate that domestic credit to the private sector significantly reduces output and inflation volatilities in Nigeria in the short and long run. However, market capitalisation promotes macroeconomic volatility. More specifically, financial development indicators play different roles in curtaining macroeconomic volatilities. The results also reveal that external shocks stimulate macroeconomic volatility in Nigeria in the short and long run. Nevertheless, the effects of external shocks on macroeconomic volatilities are reduced when the role of financial development is incorporated.

This study, therefore, concludes that strong financial sector development serves as a significant shock absorber in reducing the adverse effect of external shock on the domestic economy.

This study contributes to the extant studies by introducing a country-specific analysis into the empirical examination of how financial development can moderate the influence of external shock on macroeconomic volatilities.

This research investigates the impact of strategic research and development (R&D) (one led by a firm’s innovation orientation) on stock market performance during the economic disruption caused by the 2016 demonetization of high-value currency notes in India. It shows how firms’ strategic focus on innovation and integrated R&D initiatives can help mitigate shareholders’ losses and protect market value during negative macroeconomic shocks.

We analyzed financial and administrative data from firms listed in the Bombay Stock Exchange (BSE) 500 index and used the Fama French market model with appropriate instruments accounting for possible endogeneity to identify the impact. To ensure the reliability of our findings, we conducted robustness checks with alternate event windows, estimation methods, and variable measurements.

Strategic R&D plays a crucial role in building resilience against macroeconomic shocks. It effectively mitigated shareholders’ losses in the immediate aftermath of the shock, with an elasticity of abnormal returns of 7.65% on day zero, 13.1% during the first five days and 10.5% after the first fortnight. We also find that firms that are business-to-business (B2B), as well as those that are older and less leveraged, are better able to combat such a shock.

The study looked at one shock, namely demonetization. Future research is needed to demonstrate the generalizability of results during other macroeconomic shocks, like the COVID-19 pandemic. The study focuses on relatively near-term impacts, leaving the long-term value-creation effects of strategic R&D unexplored.

Innovation orientation acts as a structural enabler, allowing firms to make strategic R&D investments that mitigate losses during macroeconomic shocks. It explains that managers should avoid myopically managing R&D investments and align them with the firm’s innovation focus to enhance value creation.

While the currency demonetization was widely considered to be detrimental for firms as an unannounced negative monetary shock, our research shows that firms with high levels of strategic R&D were successfully able to counteract such a shock.

This is the first study to examine the short-term loss mitigation impact of firms’ focus on innovation and strategic R&D. It emphasizes the role of innovation-focused strategies during economic crises.

The increased capital requirements and the implementation of new liquidity standards under Basel III sparked various concerns among researchers, academics and other stakeholders. The question is whether Basel III regulation is ideal, that is, adequate to deal with a crisis, such as the 2007–2009 global financial crisis? The purpose of this paper is threefold: First, perform a stress testing exercise on the US banking sector, while examining liquidity and solvency risk indicators jointly under the Basel III regulatory framework. Second, allow the study to cover the post-crisis period, while referring to key Basel III regulatory requirements. And third, focus on the resilience of domestic systemically important banks (D-SIBs), which are supposed to support the US financial system in times of stress and therefore whose failure causes the entire financial system to fail.

The authors used a sample of the 24 largest US banks observed over the period Q1-2015 to Q1-2021 and a scenario-based vector autoregressive conditional forecasting approach.

The authors found that the model successfully produces accurate forecasts and simulates the responses of the solvency and liquidity indicators to different real and historical macroeconomic shocks. The authors also found that the US banking sector is resilient and can withstand both historical and hypothetical macroeconomic shocks because of its compliance with the Basel III capital and liquidity regulations, which consist of encouraging banks to hold high-quality liquid assets and stable funding resources and to strengthen their capital, which absorbs the losses incurred in a crisis.

The authors developed a framework for testing the resilience of the US banking sector under macroeconomic shocks, while examining liquidity and solvency risk indicators jointly under Basel III regulatory framework, a point not yet well studied elsewhere, and most studies on this subject are based on precrisis data. The authors also focused on the resilience of D-SIBs, whose failure causes the failure of the entire financial system, which previous studies have failed to examine.

This study aims to investigate the relationship between corporate tax avoidance and stock price crash risk and the moderating effects of corporate governance.

This study investigates the relationship between corporate tax avoidance and stock price crash risk using the sample consisting of listed firms in Vietnam for the period of 2011–2020 using panel regressions.

The authors find that there is a positive relationship between tax avoidance and stock price crash risk. Foreign ownership weakens the impacts of tax avoidance on stock price crash risk, while managerial ownership strengthens the impacts. Female Chief Executive Officers (CEOs) and female chairpersons weaken this relationship. Board gender diversity and state ownership have insignificant moderating impacts.

These findings could help the stock market build better internal monitoring mechanisms to reduce the impacts of tax avoidance on future stock price crash risk. Investors can recognize the characteristics of corporate governance, especially foreign ownership, managerial ownership, female CEOs and female chairpersons when making investment decisions. The policy makers should consider policies to attract foreign investment and support women entrepreneurship.

This paper contributes to the literature on the impacts of tax avoidance on stock price crash risk in emerging countries. This paper is the first to investigate the influence of corporate governance mechanisms including state ownership, foreign ownership, female CEOs and chairpersons and board gender diversity on this relationship.

Despite the growing recognition of the complex interplay between macroeconomic shock indexes and stock market dynamics, there is a significant research gap concerning their interconnectedness and return spillovers in the context of the African stock market. This leaves much to be desired, given that the financial market in Africa is arguably one of the most preferred destinations for hedge and portfolio diversification (Alagidede, 2008; Anyikwa and Le Roux, 2020). Further, like other financial markets across the globe, the increased capital flow, coupled with declining information asymmetry in Africa, has deepened intra and inter-sectoral integration within and across national borders. This has, thus, increased the susceptibility of financial markets in Africa to spillover of shocks from other sectors and jurisdictions. Additionally, while previous studies have investigated these factors individually (Asafo-Adjei et al., 2020), with much emphasis on developed markets, an all-encompassing examination of spillovers and the connectedness between the aforementioned macroeconomic shock indexes and stock market returns remains largely unexplored. This study happens to be the first to consider the impact of each of the indexes on stock returns in Africa, with evidence spanning from May 2007 to April 2023, covering notable global crisis episodes such as the Global Financial Crisis (GFC), the COVID-19 pandemic and the Russia–Ukraine war.

This study employs the novel quantile vector autoregression (QVAR) model, making it the first of its kind in literature. By applying the QVAR, the study captures the potential nonlinear and asymmetric relationship between stock returns and the factors of interest across different quantiles, i.e. bearish, normal and bullish market conditions. Thus, the approach allows for a more accurate and nuanced examination of the tail dependence and extreme events, providing insights into the behaviour of the variables under extreme events.

The study revealed that connectedness and spillovers intensified under bearish and bullish market conditions. It was also observed that, among the macroeconomic shock indicators, FSI exerted the highest influence on stock returns in Africa in both bullish and normal market conditions. Across the various market regimes, the Egyptian Exchange (EGX) and the Nairobi Stock Exchange (NSE) were net receiver of shocks.

This study happens to be the first to consider the impact of each of the indexes on stock returns in Africa, with evidence spanning from May 2007 to April 2023, covering notable global crisis episodes such as the GFC, the COVID-19 pandemic and the Russia–Ukraine war. On the methodology front, this study employs the novel QVAR model, making it one of the few studies in recent literature to apply the said method.

The purpose of this study is to construct a new index to assess the impact of an energy price shock on macroeconomic indicators of India. This paper also shows a comparative analysis of the constructed index along with pre-existing World Bank and International Monetary Fund indices on energy.

This paper uses three vector autoregressions and compute the long-term impact of the indices on the considered macroeconomic variables through impulse response functions.

This paper finds that an energy price shock has a detrimental impact on the macroeconomic indicators of India in the long run. This study also finds that the constructed index acts as a relatively more sensitive index in comparison to the International Monetary Fund and World Bank indices, which is bespoke to a developing economy case. This sensitivity is ascribed to dynamic weighting for a different basket of energy components, which are more pertinent to an Indian context.

The novelty of this research lies in the construction of a new index and its comparison to the existing ones. This study justifies why a developing economy would require a different measure of energy as opposed to the existing indices.

This paper seeks to explore the sensitivity of these parameters and their impact on fiscal policy outcomes. We use the existing literature to establish possible ranges for each parameter, and we examine how changes within these ranges can alter the outcomes of fiscal policy. In this way, we aim to highlight the importance of these parameters in the formulation and evaluation of fiscal policy.

The role of fiscal policy, its effects and multipliers continues to be a subject of intense debate in macroeconomics. Despite adopting a New Keynesian approach within a macroeconomic model, the reactions of macroeconomic variables to fiscal shocks can vary across different contexts and theoretical frameworks. This paper aims to investigate these diverse reactions by conducting a sensitivity analysis of parameters. Specifically, the study examines how key variables respond to fiscal shocks under different parameter settings. By analyzing the behavioral dynamics of these variables, this research contributes to the ongoing discussion on fiscal policy. The findings offer valuable insights to enrich the understanding of the complex relationship between fiscal shocks and macroeconomic outcomes, thus facilitating informed policy debates.

This paper aims to investigate key elements of New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models. The focus is on the calibration of parameters and their impact on macroeconomic variables, such as output and inflation. The study also examines how different parameter settings affect the response of monetary policy to fiscal measures. In conclusion, this study has relied on theoretical exploration and a comprehensive review of existing literature. The parameters and their relationships have been analyzed within a robust theoretical framework, offering valuable insights for further research on how these factors influence model forecasts and inform policy recommendations derived from New Keynesian DSGE models. Moving forward, it is recommended that future work includes empirical analyses to test the reliability and effectiveness of parameter calibrations in real-world conditions. This will contribute to enhancing the accuracy and relevance of DSGE models for economic policy decision-making.

This study is motivated by the aim to provide a deeper understanding of the roles macroeconomic model parameters play concerning responses to expansionary fiscal policies and the subsequent reactions of monetary authorities. Comprehensive reviews that encompass this breadth of relationships within a single text are rare in the literature, making this work a valuable contribution to stimulating discussions on macroeconomic policies.

The study examines the impact of fiscal policy shocks on economic growth and income inequality in Ghana. This has become necessary because of the interdependence between growth and income inequality and the role fiscal policy plays in this relationship in the development process of a country. Thus, a study that investigates how government expenditure shock and tax revenue shock influence the relationship between economic growth and income inequality could assist policymakers to adopt the best policy mix to ensure income equity and sustained economic growth in Ghana.

It employs sacrifice ratio from structural VAR model using quarterly time series data from 1996 to 2019 on Ghana.

Our results show that government expenditure shock impacts economic growth, exchange rate and education positively and significantly in the long run. Also, tax revenue shock has a positive impact on income inequality, economic growth and education. The findings further show that there exists a trade-off between economic growth and income inequality in the long run.

The relationships between fiscal policy shocks, economic growth and income inequality have been extensively discussed among scholars. Understanding how these three macroeconomic variables are determined and their interrelationships are crucial for policymakers. This is because fiscal policy aids in both economic growth and income inequality. In the empirical literature, the emphasis has been on independently estimating the growth effects of fiscal policy or the distribution effects of fiscal policy, leaving out the existence of possible trade-off between economic growth and income inequality following a fiscal shock. To the best of our knowledge, no empirical study has been done on Ghana to empirically examine the trade-off between economic growth and income inequality as we do in this paper.

This study seeks to examine the relationship between macroeconomic shock indicators, namely geopolitical risk (GPR), global economic policy uncertainty (GEPU) and financial stress (FS), and returns as well as volatilities on seven carefully selected stock markets in Africa. Specifically, the study intends to unravel the co-movement and interdependence between the respective macroeconomic shock indicators and each of the stock markets under consideration across time and frequency.

This study employed wavelet coherence approach to examine the strength and stability of the relationships across different time scales and frequency components, thereby providing valuable insights into specific periods and frequency ranges where the relationships are particularly pronounced.

The study found that GEPU, Financial Stress (FS) and GPR failed to induce significant influence on African stock market returns in the short term (0–4 months band), but tend to intensify in the long-term band (after 6th month). On the contrary, stock market volatilities exhibited strong coherence and interdependence with GEPU, FSI and GPR in the short-term band.

This study happens to be the first of its kind to comprehensively consider how the aforementioned macro-economic shock indicators impact stock markets returns and volatilities over time and frequency. Further, none of the earlier studies has attempted to examine the relationship between macro-economic shocks, stock returns and volatilities in different crisis periods. This study is the first of its kind in to employ data spanning from May 2007 to April 2023, thereby covering notable crisis periods such as global financial crisis (GFC) and the COVID-19 pandemic episodes.

The study examined the roles of fiscal and monetary policy in reducing poverty in sub-Saharan Africa (SSA), while accounting for macroeconomic disruptions. In particular, the study examined the complementarity of fiscal and monetary policy to mitigate shocks and reduce poverty in SSA.

The study adopts the fixed effect (within regression) model to account for country-specific characteristics, and a cross-sectional dependence – consistent model to control for the potential cross-sectional in panel data modelling. The study used the dummy variable approach to account for the macroeconomic shocks. The authors assigned 1 to the following years – 2008, 2014 and 2020; and 0 otherwise to take care of the global financial crisis, commodity terms of trade shocks and the COVID-19 pandemic respectively.

The study found that fiscal policy (particularly, government spending on health and education) has the greater capacity to reduce the level of poverty in SSA. The results also indicate that fiscal policy and monetary policy can work in tandem to reduce the negative effects of a pandemic. However, the study found an optimal threshold level of monetary policy beyond which monetary policy reduces the effectiveness of fiscal policy to reduce poverty in SSA. The research and policy implications are discussed.

The study, unlike previous studies, accounts for the impact of macroeconomic shocks in the monetary/fiscal policy and poverty literature.