https://hdl.handle.net/10419/211499 2026-10-31T02:29:12Z 2026-10-31T02:29:12Z Verona, Fabio https://hdl.handle.net/10419/335013 2026-01-17T02:04:34Z 2026-01-01T00:00:00Z

Title: Forecasting inflation: The sum of the cycles outperforms the whole Authors: Verona, Fabio Abstract: Inflation dynamics reflect forces operating at different cycles, from short-lived shocks to longterm structural trends. We introduce the sum-of-the-cycles (SOC) method, which exploits this multifrequency structure of inflation for forecasting. SOC decomposes inflation into cyclical components, applies forecasting models suited to their persistence, and recombines them into an aggregate forecast. Across U.S. inflation measures and horizons, SOC consistently outperforms leading time-series benchmarks, reducing forecast errors by about 25 percent at short horizons and nearly 50 percent at long horizons. During the 2020-21 inflation surge, when many models - including advanced machine-learning methods - struggled, SOC retained strong performance by incorporating shortage indicators. Beyond accuracy, SOC enhances interpretability: financial variables dominate high- and business-cycle frequencies, Phillips Curve models are most informative at medium frequencies, and factor-based methods, forecast combinations, and shortage indices prevail at low frequencies. This combination of accuracy and transparency makes SOC a practical complement to existing tools for inflation forecasting and policy analysis.

2026-01-01T00:00:00Z Ambrocio, Gene Bui, Dien Giau Hasan, Iftekhar Lin, Chih-Yung https://hdl.handle.net/10419/335890 2026-02-04T02:05:27Z 2026-01-01T00:00:00Z

Title: Pyrrhic diversification: Foreign institutional ownership and stock return sensitivity to the global financial cycle Authors: Ambrocio, Gene; Bui, Dien Giau; Hasan, Iftekhar; Lin, Chih-Yung Abstract: We demonstrate that foreign institutional ownership (FIO) is associated with stronger stock return sensitivity to the Global Financial Cycle (GFC), indicating greater global co-movement among stocks selected by FIOs compared to those not selected. We conjecture that this may be because (i) FIOs tend to pick ex-ante very similar firms when investing abroad, or (ii) FIO investments itself makes firms ex-post more similar and more sensitive to the GFC. We find evidence in support of both hypotheses: that the increased co-movement may be due to FIO's selecting more homogeneous firms and that the sensitivity to the GFC increases after FIO investment. However, we find no significant difference between firms that have longer exposure to FIO investors and those that have only recently obtained FIO investment. Our results indicate that diversification gains are left on the table when FIOs select firms to invest in.

2026-01-01T00:00:00Z Berkowitz, Daniel M. Lezama, Guillermo Nackle, Claire https://hdl.handle.net/10419/336767 2026-02-19T02:06:18Z 2026-01-01T00:00:00Z

Title: Sanctions, reputational losses and salience Authors: Berkowitz, Daniel M.; Lezama, Guillermo; Nackle, Claire Abstract: Can government agencies in sanctioning countries deter their companies from violating laws that limit business transactions with sanctioned countries? To understand this issue, we study the Office of Foreign Assets Control (OFAC), which is the primary enforcer of sanctions in the United States. OFAC announces a company's violations and penalty only after it has successfully completed its investigation. We document that OFAC's announcements were unanticipated and imposed reputational losses that could deter non-compliance throughout the industry when the penalties were large enough and when announcements were made at times when OFAC was being searched intensely on the internet. This suggests that a broader market sentiment sympathetic to OFAC's mission of stopping financial crimes was necessary.

2026-01-01T00:00:00Z Kaaresvirta, Juuso Kerola, Eeva Nuutilainen, Riikka https://hdl.handle.net/10419/340029 2026-04-18T01:06:07Z 2026-01-01T00:00:00Z

Title: Evolution and challenges of the yuan's internationalisation Authors: Kaaresvirta, Juuso; Kerola, Eeva; Nuutilainen, Riikka Abstract: This paper examines recent developments in the internationalisation of the Chinese yuan, focusing on trade and portfolio flows, foreign exchange markets, cross-border payments, and official reserve holdings. The promotion of the yuan's global role has been a deliberate policy objective for Chinese authorities over the past two decades. The use of the yuan in China's own cross-border trade and portfolio flows has increased in recent years. Still, broader international adoption of the yuan remains very small compared to the US dollar and the euro and has not increased markedly in recent years. Under the current Chinese economic and financial framework-characterized by constrained capital account openness and an emphasis on market and exchange rate stability- the scope for a substantial increase in global yuan use remains limited.

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