André Varella Mollick

In this brief, we examine the Rio Grande Valley (RGV) as a deeply integrated cross-border economy shaped by manufacturing complementarities with northern Mexico and by evolving patterns of investment, employment, and wages. Recent growth has generated substantial job creation, but employment remains concentrated in comparatively low-paying service occupations. At the same time, emerging investments in industry and technology point to gradual economic diversification and the potential expansion of higher-value-added activities in the region.

We examine how firm life cycle transitions, defined as movements from the mature stage to another life cycle stage, are associated with changes in the cash flow sensitivity of cash (CFS). We investigate this relation in two ways: first, by examining changes in cash holdings; and second, using the absolute residuals from a benchmark CFS model to capture variation in firms’ cash-retention policy. We find that transitions out of mature stage are associated with lower cash holdings for firms moving into introduction or decline, and with higher cash holdings for firms moving into growth and shake-out stages. We also find that these transitions are associated with larger deviations from the benchmark CFS model across destination stages. These results are robust to alternative analyses incorporating financial constraints and institutional ownership. Overall, our findings suggest that CFS is state-dependent and varies systematically with firm life cycle transitions.

This paper examines the long-run effects of oil price volatility on U.S. productivity and economic growth. Using annual data for the United States spanning 1900-2019, the longest sample employed to date, we investigate whether oil prices and quantities volatility transmit to the real economy through total factor productivity (TFP) and real GDP (RGDP) growth. Because historical data are available only at annual frequency, we construct a proxy for oil market risk based on EGARCH conditional variance. To account for structural changes over the long sample, we incorporate structural break tests. Our results provide support for the “long-run commodity price super-neutrality” hypothesis which posits that oil price volatility does not affect the steady-state rate of productivity growth or long-run output growth. In contrast, we find shocks to financial market risk premium have positive and persistent effects on productivity and RGDP growth, lasting up to three years. To rationalize these findings, we propose a simple theoretical framework. This work provides new evidence on the role of sector-specific versus market-wide risks in shaping long-run economic performance.

This paper examines whether monetary policy shocks affect CO₂ emissions over time in Brazil. We show that CO₂ emissions decline persistently following contractionary monetary policy shocks. The relationship between monetary policy and CO₂ emissions in Brazil is assessed through two channels: trade openness and exchange rates. The theoretical model illustrates how monetary policy affects the domestic economy through the real exchange rate. An application of a Global VAR (GVAR) to the Brazilian economy from 1996 to 2018 investigates the effects of monetary policy in Brazil (or in the U.S.) on real GDP and, subsequently, on CO₂ emissions. A contractionary monetary policy shock in Brazil causes a short-run appreciation of the currency, lower output in the long run, and lower CO₂ emissions (−0.02% after 24 months). A contractionary U.S. monetary policy shock also causes a decline in the stock market and a short-run depreciation of the currency. This shock leads to lower output in the long run, reducing CO₂ emissions by −0.01% after 20 months.

This paper examines how stock returns respond to oil prices with monthly data from 1990 to 2020 for 12 major economies: 6 oil-exporting countries and 6 oil-importing countries. Combining short and long-run empirical approaches in country-by-country analyses, we first document varying effects of oil price returns in the short-term, while increases in volatility (changes in VIX or geopolitical risk) have negative effects on stock markets. Dynamic OLS (DOLS) estimators show in the long-run positive oil price effects on stock markets for oil-exporters and relatively weaker negative evidence for oil-importers. Interest rate increases have strong negative effects in the long run. Panel analyses shed further light on these results along with structural breaks. Our findings suggest complementary insights from the DOLS long-run approach: oil prices and bond yields have expected signs and volatility has mixed effects on stock markets.