International Journal of Economics and Finance, Issue: Vol.18, No.7

Fiscal Rules, Green Investment, and Debt Sustainabilty: A Conditional Analysis for European Countries

Sun, 31 May 2026 15:23:06 +0000

This paper examines the relationship between fiscal rules, green public investment, and public debt sustainability in European countries over the period from 2000 to 2023, using a dynamic panel framework estimated with System GMM. The analysis introduces an interaction term between fiscal rules and green investment to assess whether institutional quality conditions the fiscal impact of climate-related spending.

The results reveal strong persistence in public debt dynamics, with a coefficient on lagged debt of approximately 0.85, indicating that past debt levels are a key determinant of current fiscal outcomes. Green public investment is found to have a positive and statistically significant effect on public debt in the short run, with a coefficient of 0.60–0.75, implying that a one percentage point increase in green investment raises public debt by up to 0.75 percentage points. This finding provides support for the short-run hypothesis that climate-related investment increases borrowing needs.

However, the interaction between fiscal rules and green investment is negative and statistically significant, with an estimated coefficient of -0.28. This indicates that stronger fiscal frameworks reduce the debt impact of green investment. The marginal effects analysis reveals a clear threshold: when the fiscal rules index is low (FR = 1), the effect of green investment on debt is strongly positive (+0.47), while at higher levels of fiscal rule strength (FR = 5), the effect becomes negative (-0.65). This implies a total shift of approximately 1.12 percentage points in the marginal effect across institutional regimes.

These results suggest that the fiscal impact of green investment is conditional on institutional quality. While climate-related spending increases debt in countries with weak fiscal frameworks, it becomes neutral or even debt-reducing in countries with strong and credible fiscal rules. The findings therefore provide strong support for the hypothesis that well-designed fiscal frameworks can reconcile fiscal discipline with green investment.

Overall, the paper contributes to the literature by integrating climate-related fiscal policy into standard models of debt sustainability and by demonstrating the critical role of fiscal institutions in shaping the effectiveness of green investment. The results have important policy implications, highlighting the need for fiscal rule reforms that combine credibility with flexibility to support the green transition without compromising fiscal stability.

Interest Rate and Sectoral Return Volatility at the Nairobi Securities Exchange, Kenya

Sun, 31 May 2026 15:25:50 +0000

Purpose

This study examined the effect of interest rates on sectoral return volatility at the Nairobi Securities Exchange (NSE). Existing studies in Kenya have largely relied on aggregate market indices, which mask sector-specific volatility dynamics and differences in sectoral responses to macroeconomic conditions.

Design/methodology/approach

The study was guided by Fisher Effect Theory and adopted a positivist philosophy and causal research design. The analysis covered 10 sectors and 47 firms listed at the Nairobi Securities Exchange using monthly data from 2011 to 2024. Sectoral return volatility was estimated using the Generalised Autoregressive Conditional Heteroskedasticity model.

Findings

The findings showed that interest rates have statistically significant, heterogeneous effects on sectoral return volatility. Interest rates significantly influenced volatility across five sectors, indicating that sectoral responses to monetary conditions differ across sectors.

Research limitations/implications

The study focused on sectoral return volatility at the NSE, using the GARCH-X model, and provides a basis for future studies employing asymmetric and regime-switching volatility models.

Practical implications

The findings support institutionalised monitoring of sectoral volatility and the development of sector-specific indices to strengthen market surveillance and investment decision-making.

Originality/value
The study extends existing literature by providing sector-level evidence on the relationship between interest rates and return volatility at the NSE.

Degrees Deferred, Rent Unpaid: Educational Non-Completion and Rent Delinquency Among Student Loan Borrowers

Mon, 08 Jun 2026 00:33:32 +0000

Millions of Americans carry student loan debt without ever earning a degree. This group faces a compounding disadvantage: the financial obligations of a college education without the income premium that credential attainment typically brings. We ask whether that disadvantage extends to housing, specifically whether student loan borrowers who did not complete a degree are more likely to fall behind on rent, and whether that risk differs by race. Using data from the 2023 Survey of Household Economics and Decisionmaking (SHED), we estimate probit regression models on a sample of 2,896 borrowers with current or past student loan obligations, and separately on a subsample of 2,227 who had fully repaid their loans. In the full sample, non-completion is not significantly associated with rent delinquency overall, but the picture changes sharply when we look by race. Among Black borrowers, failure to complete a degree raises the probability of falling behind on rent by a meaningful margin (b = 0.712, p < .05), and the effect is even larger among Hispanic borrowers (b = 0.954, p < .05). Both effects largely disappear once student loans are repaid, suggesting that the monthly debt burden is a key driver of housing vulnerability for these groups. Increased borrowing, subjective financial condition, household income, and the presence of children are consistent predictors of delinquency across both samples. These results point to the importance of race-conscious policy responses, since interventions designed for the average borrower are unlikely to reach those who need help most.

Deposit Beta Across Monetary Cycles: Evidence from U.S. Banking Dynamics

Thu, 18 Jun 2026 01:20:49 +0000

This study examines the dynamics of deposit beta in the U.S. banking sector across multiple monetary policy cycles from 2009 to 2024. Deposit beta which is denoted as the sensitivity of deposit rates to benchmark interest rates, plays an essential role in bank funding strategy, asset and liability management (ALM), and interest rate risk transmission. The study evaluates both short-run and long-run determinants of deposit pricing behavior while accounting for asymmetric responses to tightening and easing cycles. By using a time-series framework combining rolling regressions and autoregressive distributed lag (ARDL) modeling. The findings indicate that deposit beta is primarily driven by monetary policy variables, particularly the federal funds rate, SOFR, and long-term Treasury yields, rather than by internal liquidity measures or deposit volumes. Evidence of asymmetric pass-through shows stronger responsiveness during tightening cycles and muted adjustment during easing periods. Empirically, these results underscore the importance of interest rate environments in shaping bank funding behavior and highlight nonlinearities relevant to risk management and regulatory oversight. This study contributes to contemporary empirical insight into deposit pricing dynamics and offers practical implications for banking strategy and financial stability assessment.

Effect of Financial Inclusion on Women’s Economic Empowerment in Kenya

Tue, 30 Jun 2026 01:58:26 +0000

Despite Kenya’s economic growth averaging 5 percent between 2010 and 2021, significant challenges remain. Women have not benefited fully from this process of economic growth and development. Poverty is still high among women. It is revealed that in 2021 about 53 percent women in Kenya are experiencing extreme poverty compared to 47 percent men. A report on women’s economic empowerment points out that, although women make up more than half of Kenya’s population, they still face high levels of unemployment and underdevelopment. Several studies have shown that access to finance promotes women’s economic empowerment. The ability to access financial services has been associated with decreasing poverty among women, as it allows them to obtain assets, improve asset security, and mitigate the effects of income fluctuations. However, there is a dearth of research on this subject tailored to the Kenyan context. Therefore, this study seeks to investigate the effect of financial inclusion on the economic empowerment of women. The study adopts a mixed methods approach using household-level data drawn from FinAccess 2024 survey and Kenya Integrated Household Budget Survey. The results show that an increase in financial inclusion by one unit leads to increase in women’s economic empowerment by 0.025 units holding other factors constant. Based on the empirical findings, this study proposes that policymakers should deepen gender responsive financial inclusion strategies. While Kenya has made notable progress in digital financial services expansion, targeted policies are necessary to ensure that women not only access accounts but actively use them for productive purposes. Financial institutions should design low-cost, flexible transaction accounts tailored to women in informal and rural sectors.

Clustering and Banking Interconnectivity: Identification of Contagion Channels in ECOWAS

Tue, 30 Jun 2026 02:01:57 +0000

This paper analyzes the interconnectivity of banks in the Economic Community of West African States (ECOWAS) and identifies potential channels of contagion. From a sample of 120 banks covering the period 2001-2023, we use the K-means clustering algorithm to form homogeneous groups of banks with similar risk profiles. The results reveal the existence of ten distinct clusters, with banks in Ghana and Nigeria appearing as interconnected central nodes with several clusters. WAEMU banks have an average probability of default (PoD) of 9.9%, significantly lower than that of banks in the West African Monetary Zone (WAMZ) which reaches 20.7%. Moroccan banks, although foreign to the region, contribute less to systemic risk (PoD of 6.5%) than local banks. The study highlights that interbank debt acts as a moderator of systemic risk, with a significant negative relationship to the lower quantiles of the distribution. These results argue for enhanced cooperation between banking supervisors in the region.