Conflicting claims and equilibrium adjustment processes in a stock-flow consistent macro model

Econometric Fragility in the Pricing of Complex Intra-Group Financial Instruments

Transfer pricing disputes involving complex intra-group financial instruments are often presented as disagreements about comparable selection or method choice. This article argues that the deeper source of controversy is frequently different: the numerical outputs produced by standard benchmarking techniques depend materially on assumptions that remain implicit and undisclosed. Credit spreads, rating mappings, optionality adjustments and the construction of arm’s length range each function as estimation choices that carry sampling variance and model sensitivity. Drawing on the factual background of a recent French dispute involving intra-group convertible bonds – Conseil d’État, 17 December 2025, No. 491165 – the article shows how a disagreement that appears to be about a rate differential is in substance a disagreement between competing implicit models. It then proposes a framework of assumption disclosure and sensitivity testing as a practical response, with implications for transfer pricing documentation, audit defence and OECD policy.

A general theory of conflict inflation

This paper develops a novel conflict inflation model to unify the analysis of stable and explosive inflation dynamics, addressing a central theoretical divide in the literature. After providing explicit foundations for wage and price setting behaviour, it is shown that inflation expectations interact multiplicatively with the aspiration gaps of workers and firms rather than add linearly to them as in previous models. As aspiration gaps grow and inflation rises, the conflicting claims of workers and firms accelerate rather than rise steadily. This is reflected in nonlinear wage and price inflation curves whose vertical asymptotes reflect what we call the barrier wages of workers and firms – the critical values of the real wage at which workers and firms are able to resist any further increases in their aspiration gap by matching any rate of inflation. Stable inflationary–distributional outcomes follow only when the barrier wage of workers remains below that of firms. Runaway exchange rate depreciation caused by a balance-of-payments crisis is shown to lead to the collision of barrier wages and thus hyperinflation within the model in a way that is fully consistent with some stylised facts of hyperinflation. The model thus explains how explosive inflation may take hold, what the limits to stable distributional outcomes are, and how a stable inflation regime may evolve into an unstable one, all while maintaining the parsimony of the simple linear conflict inflation models.

Commodity dependence and balance-of-payments constrained growth theory: the case of South America, 1962–2023

This paper builds a bridge between Post Keynesian and Structuralist traditions, adding some Neo-Schumpeterian insights, by developing a theoretical growth model tailored to the specific features of South American commodity-dependent economies. Within the framework of balance-of-payments constrained growth models – and supported by extensive evidence of their relevance to South America – the requirement of balanced international trade is preserved. However, following a Structuralist approach, the model explicitly incorporates the region’s commodity dependence by introducing an additional export sector that is a price-taker of prices set in foreign currency at a global level and which relies on finite natural resources for production. The theoretical formulation reproduces well-known stylized facts of the region, such as the central role of commodity prices in shaping economic growth. Moreover, it sheds light on the importance of the real exchange rate and analytically disentangles its multiple channels of influence on growth, highlighting the complex macroeconomic effects of exchange rate fluctuations. Empirical validation, based on both static and dynamic panel estimations, confirms the consistency of the proposed relationships. The empirical analysis draws on a novel historical dataset specifically constructed for this research, integrating multiple large and heterogeneous databases to provide new evidence on the dynamics of South American economies.

Merger Control in a Changing World

Cash conversion cycles and financial flexibility under economic shocks: evidence from emerging markets

This study examines whether the cash conversion cycle (CCC) supports financial flexibility or instead increases firm vulnerability under economic policy uncertainty (EPU), and tests whether the COVID-19 pandemic altered this relationship for firms with different pre-existing working-capital structures. The study uses a balanced panel of 391 non-financial Indian listed firms over 2014–2024 (4,301 firm-year observations), drawn from the CMIE Prowess database. Firm fixed-effects and random-effects models are estimated with default, firm-clustered, and Driscoll-Kraay standard errors; a difference-in-differences design with firm and year fixed effects is used to exploit the COVID-19 pandemic as an exogenous shock, with firms classified into treatment (above-median pre-pandemic CCC) and control (below-median) groups. The analysis is supplemented with an event-study test of the parallel-trends assumption, a placebo test, a lagged-CCC specification, and a dynamic-panel system GMM model. CCC is not robustly significant for return on assets (ROA) once firm-clustered standard errors are applied (p = 0.264), though a one-year-lagged CCC is significantly positive for both ROA and ROE (p < 0.05); CCC is not significant for return on equity (ROE) in the static specification. EPU is positively associated with ROA at conventional or near-conventional levels across specifications. The CCC × EPU interaction is consistently negative but reaches significance only in the dynamic system-GMM specification for ROA (p = 0.025). An event-study test does not reject parallel pre-trends, and the difference-in-differences and placebo estimates show no significant differential effect for high-CCC firms at the onset of the pandemic, though a significant gap emerges by 2024. Working-capital efficiency appears to operate as a gradual, lagged operational channel rather than an immediate source of profitability or crisis vulnerability. Managers should treat CCC as a medium-term operational lever rather than a short-term crisis response tool, and should prioritise short-term liquidity buffers - proxied here by the current ratio, the most consistently significant predictor of ROA throughout this study. Policymakers should prioritise macroeconomic stability, since EPU itself shows a positive association with ROA, consistent with well-managed firms being better placed to absorb policy uncertainty. The study combines a continuous, time-varying uncertainty measure (EPU) with a discrete exogenous shock (COVID-19) within a single firm-level identification strategy, and is, to our knowledge, among the first studies of Indian working-capital management to combine static fixed-effects estimation with an event-study test of parallel trends, a placebo test, and a system-GMM dynamic-panel specification within one design.

The price of optionality: Geoeconomic fragmentation and the repricing of middle-power hedging