arXiv subjects

Marwil J. Davila-Fernandez

Publications and source records attributed to Marwil J. Davila-Fernandez.

4 recordsLinked to original sources

arXiv2026

Earthquakes, floods, and fiscal resilience: Evidence from Croatia and Slovenia

This paper studies how severe natural disasters affect public debt sustainability in two small open euro-area economies, Croatia and Slovenia, using the IMF's Natural Disaster Debt Dynamics Tool (ND-DDT). Croatia is calibrated to the 2020 Zagreb earthquake, and Slovenia to the 2023 floods. We compare baseline debt projections with four complementary disaster configurations: two empirical-distribution specifications (one-off and recurrent), one local projection, and one 95th-percentile quantile regression. We further conduct a four-channel robustness exercise allowing the disaster shock to affect inflation and the effective interest rate, in addition to real GDP growth and the primary balance. In the absence of an extreme natural event, we estimate that Croatian public debt declines from 63 per cent of GDP in 2024 to 52.7 per cent by 2034, while Slovenian debt rises from 66.6 to 74.7 per cent over the same horizon. However, a severe disaster shifts both trajectories upward and increases their persistence, raising the Croatian debt-to-GDP ratio to between 64.5 and 70.4 per cent of GDP, while the Slovenian ratio reaches between 83 and 95 per cent across scenarios. A counterfactual exercise confirms that pre-disaster fiscal space, adaptive capacity, and risk-transfer arrangements attenuate but do not eliminate the post-disaster debt burden. Our findings highlight that fiscal resilience must be built before the shock occurs.

econ.GN↗

arXiv2026

How many parents does it take? Parental time allocation and the effectiveness of fertility subsidies

There has long been an apparent consensus in the literature on intra-household allocation and fertility that greater paternal involvement in childcare relaxes maternal time constraints, enabling mothers to increase their labor supply or leisure. Recent evidence, particularly from South Korea, challenges this view: increases in fathers' childcare time have coincided with a further increase in mothers' time dedicated to child-rearing. This paper develops an Overlapping Generations (OLG) growth model to address such a puzzle. The central mechanism and our main innovation hinge on the functional form of the childcare technology. When maternal and paternal time are substitutes, the conventional result holds. However, when they are complements, greater paternal involvement necessarily raises maternal childcare time, depressing fertility and redirecting household resources toward child quality. We further argue that the elasticity of substitution should not be interpreted as a pure preference parameter, as it also reflects the social and institutional norms, the skills each parent brings to child-rearing and their intergenerational transmission. The model is extended to study the effectiveness of pro-natalist subsidies, suggesting that such policies may generate an unintended anti-fertility bias. Numerical simulations calibrated loosely to South Korean data confirm that the model is consistent with the observed quantity-quality trade-off and the persistence of low fertility despite active pro-natalist policy.

econ.GN↗

arXiv2025

Veblen effects and broken windows in an environmental OLG model

Can constantly comparing ourselves to others lead to overconsumption, ultimately increasing the ecological footprint? How do social comparisons shape green preferences over time? To answer these questions, we develop an environmental Overlapping Generations (OLG) model that explicitly accounts for Veblen effects and allows green preferences to be updated asynchronously, influenced by past environmental conditions and relative status considerations. We show that, along the optimal path, positional spending leads to overconsumption, which is detrimental to the environment. Taxing consumption is counterproductive as it does not directly address the social comparisons issue, leaving the problem unchanged. When the Veblenian mechanism is weak, the introduction of a materialistic ``secular trend'' -- that lowers the importance placed on the public good -- gives rise to two stable equilibria separated by a saddle: one in which agents care about environmental quality as much as consuming, and the other in which they derive utility solely from the latter. Studying the basins of attraction reveals that green investments are highly fragile. Our numerical experiments further indicated that, when Veblen effects are strong, the model depicts endogenous, persistent, aperiodic oscillations. In this case, green preferences fluctuate close to zero, and environmental quality is very low. Taken together, these findings suggest environmental vulnerability grows in parallel with status-driven consumption.

econ.GN↗

arXiv2025

FX-constrained growth: Fundamentalists, chartists and the dynamic trade-multiplier

Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of the economy, existing scholarship has overlooked a critical feature of developing countries. They cannot trade in their national currencies and need US dollars to access modern production techniques as well as maintain consumption patterns similar to those of wealthier societies. To address this gap, we present a novel heterogeneous agents model from the perspective of a developing economy that distinguishes between speculative and non-speculative sectors in the FX market. We demonstrate that as long as non-speculative demand responds to domestic economic activity, a market-clearing output growth rate exists that, in steady-state, is equal to the ratio between FX supply growth and the income elasticity of demand for foreign assets, i.e., a generalised dynamic trade-multiplier. Numerical simulations reproduce key stylised facts of exchange rate dynamics and economic growth, including distributions that deviate from the typical bell-shaped curve. Data from a sample of Latin American countries reveal that FX fluctuations exhibit similar statistical properties. Furthermore, we employ time-varying parameter estimation techniques to show that the dynamic trade-multiplier closely tracks observed growth rates in these economies.

econ.GN↗