This study examines the effectiveness of central bank communication during times of high-intensity adverse shocks. In particular, we explore how the National Bank of Ukraine (NBU) regulated foreign exchange (FX) markets during the Russian-Ukrainian war in 2022. Using data collected from both the black and authorized FX markets, this study suggests that the content of the NBU announcements has a significant impact on the FX market agents. Notably, the announcement aimed to maintain a fixed (floating)

FX rate lead to an increase (decrease) in the black market premium. Furthermore, the response to fixed-rate announcements is greater compared to floating rate announcements. Additionally, the NBU announcements have a stronger influence on the selling side of the foreign currency, where the black market holds near monopolistic power.

While energy risk is recognized as a new systemic risk, surprisingly little research has been done about the risk propagation of energy commodities across geographic regions. In this paper, we examine 24 countries of the European Economic Area (EEA) to address ongoing concerns about energy stability. In addition to traditional panel regressions, we also deploy the Diebold-Yilmaz volatility spillover index (2014) method for a focused network analysis. We also seek to differentiate in the cross-section across the core EU block, new EU countries joining after the 2004 enlargement, and others. In the last 20 years, the major sources of market volatility primarily emanated from economic or political uncertainty of a specific country, or group of countries, for example, from Greece during the sovereign debt crisis, from Central and Eastern European countries (CEEC) after the 2004 EU extension, and from Norway during the oil rout. Energy risks, measured by large oil and gas price shocks, have become major volatility providers since 2019, with increasing volatility risk arising from gas, a green labelled energy source. Lastly, we also show that market development plays a key role in equity market resilience, and that the less liquid CEEC markets with weakening currencies are more sensitive to oil and gas price shocks.

Organized crime represents a relevant threat to countries worldwide and use its coercive power to impose a state of fear. Yet, it is difficult to underpin how organized crime’s threat can generate distortions in the market. By using the semi-annual publication of the Anti-Mafia Investigative Directive (DIA) on Italian mafia families’ surnames over the period 2005-2018 as an exogenous shock, we document that firms located in the same industry and municipality of firms whose top executives happen to have the same surname of Mafiosi (mafia-surname firms) experience a deterioration of operating performance, sales growth, leverage, and WW-index. As a possible mechanism, we show that the fear of mafia can jeopardize firms’ relationships and economic transactions in the legal economy. To this purpose, we find that mafia-surname firms receive a greater liquidity extension than other similar firms. Overall, our results shows that the fear of Mafia has relevant consequences for the real economy.

This paper investigates corporate announcements related to the Russia-Ukraine conflict of S&P 500 firms. We find that firms withdrawing from Russia or suspending operations tend to have more cash reserves. Similarly, firms with more cash seem to announce withdrawals or suspensions relatively quickly. This seems to suggest that cash reserves seem to matter in how firms react to geopolitical events. We do not find that cash appears to matter when firms announce that they will be donating to various causes due to the conflict. However, higher cash levels do seem to speed up the timing of this type of announcement. When we investigate investor reactions to either donation or withdrawal/suspension announcements, we report raw returns surrounding the announcements are negative, between -0.6 to 0.9%. Moreover, cash levels seem to matter for withdrawals/suspensions but not for donations. Our paper confirms that cash levels (i.e., financial flexibility) are an essential determinant of how firms react to geopolitical events.