Joshua Ostry

Job Market Paper

Chokepoint: The Financial Effects of Rare Earth Supply Disruptions

This paper constructs a set of high-frequency, news-based rare earth supply shocks to examine how disruptions in these critical inputs affect firm valuations. Using a sample of more than 5,600 publicly-traded firms from 2021 to 2026, I show that rare earth supply disruptions originating from Chinese export policy cause substitution-constrained firms’ equity prices to decline by 0.8 percentage points relative to unconstrained firms. These effects are strongest for American and Japanese firms in the defense, battery, semiconductor, and motor vehicle industries. Firms that spend more, both directly and indirectly, on rare earths also underperform, a channel distinct from substitutability. Moreover, firms that do not use rare earths as inputs are still susceptible if they are exposed to China, in line with Chinese rare earth restrictions raising uncertainty over a broader decoupling of U.S.–China supply chains. Finally, non-Chinese rare earth producers, which stand to gain when Chinese supply tightens, outperform unconstrained firms by 5 percentage points after the same shocks. These findings highlight the channels through which the weaponization of critical-material supply chains transmits across global markets.

[IDEAS RePEc]   [PDF — Updated October 2026]

Working Paper

From Climate Risk to Growth-at-Risk: An Empirical Model of Downside Risks to Growth from Temperature Shocks

This paper investigates the degree to which the mean, variance and skewness of a country’s temperature distribution worsen downside risks to GDP growth. Using a quantile regression framework for a sample of 124 countries over 37 years, I first document that while rising mean temperatures reduce mean GDP growth, mean temperature shocks have more pronounced effects on worst-case (left-tail) growth outcomes. For poor countries, rising mean temperatures lower left-tail GDP growth by reducing output in both the agricultural and industrial sectors. On the other hand, rising mean temperatures affect worst-case growth in rich countries only through the agricultural sector. Next, I highlight that higher moments of the temperature distribution are also salient predictors of left-tail growth. For rich countries, greater temperature volatility and more extreme cold temperatures — left-skewed temperature distributions — forecast weaker agricultural growth. On the other hand, more extreme hot temperatures — right-skewed distributions — predict significant deteriorations in agricultural growth in poor countries. Finally, using country case studies, I quantify the degree to which shocks to the moments of the temperature distribution affect the conditional distribution of (sectoral) growth, with an emphasis on the distribution’s left tail.

[IHEID Repository]   [PDF]

Working Paper — with Alba Patozi

International Financial Spillovers of Carbon Price Shocks

This paper investigates the degree to which carbon price shocks in the European Union result in financial spillovers to US firms. We begin by constructing a carbon price shock series using a high frequency identification of EU carbon prices around EU ETS regulatory event announcements regarding the supply of carbon allowances. Next, using a local projections panel regression framework for a sample of approximately 3,500 US firms between 2008–2020, we document that, in response to a decrease in a firm’s environmental score, their sales and investment become more sensitive to carbon price shocks in the EU, and brown firms benefit from increased demand when EU carbon prices rise.

IFC–WTO Policy Report — 2022

Trade Finance in West Africa

Trade finance — credit facilities used by importers and exporters to transact business — is routinely provided by banks to importers and exporters in advanced economies but developing countries face chronic shortages. This publication focuses specifically on the situation in the four largest economies in the Economic Community of West African States (ECOWAS), namely Côte d’Ivoire, Ghana, Nigeria and Senegal. The International Finance Corporation (IFC) and the WTO conducted a survey of banks providing trade finance in the four countries to assess the obstacles faced by borrowers and lenders. The results were then used along with other data to estimate the size of trade finance shortfalls in the four countries and the potential boost to trade that would come from closing those gaps.

[WTO]

WTO Working Paper — with Marc Auboin (WTO)

COVID-19, Growth and Trade: Lessons from the Pandemic

This paper examines the impact of increased vaccination and lockdown measures on economic growth and trade growth during the COVID-19 pandemic. First, using a panel regression model with data between January 2020 and December 2021, we find that a 1% increase in a country’s vaccination rate increases its GDP growth by 0.2% at low vaccination rates, though this effect diminishes as vaccination rates rise. Furthermore, a 1 unit rise in the OxCGRT lockdown stringency index reduces GDP growth by 0.4%, though this negative effect can be mitigated if a country’s labor force is able to work from home. Second, we estimate the impact of vaccination rates and lockdown stringency on export growth using a similar panel regression analysis. We find that a country’s own vaccination rate and lockdown stringency have no significant effect on its export growth. However, a 1% increase in the global export-weighted vaccination rate increases a country’s export growth rate by 0.4%. These results demonstrate the potential benefits of coordinated global vaccination efforts for promoting economic growth and trade, and highlight the need for policies that support remote work to mitigate the negative impacts of lockdowns.