Daily Papers

AI inference services -- API subscriptions, enterprise chat tools, and SaaS products with embedded AI features -- fall unambiguously within Scope 3 Category 1 under the Corporate Sustainability Reporting Directive (CSRD), which requires disclosure for fiscal years starting January 2024. Yet no standardised methodology exists for including them in corporate GHG inventories. Current practice either omits the category entirely or applies a generic economic input-output (EEIO) factor calibrated to the ICT sector as a whole, overestimating AI inference emissions by 10-40x relative to physically derived alternatives. We propose a four-tier framework that matches estimation precision to the data organisations can realistically obtain, progressing from direct token-based physical estimation -- using GPU energy benchmarks and regional grid carbon intensities -- down to a spend-based EEIO fallback for services where no usage data exists. Emission factors are derived from peer-reviewed GPU energy benchmarks (ML.ENERGY Leaderboard v3), confirmed grid carbon intensities (EPA eGRID 2023; Ember 2023), and published water use effectiveness data (Li et al., 2025). Applied to a 200-person European firm, the framework yields a total below 1 tCO2e, illustrating that the compliance challenge is methodological rather than magnitude-driven. We further document a water-carbon trade-off that current ESG tools do not surface: Sweden's hydro-dominated grid delivers the lowest carbon intensity in our dataset but the highest water footprint, with direct implications for data centre location strategy.

Standard methods for detecting discontinuities in conditional means are not applicable to outcomes that are complex, non-Euclidean objects like distributions, networks, or covariance matrices. This article develops a nonparametric test for jumps in conditional means when outcomes lie in a non-Euclidean metric space. Using local Fr\'echet regressionx2014which generalizes standard regression to metric-space valued datax2014the method estimates a mean path on either side of a candidate cutoff, extending existing k-sample tests to a flexible regression setting. Key theoretical contributions include a central limit theorem for the local estimator of the conditional Fr\'echet variance and the asymptotic validity and consistency of the proposed test. Simulations confirm nominal size control and robust power in finite samples. Two applications demonstrate the method's value by revealing effects invisible to scalar-based tests. First, I detect a sharp change in work-from-home compositions at Washington State's income threshold for non-compete enforceability during COVID-19, highlighting remote work's role as a bargaining margin. Second, I find that countries restructure their input-output networks after losing preferential US trade access. These findings underscore that analyzing regression functions within their native metric spaces can reveal structural discontinuities that scalar summaries would miss.

A growing number of countries are adopting policies to reduce greenhouse-gas emissions, a process expected to reshape production systems and labour markets by altering relative prices and changing production and demand patterns across sectors. We develop an agent-based monetary input--output network model to analyse the medium-term effects of climate policies on production networks and sectoral labour allocation. The model features heterogeneous industries and households, incorporates greenhouse-gas emissions accounting, and is calibrated to a multi-regional input--output database covering the world economy. We simulate two alternative climate-policy scenarios over 2026--2035: one based on countries' nationally determined contributions and another targeting larger reductions in global emissions. The results reveal significant economy-wide reallocation: fossil-energy sectors contract, low-carbon energy sectors expand, and their positions within production networks change asymmetrically. Fossil energy loses relevance as a direct supplier and exerts less forward influence, while its remaining production becomes more dependent on intermediate inputs and upstream suppliers; low-carbon energy primarily strengthens its role as a supplier. Carbon pricing also generates sectoral labour gaps that, under mobility frictions, imply greater potential transitional unemployment. Because the model allows only limited technological change and adjustment within existing production links, the simulations provide a counterfactual assessment of how existing production structures respond to a relatively rapid climate transition, revealing the adjustment pressures that emerge when policy ambitions advance faster than the productive system's capacity to adapt.

This study examines the relationship between trade openness, logistics performance, and economic growth within G20 economies. Using a Bootstrap Autoregressive Distributed Lag (ARDL) model augmented by a dynamic error correction mechanism (ECM), the analysis quantifies both short run and long run effects of trade facilitation and logistics infrastructure, measured via the World Bank's Logistics Performance Index (LPI) from 2007 to 2023, on economic growth. The G20, as a consortium of the world's leading economies, exhibits significant variation in logistics efficiency and degrees of trade openness, providing a robust context for comparative analysis. The ARDL-ECM approach, reinforced by bootstrap resampling, delivers reliable estimates even in the presence of small samples and complex variable linkages. Findings are intended to inform policymakers seeking to enhance trade competitiveness and economic development through targeted investment in infrastructure and regulatory reforms supporting trade facilitation. The results underscore the critical role of efficient logistics specifically customs administration, physical infrastructure, and shipment reliability in driving international trade and fostering sustained economic growth. Improvements in these areas can substantially increase a country's trade capacity and overall economic performance.

This study examines the effects of de-globalization trends on international trade networks and their role in improving forecasts for economic growth. Using section-level trade data from nearly 200 countries from 2010 to 2022, we identify significant shifts in the network topology driven by rising trade policy uncertainty. Our analysis highlights key global players through centrality rankings, with the United States, China, and Germany maintaining consistent dominance. Using a horse race of supervised regressors, we find that network topology descriptors evaluated from section-specific trade networks substantially enhance the quality of a country's GDP growth forecast. We also find that non-linear models, such as Random Forest, XGBoost, and LightGBM, outperform traditional linear models used in the economics literature. Using SHAP values to interpret these non-linear model's predictions, we find that about half of most important features originate from the network descriptors, underscoring their vital role in refining forecasts. Moreover, this study emphasizes the significance of recent economic performance, population growth, and the primary sector's influence in shaping economic growth predictions, offering novel insights into the intricacies of economic growth forecasting.

This study analyzes Sri Lankan migration and remittances over 32 years (1994-2025). Using a 384-month harmonized dataset, we apply exploratory data analysis, stationarity corrected time-series modeling (ADF, Johansen, VAR/VECM), and supervised learning. Results reveal remittance inflows are primarily driven by external macroeconomic variables, specifically exchange rate dynamics and global oil prices, rather than domestic indicators. Impulse response analysis confirms the asymmetric impact of currency depreciation and oil price shocks. Predictively, multivariate machine learning models outperform traditional univariate approaches; Ridge Regression achieves a 73.8% accuracy improvement over SARIMA (Annualized RMSE: USD 494.8 Mn). The optimized framework projects 2026 remittances at USD 9,001 million under stable conditions. These findings highlight the structural dependence of remittances on global economies, emphasizing the need for robust exchange rate policies, skilled migration, and formal financial channels to enhance long-term economic resilience.

An AI system can produce more economically valuable work while delivering less value for the energy it consumes. We therefore ask: How much economic value does an AI system create per unit of energy consumed? We formalize economic value in two ways: (1) net dollar value, the output's dollar value minus AI-system execution cost, and (2) time saving, the expert's completion time minus the AI system's completion time. Dividing each by measured end-to-end energy yields Net Value per Joule (NVJ) and Time Saving per Joule (TSJ), reported in USD/MJ and hours/MJ. We study 220 public GDPval tasks across 44 occupations, serving five open-weight models locally and evaluating four accelerator types. First, the occupation groups where AI systems succeed most often, deliver the greatest dollar value, or save the most time do not necessarily provide the greatest economic return per joule. For example, among the tested tasks, engineering work delivers about 10% more net dollar value per task than software development. Yet software development delivers about 27% more net value per joule. Second, GLM 5.2 delivers the highest average net dollar value, at $72.27 per task using 0.430 MJ, equivalent in energy to about four hours of active laptop use. By contrast, Gemma 4 31B delivers 56% of that net dollar value using just 23% of the energy, achieving approximately 2.5 times the NVJ and 2.8 times the TSJ. Third, across four single-accelerator deployments, Qwen3.6-27B's NVJ varies by a factor of 4.32 and TSJ by 9.27, with B200 leading both. Additionally, one and eight H100s deliver similar net dollar value, but eight reduce completion time by 22% at 3.24 times the energy. Our framework makes output value and expert time saving under an energy budget explicit objectives for improving models, accelerators, and software, while offering a new basis for assessing AI's potential economic effect on occupational work.

We introduce GDPval, a benchmark evaluating AI model capabilities on real-world economically valuable tasks. GDPval covers the majority of U.S. Bureau of Labor Statistics Work Activities for 44 occupations across the top 9 sectors contributing to U.S. GDP (Gross Domestic Product). Tasks are constructed from the representative work of industry professionals with an average of 14 years of experience. We find that frontier model performance on GDPval is improving roughly linearly over time, and that the current best frontier models are approaching industry experts in deliverable quality. We analyze the potential for frontier models, when paired with human oversight, to perform GDPval tasks cheaper and faster than unaided experts. We also demonstrate that increased reasoning effort, increased task context, and increased scaffolding improves model performance on GDPval. Finally, we open-source a gold subset of 220 tasks and provide a public automated grading service at evals.openai.com to facilitate future research in understanding real-world model capabilities.

International trade policies have recently garnered attention for limiting cross-border exchange of essential goods (e.g. steel, aluminum, soybeans, and beef). Since trade critically affects employment and wages, predicting future patterns of trade is a high-priority for policy makers around the world. While traditional economic models aim to be reliable predictors, we consider the possibility that Machine Learning (ML) techniques allow for better predictions to inform policy decisions. Open-government data provide the fuel to power the algorithms that can explain and forecast trade flows to inform policies. Data collected in this article describe international trade transactions and commonly associated economic factors. Machine learning (ML) models deployed include: ARIMA, GBoosting, XGBoosting, and LightGBM for predicting future trade patterns, and K-Means clustering of countries according to economic factors. Unlike short-term and subjective (straight-line) projections and medium-term (aggre-gated) projections, ML methods provide a range of data-driven and interpretable projections for individual commodities. Models, their results, and policies are introduced and evaluated for prediction quality.

Institutional investors have been increasing the allocation of the illiquid alternative assets such as private equity funds in their portfolios, yet there exists a very limited literature on cash flow forecasting of illiquid alternative assets. The net cash flow of private equity funds typically follow a J-curve pattern, however the timing and the size of the contributions and distributions depend on the investment opportunities. In this paper, we develop a benchmark model and present two novel approaches (direct vs. indirect) to predict the cash flows of private equity funds. We introduce a sliding window approach to apply on our cash flow data because different vintage year funds contain different lengths of cash flow information. We then pass the data to an LSTM/ GRU model to predict the future cash flows either directly or indirectly (based on the benchmark model). We further integrate macroeconomic indicators into our data, which allows us to consider the impact of market environment on cash flows and to apply stress testing. Our results indicate that the direct model is easier to implement compared to the benchmark model and the indirect model, but still the predicted cash flows align better with the actual cash flows. We also show that macroeconomic variables improve the performance of the direct model whereas the impact is not obvious on the indirect model.

In this paper we construct an inferential procedure for Granger causality in high-dimensional non-stationary vector autoregressive (VAR) models. Our method does not require knowledge of the order of integration of the time series under consideration. We augment the VAR with at least as many lags as the suspected maximum order of integration, an approach which has been proven to be robust against the presence of unit roots in low dimensions. We prove that we can restrict the augmentation to only the variables of interest for the testing, thereby making the approach suitable for high dimensions. We combine this lag augmentation with a post-double-selection procedure in which a set of initial penalized regressions is performed to select the relevant variables for both the Granger causing and caused variables. We then establish uniform asymptotic normality of a second-stage regression involving only the selected variables. Finite sample simulations show good performance, an application to investigate the (predictive) causes and effects of economic uncertainty illustrates the need to allow for unknown orders of integration.

The GDP of a country is modelled as the relative interaction between two agents - working hours, reflecting the social choice of a population, and Total Factor Productivity, reflecting the collective investment in productivity enhancers. It is shown that a Random Forest model can accu- rately predict the GDP from these two factors. The differences in the choices made by Germany and USA are analysed though Gini importance, SHAP plots and partial dependency. It is shown that the differences in the social structure of the countries are reflected in the relative contribution of working hours and productivity to the GDP.

Interpretability researchers have attempted to understand MLP neurons of language models based on both the contexts in which they activate and their output weight vectors. They have paid little attention to a complementary aspect: the interactions between input and output. For example, when neurons detect a direction in the input, they might add much the same direction to the residual stream ("enrichment neurons") or reduce its presence ("depletion neurons"). We address this aspect by examining the cosine similarity between input and output weights of a neuron. We apply our method to 12 models and find that enrichment neurons dominate in early-middle layers whereas later layers tend more towards depletion. To explain this finding, we argue that enrichment neurons are largely responsible for enriching concept representations, one of the first steps of factual recall. Our input-output perspective is a complement to activation-dependent analyses and to approaches that treat input and output separately.