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on Central Banking |
| By: | Artyom Ghazaryan (Central Bank of Armenia); Anahit Matinyan (Central Bank of Armenia); Gevorg Minasyan (Central Bank of Armenia); Aleksandr Shirkhanyan (Central Bank of Armenia) |
| Abstract: | Quantifying the transmission of monetary policy in emerging markets remains a significant challenge due to data scarcity and structural shifts. This study addresses these constraints by identifying monetary policy shocks in Armenia through a dual approach: a high-frequency method following Bu et al. (2021) and a modified narrative strategy adapted from Romer & Romer (1989). We propose a specific modification to the narrative approach that allows identification even when qualitative information is limited, thereby extending the utility of narrative methods to economies outside the advanced-market spectrum. Despite their distinct methodologies, the shocks identified by both approaches exhibit qualitative consistency. Using these shocks within a Local Projection framework, we estimate the impulse responses of the economic activity index, inflation, the real effective exchange rate, and short-term government bond yields. Our findings indicate that while financial variables respond immediately and sharply to monetary policy, the effect on inflation materializes with a lag. These findings provide a refined empirical basis for understanding monetary policy propagation in Armenia and offer a methodological roadmap for identification in data-limited environments. |
| Keywords: | Monetary Policy; Shock Identification; High-Frequency; Narrative; Monetary Policy Transmission |
| JEL: | E52 E58 E65 E31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ara:wpaper:wp-2026-01 |
| By: | Joshua Aizenman; Jamel Saadaoui; Gazi Salah Uddin; Naoki Yago |
| Abstract: | This paper studies the role of foreign exchange and gold reserves in mitigating the US monetary policy spillovers to exchange rates at times of geopolitical fragmentation and de-dollarization. US dollar reserves mitigate depreciation driven by US monetary tightening, while non-dollar reserves do not. Gold reserves are also associated with smaller exchange-rate responses, though less strongly than dollar reserves, suggesting novel complementarity between dollar and gold reserves. Moreover, the estimated effects of dollar and gold reserves are concentrated in countries without swap and repo lines. These findings are consistent with recent large-scale purchases and sales of gold reserves by emerging economies amid sanctions-related restrictions and geopolitical concerns about access to dollar liquidity. Our results suggest that not only the aggregate volume but also the composition of foreign exchange and gold reserves and access to dollar liquidity facilities are empirically relevant for exchange-rate responses to US monetary shocks. Finally, we exploit cross-country heterogeneity and show that countries with large dollar exposure exhibit smaller exchange-rate responses when dollar and gold reserve holdings are larger. |
| JEL: | E52 F31 F32 F41 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35337 |
| By: | Bartels, Bernhard; Eichengreen, Barry; Schumacher, Julian; Weder di Mauro, Beatrice |
| Abstract: | Unprecedented balance sheet expansion in recent years has resulted in heightened financial risk for central banks, reflected initially in higher profits and subsequently in significant losses. Combining data on central bank balance sheets with market data on asset prices, we provide evidence on the evolution and determinants of financial risk-taking by 18 advanced economy central banks. Based on the estimated Value at Risk (VaR), we document that average central bank balance sheet risk increased to about 3 percent of GDP. Central banks took more risk in periods of low policy rates, less expansionary fiscal policies, and more favorable growth prospects. Less independent central banks were more risk averse than their more independent peers, contrary to the fiscal dominance view. |
| Keywords: | Monetary policy; Central bank independence |
| JEL: | E52 E58 E63 G32 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21570 |
| By: | Goodhart, Charles; Lastra, Rosa |
| Abstract: | This paper provides a critical approach to the current political and economic debate on the state of financial regulation. It discusses why setting capital regulatory requirements causes tensions between bank managers and shareholders on the one hand and taxpayers on the other, leading to a Minsky cycle. It also re-imagines the central bank’s Lender of Last Resort Role, with the aspiration that the central bank becomes again “Leader of Last Resort†. The paper also considers bank competitiveness and its interaction with regulation and takes into account the counter-regulation movement in the US. |
| Keywords: | Financial regulation; Capital; Liquidity; Central banking; Lender of last resort |
| JEL: | E44 E58 G18 G28 G38 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21590 |
| By: | Boris Hofmann; Matthias Kaldorf; Matthias Rottner |
| Abstract: | We analyse the macroeconomic impact of stablecoins using a quantitative macroeconomic model. Stablecoins influence the economy through two opposing channels: (i) a bank lending channel, as household demand for stablecoins raises deposit rates, increases bank funding costs, and reduces loan supply; and (ii) a fiscal space channel, as stablecoin issuers' demand for Treasury bills lowers sovereign borrowing costs, expands fiscal space for tax reductions or higher spending. Calibrated to the U.S., the model predicts that widespread stablecoin adoption modestly reduces long-run output, as the bank lending channel outweighs the fiscal space channel. However, the overall long-run impact may shift under alternative scenarios about stablecoin reserve asset regulation, the level of public debt and the strength of foreign demand. Moreover, the fiscal space channel activates more quickly than the bank lending channel, resulting in significantly positive short-term output effects during the transition phase. Additionally, the model suggests a strengthening of monetary policy transmission via the bank lending channel. |
| Keywords: | stablecoins, macroeconomic model, regulation, credit supply, fiscal policy, monetary policy |
| JEL: | E42 E43 G12 G23 G28 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1363 |
| By: | Etienne Fakaba Sissoko; Khalid Dembélé (Université des sciences sociales et de gestion de Bamako - USSGB - Université des sciences sociales et de gestion de Bamako) |
| Abstract: | Digital monetary infrastructures are transforming the institutional architecture of money. In the West African Economic and Monetary Union (WAEMU), the Central Bank of West African States (BCEAO) has moved toward interoperable instant payments through the PI-SPI platform, while policy discussions on central bank digital currencies have opened the question of a possible regional retail instrument, here designated as the e-CFA. This article examines whether these instruments should be read as neutral technical innovations, as mechanisms of financial inclusion, or as institutional devices that redistribute monetary power. The analysis combines monetary institutionalism, banking intermediation theory and critical approaches to algorithmic regulation. It uses a qualitative documentary method and a comparative reading of three CBDC experiences: China's e-CNY, Nigeria's eNaira and the Bahamian Sand Dollar. The article argues that the core issue is not digitization itself, but the governance of programmability, transaction metadata, technical infrastructure and the future role of banks. PI-SPI can reduce fragmentation and transaction delays, but it also creates a common operational locus for payment flows. A direct retail e-CFA, if designed without tiering, holding limits, legal safeguards and bank participation, could intensify deposit migration and weaken the financing capacity of commercial banks. Conversely, a regulated two-tier design could requalify banks as trusted interfaces, credit providers and value-added service institutions. The article contributes the concept of distributed monetary sovereignty: a model in which public monetary authority is preserved while algorithmic rules, data governance and operational infrastructures remain legally bounded, auditable and institutionally plural. |
| Keywords: | financial inclusion JEL codes: E42, O55, O33, G21, E51, algorithmic governance, banking disintermediation, monetary sovereignty, WAEMU, BCEAO, e-CFA, PI-SPI, central bank digital currency, central bank digital currency PI-SPI e-CFA BCEAO WAEMU monetary sovereignty banking disintermediation algorithmic governance financial inclusion JEL codes: E42 E51 G21 O33 O55 |
| Date: | 2026–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05607364 |
| By: | Mark Toth |
| Abstract: | This paper analyzes how the spatial structure of housing affects monetary policy transmission. I integrate spatial structure into a monetary business cycle model with housing. Spatial structure matters economically through households’ location prefer ences and residential externalities. These two features are reflected in two measures of residential concentration. Higher residential concentration dampens consumption responses to interest rate changes through housing demand. In an empirical analysis, I create model-consistent measures of residential concentration for US and Eurozone regions, using geospatial data based on satellite imagery. I empirically validate the model’s predictions in a state-dependent local projections framework. My paper identifies residential concentration as a fundamental determinant of monetary policy transmission. |
| Keywords: | Monetary policy, business cycle, spatial, housing demand. |
| JEL: | E32 E52 R12 R21 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_762 |
| By: | Bence Bardóczy; Gideon Bornstein; Sergio Salgado |
| Abstract: | This paper studies how labor market power affects the transmission of monetary policy. Using administrative U.S. Census data, we show that firms with high monopsony power—defined as those accounting for over 10 percent of the local wage bill—respond less to monetary policy in terms of their wage bill and employment. We then develop a New Keynesian model with heterogeneous firms and oligopsonistic competition to interpret these findings. Wage stickiness combined with firms’ labor market power is key to generating the heterogeneous responses that we document. Our model highlights two channels through which oligopsony shapes the aggregate effects of monetary policy: partial passthrough and misallocation. Calibrated to U.S. labor markets, the model implies that the decline in labor market power since the 1980s has increased the output response to monetary policy by about 10 percent and accounts for about 15 percent of the estimated flattening of the Phillips curve. |
| JEL: | E0 E31 E52 J42 L13 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35335 |
| By: | Marie-Hélène Gagnon (Université Laval [Québec]); Céline Gimet (Aix Marseille Univ, CNRS, AMSE, Marseille, France); Uros Herman (Aix Marseille Univ, CNRS, AMSE, Marseille, France) |
| Abstract: | We study the effects of macroprudential policies on income and wealth inequality across 18 Eurozone countries over the period 2000–2024. We focus on the financially constrained Wealthy Hand-to-Mouth households for whom the regulation changes are likely to be consequential. We present insights from a stylised two-economy incomplete-markets model where the heterogeneity in household portfolio composition shapes the effects on inequalities of borrower-based regulation. Using panel regressions and local projections, we test empirically the model's predictions that macroprudential policies matter for inequalities and their effects differ depending on the concentration of housing or pension assets in the Wealthy Hand-to-Mouth households' illiquid portfolios. The empirical findings underscore that in housing dominant economies, the reduction of the LTV ratio improves wealth inequalities in the short term through a collateral-leverage mechanism, whereas it persistently widens wealth disparities in pension-dominant economies through credit exclusion effects. |
| Keywords: | Loan-to-value regulation; Macroprudential policy; Eurozone; Local projections; Wealthy hand-to-mouth; Heterogeneity; Portfolio; Wealth inequalities |
| JEL: | D31 E21 E44 G28 R21 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2617 |
| By: | Ulrike Malmendier; Stefan Nagel; Ulrike M. Malmendier |
| Abstract: | Empirical evidence commonly cited as indicating that inflation expectations have become better anchored includes the declining sensitivity of expectations to inflation surprises over time, particularly around the adoption of inflation targeting. These patterns are typically attributed to the influence of explicit or implicit inflation targets on inflation expectations. We show that this evidence is consistent with a model of experience-based learning in which individuals learn solely from their life-time history of realized inflation, without anchoring their expectations to an announced inflation target. In this model, the prolonged experience of low short-run inflation persistence in the pre-COVID decades renders long-run expectations insensitive to inflation surprises, matching the patterns observed in empirical anchoring tests. A unique prediction of the experience-based learning model is also borne out in the data: the decline in surprise sensitivity since the 1980s is strongest among younger individuals. The memory of low inflation persistence experiences further explains why long-run inflation expectations remained stable in the face of the post-COVID inflation surge. At the same time, simulations indicate that the sensitivity of long-run expectations to inflation surprises would rise sharply if individuals were to experience another sustained episode of highly persistent inflation. Overall, long-run inflation expectations may be less firmly anchored than commonly believed. |
| Keywords: | Inflation expectations, anchoring, monetary policy, learning from experience |
| JEL: | E31 E52 E71 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12750 |
| By: | Kumar, Naveen |
| Abstract: | This paper provides novel subnational evidence on the inflationary effects of climate shocks in India using monthly data for 21 states during 2013–2023 and panel local projections. Four main findings emerge. First, temperature shocks persistently raise both headline and food inflation, with no evidence of mean reversion over the medium run. Second, these effects are heterogeneous, with stronger responses in rural areas, post-monsoon months, and agriculture-dependent states. Third, the response is asymmetric: warm anomalies drive most of the inflationary effect through agricultural supply disruptions, while cold anomalies remain statistically insignificant. Fourth, flexible inflation targeting weakens, but does not eliminate, climate induced inflationary pressures. |
| Date: | 2026–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:uj8s3_v1 |
| By: | Thomas Lustenberger; Enzo Rossi; Anna Zeitz |
| Abstract: | Drawing on a novel dataset of more than 10, 000 speeches from 1914 to 2024, we track the evolution of Federal Reserve communication and identify three stylized facts. (1) Although the overall volume of speeches has declined over the past decade, the composition of Fed communication has remained notably consistent for forty years, with Federal Reserve Bank (FRB) presidents accounting for the majority of public engagements. Variation in communicative participation is driven primarily by dispositional factors, including professional background, gender, and other speaker-specific idiosyncrasies, rather than the particular time frame in which the speeches were delivered. (2) While governors' communication reacts to financial stability, FRB presidents' schedules remain decoupled from both regional shifts in their districts and broader macroindicators. (3) A "complexity paradox" has emerged: while the syntactic structure simplifies during crises, the conceptual density increases. When adjusted for abstractness, the communication patterns of governors and FRB presidents appear remarkably similar. |
| Keywords: | Federal Reserve System, Central bank communication, Content analysis, Language complexity |
| JEL: | E52 E58 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2026-06 |
| By: | Bono Beriša (University of St Andrews Business School, UK); Ivan Mužić and Jurica Zrnc (Faculty of Economics and Business, University of Rijeka); Jurica Zrnc (Croatian National Bank) |
| Abstract: | We study the effects of a government initiative aimed at increasing the passthrough of monetary tightening to deposit rates. A large state-owned bank responded first to the initiative with a sharp and unexpected deposit rate increase. Competing banks quickly followed, albeit with substantial heterogeneity. The resulting deposit-rate shock led to a sizable increase in term deposits, driven primarily by ex-ante liquidity-rich individuals. Using matched deposit and residential real-estate purchase data at the individual level, we document a strong portfolio-rebalancing effect away from real estate. At the same time, consumption remains unchanged. Despite the sizable deposit reallocation, the shock does not affect the supply of loans to firms or households, consistent with high pre-existing bank liquidity. This setting provides a unique opportunity to uncover the effects of increased deposit competition and the ensuing deposit-rate shock on household portfolios, consumption, and bank lending. |
| Date: | 2026–06–17 |
| URL: | https://d.repec.org/n?u=RePEc:hnb:wpaper:75 |
| By: | Elton Beqiraj; Giuseppe Ciccarone; Giovanni Di Bartolomeo |
| Abstract: | Most comparative analyses explaining the 1970s and 1990s/2000s inflation performance, focusing on good/bad policy versus good/bad luck, assume that price- and wage-setting institutions remained constant. While studies acknowledge institutional changes, they typically overlook sources of intrinsic persistence of wage and price inflation. This paper contributes to this ongoing debate by revisiting the U.S. business cycle. We account for time variations in pricing and wage-setting behavior due to institutional changes and for switches in inflation-intrinsic persistence, which we formally represent as changes in the shape of the hazard function. By analyzing how policy and shocks interact within different institutional settings in our model economy, we trace the existing contrasting evidence back to an identification problem that biases regime estimates and leads to misleading interpretations. Once we account for persistence switches, the empirical outcomes strongly support, but refine, the luck interpretation over the policy interpretation. The 1970s were characterized not only by larger shocks but also by more pronounced transmission mechanisms of supply shocks, driven by the price- and wage-setting institutions of the time. Additionally, the data suggest reinterpreting monetary regimes more in line with central bankers' views and show that structural changes in price and wage adjustments play essential, opposing roles in the Great Inflation. Finally, our analysis yields two important general findings. First, it emphasizes the critical role that changes in price- and wage-setting institutions play in influencing the propagation of shocks. Second, it validates the use of a generalized time-dependent rule to represent nominal rigidities. |
| Keywords: | duration-dependent wage adjustments, intrinsic inflation persistence, DSGE models, hybrid Phillips curves, Markov-switching |
| JEL: | E24 E31 E32 C11 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00204 |
| By: | Mike Djesa (Faculty of Economics) |
| Abstract: | This study examines the macroeconomic drivers of corporate investment in the United Kingdom using a multivariate time-series framework. Focusing on five key variables-interest rates, inflation, GDP growth, exchange rates, and corporate profits-the analysis investigates their combined effects on aggregate corporate investment using annual data from 1990 to 2022. By concentrating on macroeconomic determinants rather than firm-level factors, the study provides evidence on how monetary and real-sector conditions shape investment behavior in a mature, market-based economy. The contribution of this study lies in integrating long-run macroeconomic trends within a multivariate econometric framework that captures interactions between corporate profits, inflation, and exchange-rate movements in the UK over three decades of evolving policy regimes. Given the mixed order of integration among the variables, the study employs an Autoregressive Distributed Lag (ARDL) bounds testing approach to examine long-run relationships and short-run adjustment dynamics. OLS and Two-Stage Least Squares (2SLS) estimates are retained as benchmark and robustness checks. The results indicate that higher interest rates exert a significant positive effect on corporate investment, consistent with the endogenous and pro-cyclical nature of UK monetary policy. Corporate profits have a strong positive influence, highlighting the importance of internal finance. Inflation exhibits a negative and significant impact, while GDP growth shows a weak accelerator effect and exchange-rate movements are statistically insignificant. These findings underscore the dominance of profitability and policy credibility in driving UK investment and offer relevant insights for sustaining long-term capital formation. |
| Keywords: | corporate investment, United Kingdom, monetary policy, interest rates, inflation, exchange rate, corporate profits, ARDL bounds testing, 2SLS |
| JEL: | E22 E52 G31 |
| Date: | 2026–06–09 |
| URL: | https://d.repec.org/n?u=RePEc:boh:wpaper:03_2026 |