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on Macroeconomics |
| By: | Philip Coyle (University of Wisconsin-Madison, Department of Economics (Email: pcoyle@wisc.edu)); Naoki Maezono (Graduate School of Public Policy, University of Tokyo (Email: m7046ranpo464@g.ecc.u-tokyo.ac.jp)); Taisuke Nakata (Faculty of Economics and Graduate School of Public Policy, University of Tokyo (Email: taisuke.nakata@e.u-tokyo.ac.jp)); Sebastian Schmidt (European Central Bank, Monetary Policy Research Division, (Email: sebas-tian.schmidt@ecb.int)) |
| Abstract: | We analyze the so-called deflationary equilibrium of the New Keynesian model with an interest rate lower bound when the future course of the economy is uncertain. In the deflationary equilibrium, we find that the rate of inflation is higher at the risky steady state-which takes uncertainty into account-than at the deterministic steady state- which abstracts away from uncertainty. The rate of inflation at the risky steady state can be positive if the target rate set by the central bank is positive. Our theory is consistent with the Japanese experience in the 2010s when the rate of inflation was on average positive while the interest rate lower bound was binding. |
| Keywords: | Effective Lower Bound, Deflationary Equilibrium, Liquidity Trap, Risky Steady State, Uncertainty |
| JEL: | E32 E52 E61 E62 E63 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ime:imedps:25-e-01 |
| By: | Christian R. Proano; Jonas Dix |
| Abstract: | This paper investigates the implications of output gap uncertainty for the conduct of fiscal policy using a small-scale macroeconomic model with boundedly rational agents. Specifically, agents use an adaptive updating mechanism to approximate the unobservable potential output that suffers, similarly to the Hodrick and Prescott (1997), from an end-point bias. This generates an unintendedly procyclical fiscal policy that affects the government’s credibility and by extension the sovereign risk premium. Our simulations highlight the importance of this so-called bond vigilantes channel, as well as of the government’s credibility among financial markets, for the sustainability of government debt and for macroeconomic stability. |
| Keywords: | output gap uncertainty, fiscal policy, sovereign risk, government credibility, bounded rationality |
| JEL: | E62 E63 H63 E32 D84 G12 D83 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-27 |
| By: | Masashige Hamano (School of Political Science and Economics, Waseda University) |
| Abstract: | This paper examines how heterogeneity in product-level tastes and firm-level technologies shapes macroeconomic fluctuations. We develop a general equilibrium model with multiproduct firms and endogenous entry, where firms adjust their product mix in response to aggregate shocks. Calibrated to U.S. data, the model replicates key business cycle moments and shows that low taste dispersion amplifies aggregate volatility by limiting per-product profit adjustments, whereas high dispersion dampens fluctuations. While firm-level productivity granularity also affects volatility, its impact is comparatively minor. A simplified analytical model reinforces these findings, highlighting the critical role of aggregate shock propagation to firm- and product-level fixed costs, as well as heterogeneity in tastes and technologies, in determining macroeconomic volatility. |
| Keywords: | Firm Heterogeneity, Multi-Product Firms, Business Cycles, Product Quality |
| JEL: | D24 E23 E32 L11 L60 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2502 |
| By: | Joel P. Flynn; Georgios Nikolakoudis; Karthik Sastry |
| Abstract: | Modern theories of aggregate supply are built on the foundation that firms set prices and commit to producing whatever the market demands. We remove this strategic restriction and allow firms to choose supply functions, mappings that describe the prices charged at each quantity of production. Theoretically, we characterize firms’ optimal supply function choices in general equilibrium and study the resulting implications for aggregate supply. Aggregate supply flattens under lower inflation uncertainty, higher idiosyncratic demand uncertainty, and less elastic demand. Quantitatively, our theory can rationalize the flattening of aggregate supply during the Great Moderation and steepening during the 1970s and 2020s. |
| JEL: | E31 E32 E50 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33711 |
| By: | Tomohiro Hirano; Joseph E. Stiglitz |
| Abstract: | This paper considers growth and fluctuations in a standard Overlapping Generations (OLG) model with rational expectations, with land (a non-produced asset), credit frictions, and endogenous growth. Under plausible conditions, there can be multiple momentary equilibria, with the multiplicity itself depending on capital and land prices; this can give rise in turn to an infinity of rational expectations trajectories, all operating within bounds that can be calculated. Improvements in technology, while in the short run increasing GDP, may result in the equilibrium being unstable and fragile—and in the long run lead to a stagnation trap with lower GDP. The introduction of land increases the scope for fluctuations; the only rational expectations trajectories may entail fluctuations, with episodic unemployment and dynamic inefficiencies. With credit frictions, expansionary credit and financial policies may lead to lower growth, with the additional funds unevenly going to land speculation, diverting savings from productive investments, results consistent with empirical evidence. The analysis resolves several theoretical puzzles, such as how can land prices be finite with an interest rate less than the growth rate. It shows that even with two state variables, a tractable OLG model can be constructed providing a global analysis of complex dynamics. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cnn:wpaper:25-012e |
| By: | Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Selena Duraković (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Meryem Gökten (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Maciej Grodzicki; Ioannis Gutzianas (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Marcus How; Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw); Niko Korpar (The Vienna Institute for International Economic Studies, wiiw); Dzmitry Kruk; Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Benedetta Locatelli; Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Emilia Penkova-Pearson; Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Oliver Reiter (The Vienna Institute for International Economic Studies, wiiw); Sandor Richter (The Vienna Institute for International Economic Studies, wiiw); Marko Sošić; Bernd Christoph Ströhm (The Vienna Institute for International Economic Studies, wiiw); Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The global economy is set to suffer from new US tariffs, which will remain above pre-2025 levels and drive trade disruptions, financial volatility, and a downgrade in euro area GDP this year. In CESEE, the tariffs and their spillover effects from the EU, especially Germany, will slow regional growth to 2.6% in 2025. Private consumption and investment continue to support growth, but exports will struggle amid the US-led trade war. Political instability, unresolved conflicts, and ongoing risks from the war in Ukraine—compounded by the potential for an unfavourable settlement or Ukrainian collapse—pose additional threats to CESEE’s economic outlook and regional security. |
| Keywords: | CESEE Central and Eastern Europe, economic forecast, Western Balkans, CIS, Ukraine, Russia, Turkey, EU, business cycle, economic sentiment, euro area, convergence, labour markets, unemployment, Russia-Ukraine war, commodity prices, inflation, price controls, trade disruptions, renewable energy, gas, electricity, monetary policy, fiscal policy, impact on Austria |
| JEL: | E20 E21 E22 E24 E32 E5 E62 F21 F31 H60 I18 J20 J30 O47 O52 O57 P24 P27 P33 P52 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wii:fpaper:fc:spring2025 |
| By: | Dimitrios Kanelis; Pierre L. Siklos |
| Abstract: | We combine modern methods from Speech Emotion Recognition and Natural Language Processing with high-frequency financial data to precisely analyze how the vocal emotions and language of ECB President Mario Draghi affect the yields and yield spreads of major euro area economies. This novel approach to central bank communication reveals that vocal and verbal emotions significantly impact the yield curve, with effects varying in magnitude and direction. Our results reveal an important asymmetry in yield changes with positive signals raising German, French, and Spanish yields, while negative cues increase Italian yields. Our analysis of bond spreads and equity markets indicates that positive communication influences the risk-free yield component, whereas negative communication affects the risk premium. Additionally, our study contributes by constructing a synchronized dataset for voice and language analysis. |
| Keywords: | artificial intelligence, asset prices, communication, ECB, high-frequency data, speech emotion recognition |
| JEL: | E50 E58 G12 G14 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-25 |
| By: | Olivia Edwards; Jonathan Meer |
| Abstract: | We examine the impact of encouragement emails sent to high-performing students in a principles of microeconomics course at a large state university, aimed at motivating them to take additional economics courses and consider an economics major or minor. Using a regression discontinuity design, we find some evidence of an increase in the likelihood of enrolling in intermediate microeconomics, especially for first-generation college students and underrepresented minorities, but limited effects on major switching or declaring an economics minor. Our findings suggest sustained interventions may be necessary to produce lasting effects |
| JEL: | I21 I24 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33676 |
| By: | Palligkinis, Spyros |
| Abstract: | I assess the impact of the recent hike in bank lending rates on euro area retail borrowers using a novel microsimulation framework that updates household-level data of a recent representative survey with up-to-date macro-financial information. The key novelty is that existing mortgages are gradually repaid, and new ones are extended, a feature necessary for medium-term simulations in a period of sizable credit growth. Since lending rates have increased, debt servicing has become more demanding, and the simulated share of distressed loans has increased. Effects are stronger for adjustable-rate mortgages, and especially for the most recent among them, but are present in all portfolios. JEL Classification: C1, G2, G51, E52 |
| Keywords: | financial stability, household finance, microsimulations, monetary policy |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253053 |
| By: | Patrick Bayer; Kerwin Kofi Charles; JoonYup Park |
| Abstract: | We introduce the concept of racial capital, defined as the collective material and non- material assets of the racial groups to which a child is exposed while growing up, and examine its potential to explain racial disparities in life outcomes that persist even after accounting for a broad range of parental and neighborhood resources. Estimates for Asian, Black, Hispanic, and White children born around 1980 imply that metro-level racial capital measures: (i) have substantial power to explain racial differences in life outcomes, (ii) sharply close and, in many cases, reverse the sign of racial intergenerational mobility gaps in education, income, and employment, and (iii) matter most when racial dissociation, as measured by residential and marriage segregation, is greatest. In contrast to standard estimates, our empirical framework implies a steady state equilibrium that is characterized by near equality for Black and White Americans. The inclusion of racial capital in the model, however, greatly slows the speed of convergence to the steady state, helping to explain the historically slow speed of racial economic convergence in the United States over the past two centuries. Finally, our framework highlights the complementary way that policies related to racial dissociation and wealth transfers affect the speed of convergence across generations. |
| JEL: | J15 J71 R31 R32 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33690 |
| By: | Kevin Andrew (Pacific Institute for Climate Solutions); Jevan Cherniwchan (McMaster University); Mamoon Kader (Department of Economics, Carleton University); Hashmat Khan (Department of Economics, Carleton University) |
| Abstract: | The technique effect – the reduction in aggregate pollution emissions due to reductions in the pollution intensity of individual industries – is often interpreted as evidence that countries are getting cleaner because of improvements in how goods and services are produced. We extend the standard decomposition used in previous research to show the technique effect may also capture changes in the geography of economic activity. An empirical application to Canada suggests such changes may be economically important. While the technique effect decreased aggregate Canadian pollution intensity by 18.0% between 2009-2021, if the pollution intensity of production had remained fixed, within-industry shifts in production across Canada would have increased aggregate pollution intensity by over 11%. The technique effect decreased Canadian pollution intensity because these within-industry shifts were accompanied by reductions in pollution intensity that were greatest in provinces that received the largest within-industry reallocation of economic activity. |
| Keywords: | Pollution Decomposition, Technique Effect |
| JEL: | Q56 R11 |
| Date: | 2024–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:car:carecp:24-03 |
| By: | Mario R. Pinheiro; Mario J. Pinheiro |
| Abstract: | The proposed framework introduces a novel multidimensional representation of money using tensor analysis, enabling a more granular examination of economic interactions and capital flow. By treating money as a multidimensional entity, this approach allows for detailed tracking and modeling of sectoral, temporal, and agent-based dynamics. This enhanced perspective facilitates the design of adaptive economic policies that can effectively respond to evolving macroeconomic conditions, ensuring resilience and inclusivity in financial systems. Furthermore, the tensor-based modeling framework bridges traditional economic analyses with advanced computational techniques, offering a robust foundation for algorithmic governance and data-driven decision-making in complex economies. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.06286 |
| By: | Yunhua Pei; John Cartlidge; Anandadeep Mandal; Daniel Gold; Enrique Marcilio; Riccardo Mazzon |
| Abstract: | Accurate financial market forecasting requires diverse data sources, including historical price trends, macroeconomic indicators, and financial news, each contributing unique predictive signals. However, existing methods often process these modalities independently or fail to effectively model their interactions. In this paper, we introduce Cross-Modal Temporal Fusion (CMTF), a novel transformer-based framework that integrates heterogeneous financial data to improve predictive accuracy. Our approach employs attention mechanisms to dynamically weight the contribution of different modalities, along with a specialized tensor interpretation module for feature extraction. To facilitate rapid model iteration in industry applications, we incorporate a mature auto-training scheme that streamlines optimization. When applied to real-world financial datasets, CMTF demonstrates improvements over baseline models in forecasting stock price movements and provides a scalable and effective solution for cross-modal integration in financial market prediction. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.13522 |
| By: | Benjamin Christoffersen; Arvid Hoffmann; Zwetelina Iliewa; Lena Jaroszek |
| Abstract: | We examine how and why context influences experiential learning, comparing professional and private-context stock market experiences. We find opposing patterns: In professional contexts, experiential learning exhibits a primacy bias, where sticky early experiences cause an underreaction to subsequent experiences. In contrast, in private contexts, a recency bias causes beliefs to fluctuate excessively over time. To identify the causal effect of context, we leverage (i) panel data on the dynamics of context-related experiences and expectations of finance professionals and (ii) experimental data on investment choices. Our experimental design allows us to identify the cognitive mechanisms underlying the documented context dependence of experience effects. |
| Keywords: | experience effects, finance professionals, reinforcement learning, salience, attention |
| JEL: | D83 D84 G02 G17 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_684 |
| By: | Kym Pram; Burkhard C. Schipper |
| Abstract: | We study the design of efficient mechanisms under asymmetric awareness and information. Unawareness refers to the lack of conception rather than the lack of information. Assuming quasi-linear utilities and private values, we show that we can implement in conditional dominant strategies a social choice function that is utilitarian ex-post efficient when pooling all awareness of all agents without the need of the social planner being fully aware ex-ante. To this end, we develop novel dynamic versions of Vickrey-Clarke-Groves mechanisms in which types are revealed and subsequently elaborated at endogenous higher awareness levels. We explore how asymmetric awareness affects budget balance and participation constraints. We show that ex-ante unforeseen contingencies are no excuse for deficits. Finally, we propose a modified reverse second price auction for efficient procurement of complex incompletely specified projects. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.04382 |
| By: | Fabien Rondeau (Crem - Centre de Recherche sur les Médiations - UL - Université de Lorraine); Yushi Yoshida (University of Shiga Prefecture) |
| Abstract: | With internationally fragmented processes of production via global value chains, value-added components of a country's export include the importer's contributions as well as that of exporters. The exchange rate sensitivity of export price reflects these value-added components. We examine the effect of value-added contributions of exporters and importers on the degree of exchange rate pass-through by focusing on the Japanese import prices by industries. Our results show that exchange rate pass-through increases for industries with a higher contribution of exporting countries' value added and for industries with a lower contribution of the importing country's value added. The differentials in value added among industries help explain the dynamics of exchange rate pass-through at the industry level. |
| Keywords: | Exchange rate pass-through, Global value chains, Value added in trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05035175 |
| By: | Carmen Cantuarias-Villessuzanne (ESPI2R - Laboratoire ESPI2R Research in Real Estate [Lyon] - ESPI - Ecole Supérieure des Professions Immobilières, UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Mettre en place un module d'échange et d'enseignement pluridisciplinaire en économie de l'environnement, géographie et écologie, et créer un réseau de recherche sur la prise en compte de la biodiversité dans le déploiement des infrastructures en Amérique latine. |
| Date: | 2024–11–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05031118 |
| By: | Brodeur, Abel (University of Ottawa); Fiala, Lenka (University of Bergen); Fitzgerald, Jack (Vrije Universiteit Amsterdam); Kujansuu, Essi (University of Innsbruck); Valenta, David (University of Ottawa); Rogeberg, Ole (Ragnar Frisch Centre for Economic Research); Bensch, Gunther (RWI) |
| Abstract: | Vlassopoulos et al. (2024) find that after providing two hours of telephone counseling over three months, a sample of Bangladeshi women saw significant reductions in stress and depression after ten months. We find three anomalies. First, estimates are almost entirely driven by reverse-scored survey items, which are handled inconsistently both in the code and in the field. Second, participants in this experiment are reused from multiple prior experiments conducted by the paper’s authors, and estimates are extremely sensitive to the experiment from which participants originate. Finally, inconsistencies and irregularities in raw survey files raise doubts about the data. |
| Keywords: | reproduction, replication, mental health, COVID-19 |
| JEL: | B41 C12 I12 I18 J16 O12 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17782 |
| By: | Eric Cuijpers |
| Abstract: | This paper examines the role of regulation on how sovereign risk shocks affect bank balance sheets using a panel local projection approach and a newly created dataset of sovereign risk shocks for a sample of Eurozone banks. The empirical results show the existence of a regulatory precondition to sovereign risk transmission: banks that receive a favorable regulatory treatment in the form of a zero percent risk weight tend to increase home sovereign debt holdings and decrease lending in response to sovereign risk shocks. In contrast, comparable banks that face a stricter regulatory treatment, which requires them to calculate positive risk weights, do not exhibit this behavior. The results suggest that reforming the regulatory treatment of sovereign debt could mitigate the transmission of sovereign risk to bank balance sheets. |
| Keywords: | Banks; Government Policy and Regulation; Sovereign Debt |
| JEL: | G21 G28 H6 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:834 |
| By: | Guglielmo Maria Caporale; Luis Alberiko Gil-Alana; Leyre Muñoz |
| Abstract: | This paper examines the stochastic behaviour of the number of earthquakes (in total and also classified by magnitude) and stock market log prices and returns in the case of Japan over the period from January 2009 to February 2024 using fractional integration methods. Their linkages are then investigated by means of regression analysis. The results indicate that the former variable exhibits short-memory, I(0) behaviour. By contrast, stock market prices appear to be an I(d), fractional integration process, with d less than 1. Since the orders of integration of the two variables are different, we treat seismic events as exogenous in the context of a regression model with stock returns. The findings suggest that earthquakes have a statistically significant, though relatively small, negative impact on the Nikkei 225 index. More specifically, there exists a negative relationship between the magnitude and number of earthquakes and monthly stock returns. This suggests that seismic activity creates uncertainty in the market, which in turn affects its performance. |
| Keywords: | stock market prices, earthquakes, Japan, persistence, fractional integration. |
| JEL: | C22 C58 G14 Q54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11822 |