nep-mon New Economics Papers
on Monetary Economics
Issue of 2023‒11‒27
thirty-two papers chosen by
Bernd Hayo, Philipps-Universität Marburg

  1. Robust Real Rate Rules By Holden, Tom D.
  2. An Alternative Measure of Core Inflation: The Trimmed Persistence PCE Price Index By John O'Trakoun
  3. Monetary Policy Surprises and Inflation Expectations By Yu-Ting Chiang; Jesse LaBelle
  4. Unconventional Policies in State-Contingent Liquidity Traps By William Tayler; Roy Zilberman
  5. Perceptions about Monetary Policy By Michael D. Bauer; Carolin Pflueger; Adi Sunderam
  6. What Do Components of Key Inflation Measures Say about Future Inflation? By Michael W. McCracken; Trần Khánh Ngân
  7. The role of expectations for currency crisis dynamics - The case of the Turkish lira By Beckmann, Joscha; Czudaj, Robert L.
  8. How Inflation and Relative Price Increases Differ By Guillaume Vandenbroucke
  9. Will High Inflation Persist? By Michael W. McCracken; Trần Khánh Ngân
  10. The Relationship between Consumption Growth and Inflation By Juan M. Sanchez
  11. Financial shock transmission to heterogeneous firms: the earnings-based borrowing constraint channel By Chiţu, Livia; Grothe, Magdalena; Schulze, Tatjana; Van Robays, Ine
  12. Global Inflation Uncertainty and its Economic Effects By Juan M. Londono; Sai Ma; Beth Anne Wilson
  13. Firming up price inflation By Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Gregory Thwaites; Ivan Yotzov
  14. U.S. Monetary Policy and Fluctuations of International Bank Lending By Avdjiev, Stefan; Hale, Galina
  15. The Effect of Monetary Policy & Macroprudential Policy and Their Interaction on Bank Risk-Taking in Indonesia By Hero Wonida; Sekar Utami Setiastuti
  16. Opportunistic Political Central Bank Coverage: Does media coverage of ECB's Monetary Policy Impacts German Political Parties' Popularity? By Hugo Oriola; Matthieu Picault
  17. The CO2 content of the TLTRO III scheme and its greening By Senni, Chiara Colesanti; Pagliari, Maria Sole; van 't Klooster, Jens
  18. Firming up price inflation By Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Gregory Thwaites; Ivan Yotzov
  19. The Different Paths of Central Bank Scientization: The Case of the Bank of England By Goutsmedt, Aurélien; Sergi, Francesco; Claveau, François; Fontan, Clément
  20. Monetary shocks and house prices in Europe By Alexis Pourcelot; Alain Coen
  21. Scenarios for Inflation in 2023: Base Effects in Action By Kevin L. Kliesen
  22. The Influence of Fiscal and Monetary Policies on the Shape of the Yield Curve By Yoosoon Chang; Fabio Gomez-Rodriguez; Christian Matthes
  23. That’s what she said: An Empirical Investigation on the Gender Gap in Inflation Expectations By Lovisa Reiche
  24. Balancing Volatility and Returns in the Czech National Bank's Foreign Exchange Portfolio By Tomas Adam; Ales Michl; Michal Skoda
  25. The Societal Costs of Inflation and Unemployment By Popova, Olga; See, Sarah Grace; Nikolova, Milena; Otrachshenko, Vladimir
  26. Do Household Expectations Help Predict Inflation? By Mr. Luis Brandão-Marques; Mr. Gaston Gelos; Mr. David J Hofman; Ms. Julia Otten; Gurnain Kaur Pasricha; Zoe Strauss
  27. Understanding the Recent Behavior of Inflation By Fernando M. Martin
  28. Inflation Is Still High and Widespread By Fernando M. Martin
  29. Tracking Wage Inflation in Real Time By Maximiliano Dvorkin; Maggie Isaacson
  30. Which Households Are Most Exposed to the Inflation “Tax”? By Yu-Ting Chiang; Jesse LaBelle
  31. Bank Deposits as {\em Money Quanta} By Fabio Bagarello; Biagio Bossone
  32. Demographics and Real Interest Rates Across Countries and Over Time By Carlos Carvalho; Andrea Ferrero; Felipe Mazin; Fernanda Nechio

  1. By: Holden, Tom D.
    Abstract: Central banks wish to avoid self-fulfilling fluctuations. Interest rate rules with a unit response to real rates achieve this under the weakest possible assumptions about the behaviour of households and firms. They are robust to household heterogeneity, hand-to-mouth consumers, non-rational household or firm expectations, active fiscal policy and to any form of intertemporal or nominal-real links. They are easy to employ in practice, using inflation-protected bonds to infer real rates. With a time-varying short-term inflation target, they can implement an arbitrary inflation path, including optimal policy. This provides a way to translate policy makers’ desired path for inflation into one for nominal rates. US Federal Reserve behaviour is remarkably close to that predicted by a real rate rule, given the desired inflation path of US monetary policy makers. Real rate rules work thanks to the key role played by the Fisher equation in monetary transmission.
    Keywords: robust monetary rules, determinacy, Taylor principle, inflation dynamics, monetary transmission mechanism
    JEL: E52 E43 E31
    Date: 2023
  2. By: John O'Trakoun
    Abstract: I introduce the "trimmed persistence PCE, " a new measure of core inflation in which component prices are weighted according to the time-varying persistence of their price changes. The components of trimmed persistence personal consumption expenditures (PCE) display less tendency to mechanically pass-through the level of the prior period's inflation to the current period; thus, the impact of the current stance of monetary policy and real economic factors are more likely to be visible in recent trimmed persistence inflation compared to headline inflation. Trimmed persistence inflation performs comparably to existing popular measures of core inflation in terms of volatility and relationship with economic slack. Model selection procedures confirm trimmed persistence PCE contributes additional information to inflation forecasting models when stacked against other popular measures of core inflation. Applying the new index in a Taylor rule analysis suggests the Fed's aggressive path of federal funds rate hikes during the pandemic may have achieved appropriately restrictive levels by the fourth quarter of 2022, clearing the way for more measured policy adjustment thereafter as risks of policy overshooting became more salient.
    Keywords: inflation; core inflation; inflation persistence; time-varying; inflation dynamics
    JEL: C22 E31 E37 E52
    Date: 2023–11
  3. By: Yu-Ting Chiang; Jesse LaBelle
    Abstract: The private sector may slightly underestimate the short-term impact of monetary policy surprises on inflation but may predict longer-term effects fairly well.
    Keywords: monetary policy; inflation
    Date: 2022–10–13
  4. By: William Tayler; Roy Zilberman
    Abstract: We characterize optimal unconventional monetary and fiscal-financial policies within a tractable New Keynesian model featuring a monetary policy cost channel. State-dependent deposit tax-subsidy interventions remove the zero lower bound constraint on the nominal interest rate, thereby minimizing output and price fluctuations following both supply-driven and demand-driven liquidity traps. Specifically, deposit subsidies circumvent the inflation-output trade-off arising from stagflationary shocks by enabling the implementation of negative nominal interest rates. Moreover, deposit taxes facilitate modest interest rate hikes to escape deflationary traps. Notably, discretionary and commitment policies with deposit taxes / subsidies deliver virtually equivalent welfare gains, rendering time-inconsistent forward guidance schedules unnecessary.
    Keywords: deposit tax-subsidy, cost channel, optimal policy, discretion vs. commitment, zero lower bound
    JEL: E32 E44 E52 E58 E63
    Date: 2023
  5. By: Michael D. Bauer; Carolin Pflueger; Adi Sunderam
    Abstract: We estimate perceptions about the Federal Reserve’s monetary policy rule from panel data on professional forecasts of interest rates and macroeconomic conditions. The perceived dependence of the federal funds rate on economic conditions varies substantially over time, including over the monetary policy cycle. Forecasters update their perceptions about the Fed’s policy rule in response to monetary policy actions, measured by high-frequency interest rate surprises, suggesting that they have imperfect information about this rule. Monetary policy perceptions matter for monetary transmission, as they affect the sensitivity of interest rates to macroeconomic news, term premia in long-term bonds, and the response of the stock market to monetary policy surprises. A simple learning model with forecaster heterogeneity and incomplete information about the policy rule motivates and explains our empirical findings.
    Keywords: FOMC; monetary policy rules; survey forecasts; beliefs
    JEL: E43 E52 E58
    Date: 2023–10–25
  6. By: Michael W. McCracken; Trần Khánh Ngân
    Abstract: A new analysis suggests that the food expenditures category of the consumer price index could be a useful signal of future headline inflation.
    Keywords: food expenditures; Consumer Price Index (CPI); headline inflation; inflation
    Date: 2023–05–25
  7. By: Beckmann, Joscha; Czudaj, Robert L.
    Abstract: This paper examines whether and how expectations have contributed to the turbulent path of the Turkish lira since 2008. We derive uncertainty measures surrounding gross domestic product (GDP) growth, inflation, the interest rate, and exchange rates based on survey data from Consensus Economics. Our results illustrate that forecasts have affected realized exchange rates and stock market returns via increased uncertainty. We also show that expectations regarding monetary policy have changed throughout the sample period. In line with, a gradual adjustment of expectations professionals have accounted for the violation of the Taylor rule.
    Keywords: disagreement, expectations, foreign exchange, survey data, Taylor rule, Turkish lira, uncertainty
    Date: 2023
  8. By: Guillaume Vandenbroucke
    Abstract: Rising prices don’t necessarily mean a rise in overall inflation. This blog post explains the difference between increases in relative prices and the inflation rate.
    Keywords: inflation; relative prices
    Date: 2023–02–13
  9. By: Michael W. McCracken; Trần Khánh Ngân
    Abstract: The answer to when inflation will revert to its long-run average likely depends on whether we are still in the “Great Moderation” regime of less volatile inflation.
    Keywords: inflation
    Date: 2023–01–10
  10. By: Juan M. Sanchez
    Abstract: An analysis examines whether inflation since April 2021 can be linked to consumption growth and whether monetary policy tightening is working to reduce such growth.
    Keywords: inflation; consumption growth; monetary policy
    Date: 2022–12–29
  11. By: Chiţu, Livia; Grothe, Magdalena; Schulze, Tatjana; Van Robays, Ine
    Abstract: We study the heterogeneous impact of jointly identified monetary policy and global riskshocks on corporate funding costs. We disentangle these two shocks in a structural BayesianVector Autoregression framework and investigate their respective effects on funding costsof heterogeneous firms using micro-data for the US. We tease out mechanisms underlyingthe effects by contrasting financial frictions arising from traditional asset-based collateralconstraints with the recent earnings-based borrowing constraint hypothesis, differentiatingfirms across leverage and earnings. Our empirical evidence strongly supports the earnings-basedborrowing constraint hypothesis. We find that global risk shocks have stronger andmore heterogeneous effects on corporate funding costs which depend on firms’ positionwithin the earnings distribution. JEL Classification: G12, E43, E52
    Keywords: corporate spreads, earnings-based borrowing constraint, global risk shocks, heterogeneous firms, monetary policy shocks
    Date: 2023–11
  12. By: Juan M. Londono; Sai Ma; Beth Anne Wilson
    Abstract: Policymakers, including Federal Open Market Committee (FOMC) participants, have been stressing the elevated level of uncertainty, especially related to inflation, and the challenge this poses for monetary policy. As seen in Figure 1, with few exceptions, FOMC participants see the level of uncertainty around their forecasts for core PCE inflation as high, compared to the average over the past 20 years.
    Date: 2023–09–25
  13. By: Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Gregory Thwaites; Ivan Yotzov
    Abstract: We use data from a large panel survey of UK firms to analyze the economic drivers of price setting since the start of the Covid pandemic. Inflation responded asymmetrically to movements in demand. This helps to explain why inflation did not fall much during the negative initial pandemic demand shock. Energy prices and shortages of labor and materials account for most of the rise during the rebound. Inflation rates across firms have become more dispersed and skewed since the start of the pandemic. We find that average price inflation is positively correlated with the dispersion and skewness of the distribution. Finally, we also introduce a novel measure of subjective inflation uncertainty within firms and show how this has increased during the pandemic, continuing to rise in 2022 even as sales uncertainty dropped back.
    Keywords: price inflation, data, panel survey, UK firms, Covid, pandemic, energy prices
    Date: 2022–12–15
  14. By: Avdjiev, Stefan; Hale, Galina
    Date: 2023–10–29
  15. By: Hero Wonida (Bank Indonesia); Sekar Utami Setiastuti (Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada)
    Abstract: We use the Indonesian quarterly bank-level data from 2009Q1 to 2021Q1 to investigate the effect of monetary policy, macroprudential policy, and the interaction between both policies on bank risk-taking in Indonesia. Several important results emerge. Firstly, we find evidences of the existence of risk-taking channels of the monetary policy in Indonesia, and that both bank size and level of capital have a relatively significant negative impact on bank risk-taking. Secondly, macroprudential policy tightening lowers bank risk-taking. We also find that the interaction between macroprudential policy and monetary policy tightening lowers risk-taking.
    Keywords: Monetary policy, Macroprudential policy, Bank risk-taking
    JEL: G21 G28 G32
    Date: 2023–08
  16. By: Hugo Oriola; Matthieu Picault
    Abstract: We define the concept of Opportunistic Political Central Bank Coverage (OPCBC) which corresponds to an opportunistic modification of parties’ popularity induced by media coverage of monetary policy. More precisely, we suppose that the treatment of monetary policy in the press has a significant impact on the popularity of national political parties prior to an election. To investigate on the existence of this concept, we collect monthly popularity ratings for 6 German political forces on the period between January 2005 and December 2021. Then, we measure media coverage through a textual analysis on more than 26.000 press articles from 6 different German newspapers. Finally, we estimate popularity functions for these German political parties in which we introduce our textual measures interacted with a dummy taking the value 1 in the month prior to an election. Our analysis underlines the existence of OPCBCs in Germany in the month preceding federal elections and elections to the European Parliament. This result is robust to the use of a SUR model, alternative pre-electoral periods, the implementation of two different tone analysis, the use of Google Trends data and the interest of the public for members of the ECB. Finally, it seems that the existence of OPCBCs depend on the partisanship of the media studied.
    Keywords: European Central Bank; Press; Textual Analysis; Tone Analysis; Elections; Political Cycles; Germany
    JEL: E58 D72 P35
    Date: 2023
  17. By: Senni, Chiara Colesanti; Pagliari, Maria Sole; van 't Klooster, Jens
    Abstract: This paper investigates the climate impact of central bank refinancing operations, with a focus the ECB’s TLTRO III program. Notably, we construct a novel database that combines i) confidential data on loans granted by EU banks to non-financial corporations; ii) confidential data on TLTRO III participation and iii) data on sectoral emissions. We find that the emissions content of bank loans granted over the TLTRO III reference period amount to 8% of overall Euro Area 2019 emissions and that more than 80% of total cumulated loans issued in the reference period was directed towards polluting companies. We then investigate the effectiveness of a green credit easing scheme via a general equilibrium model. Our findings are twofold: first, the central bank policy can increase the costs for lending to polluting companies, thus re-directing loans to less-polluting firms; second, the financial stability implications of such a policy should be carefully considered. Finally, we address legal and operational challenges to such a policy by outlining three alternative ways of implementing a “green” TLTRO programme.
    Keywords: TLTRO; CO2 emissions; transition risk; monetary policy; financial stability
    JEL: E40 E50 Q50 Q54
    Date: 2023–05–31
  18. By: Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Gregory Thwaites; Ivan Yotzov
    Abstract: We use data from a large panel survey of UK firms to analyze the economic drivers of price setting since the start of the Covid pandemic. Inflation responded asymmetrically to movements in demand. This helps to explain why inflation did not fall much during the negative initial pandemic demand shock. Energy prices and shortages of labor and materials account for most of the rise during the rebound. Inflation rates across firms have become more dispersed and skewed since the start of the pandemic. We find that average price inflation is positively correlated with the dispersion and skewness of the distribution. Finally, we also introduce a novel measure of subjective inflation uncertainty within firms and show how this has increased during the pandemic, continuing to rise in 2022 even as sales uncertainty dropped back.
    Keywords: price setting, energy prices, labour shortages, Covid
    Date: 2023–05–15
  19. By: Goutsmedt, Aurélien (UC Louvain - F.R.S-FNRS); Sergi, Francesco; Claveau, François; Fontan, Clément
    Abstract: This article investigates the scientization process in central banks, using the Bank of England (BoE) as a case study. It proposes an ideal type of the scientized central bank, which is tied to the core idea that the scientization of an organization grows with its willingness to contribute to the relevant science. We derive from this ideal type empirically observable characteristics regarding leadership and staff profiles, use of internal resources, composition of external networks, and publication and discursive outputs. The BoE is then contrasted to this ideal type of a thoroughly scientized central bank. The empirical material includes archives and interviews as well as three databases providing quantitative information from 1980 to 2019. We find that the path towards scientization is strategically motivated and varied, influenced by factors such as balancing the imperatives of expert credibility and informing policymaking. Based on this empirical analysis, we underline the multifaceted dynamics of the scientization process and call for more nuanced representations in the academic literature.
    Date: 2023–10–30
  20. By: Alexis Pourcelot; Alain Coen
    Abstract: The purpose of this study is to investigate the effect of conventional and unconventional monetary policy shocks on housing price dynamics and the economy. We also examine the effect of a housing price shock on monetary policy and its implications for the economy. To do so, we implement an SVAR model for the six major European countries (France, Germany, Italy, Netherlands, Spain and the United Kingdom) and thirteen European markets (Paris, Lyon, Marseille, Berlin, Munich, Frankfurt, Amsterdam, Madrid, Barcelona, Seville, London, Birmingham and Manchester) for the last 20 years (2000-2020). We use impulse response functions to understand the effect of a policy rate and a balance sheet shock on housing prices. We also conduct a forecast error variance decomposition analysis to explore each shock’s effect on housing prices across markets. We find that a contractionary policy rate has a negative influence on house prices. Moreover, an expansionary balance sheet shock has a positive impact on housing prices in all countries, but the effect is heterogeneous according to markets. An unconventional monetary policy shock has greater explanatory power regarding housing prices than a conventional one except in the United Kingdom. The market-level analysis indicates that a conventional monetary policy shock explains a larger share of total housing price variance than an unconventional monetary policy shock in markets such as Paris, Lyon, Madrid, London, Birmingham, Manchester and Amsterdam whereas the opposite is true in the German markets, Barcelona and Seville. In Marseille, both policy types have the same explanatory power. Finally, we find that conventional and unconventional monetary policy shocks have a greater impact in more liberalized credit markets.
    Keywords: Conventional and unconventional monetary policy; House Prices; SVAR model
    JEL: R3
    Date: 2023–01–01
  21. By: Kevin L. Kliesen
    Abstract: Private forecasters expect the core PCEPI to grow less than 0.3% monthly on average from April to December 2023. What other paths could inflation take?
    Keywords: inflation
    Date: 2023–05–30
  22. By: Yoosoon Chang (Indiana University); Fabio Gomez-Rodriguez (Lehigh University and Central Bank of Costa Rica); Christian Matthes (Indiana University)
    Abstract: We investigate the influence of the U.S. government’s spending and taxation decisions, along with the monetary policy choices made by the Federal Reserve, on the dynamics of the nominal yield curve. Aggregate government spending moves the long end of the yield curve, whereas monetary policy and changes in taxation move the short end of the yield curve on impact. Disentangling different types of government spending, we find that only government consumption exerts a discernible influence on the short end of the yield curve. The effects are generally transient and disappear after one year.
    Keywords: Yield Curve, Fiscal Policy, Monetary Policy, Functional Time Series
    Date: 2023–11
  23. By: Lovisa Reiche
    Abstract: The gender gap in inflation expectations, i.e., women reporting systematically higher inflation expectations in consumer surveys, is a well-established phenomenon. The dis parity has been attributed to women’s greater involvement in grocery shopping and exposure to volatile food prices. I evaluate this hypothesis using a Bayesian learning framework, which suggests that signal volatility increases mean expectations only when ever the prior is flat. Such a flat prior could be caused by low financial literacy, which is more prevalent in women. Using data from the “Bundesbank Online Panel – House holds”, I find that grocery shopping increases expectations only for a low literacy sample and including a control for financial literacy closes the gender gap fully. This observation has significant macroeconomic implications, including potential gender-based disparities in retirement investment and monetary policy targeting.
    Date: 2023–10–23
  24. By: Tomas Adam; Ales Michl; Michal Skoda
    Abstract: This paper discusses the implications of possible changes in the composition of the Czech National Bank's foreign exchange reserves, which are large by international standards and account for about 98% of the CNB's assets and are thus crucial for its earnings. Starting from the allocation as of October 31, 2022, we test how the risk-return characteristics change under the following three hypotheses: (i) increasing the share of equities from about 18% to, for example, 20%, (ii) increasing the amount of gold to, for example, 100 tons (from about 0.5% to 4.5% of the reserves), (iii) reducing the share of euro-denominated assets from 46% to, for example, 40%. The results suggest that if asset prices followed the pattern of the last 20 years, increasing the share of equities to 20% would increase the expected return on the portfolio, while the volatility would increase only slightly. Next, increasing the amount of gold to 100 tons could increase the expected return on the portfolio, while its volatility, measured in Czech koruna, would decrease. Reducing the share of euro-denominated assets, on the other hand, could slightly increase the expected return on the portfolio but could also significantly increase the volatility of the returns measured in Czech koruna, and is therefore not appropriate.
    Keywords: Central bank finances, foreign exchange reserves, foreign exchange reserve management, portfolio choice
    JEL: E44 E58 F31 G11
    Date: 2022–09
  25. By: Popova, Olga (Leibniz Institute for East and Southeast European Studies (IOS)); See, Sarah Grace (University of Groningen); Nikolova, Milena (University of Groningen); Otrachshenko, Vladimir (Justus Liebig University, Giessen)
    Abstract: What are the broad societal implications of inflation and unemployment? Analyzing a dataset of over 1.9 million individuals from 156 countries via the Gallup World Poll spanning 2005 to 2021, alongside macroeconomic data at the national level, we find that both inflation and unemployment have a negative link with confidence in financial institutions. While inflation is generally unassociated with confidence in government and leadership approval, unemployment still has a strong negative association with these outcomes. While we find no gender differences in the consequences of inflation and unemployment for confidence in political and financial institutions, the associations we document are more substantial for the cohorts that are likely to bear a disproportionate burden from inflation and unemployment—the middle-aged, lower-educated, and unmarried individuals, and for those living in rural areas. Uncertainty about the country's economic performance and one's own economic situation are the primary channels behind the associations we identify. These findings hold significant implications for policymakers, Central Banks, and public discourse, necessitating targeted strategies to alleviate the social consequences of inflation and unemployment.
    Keywords: inflation, unemployment, trust, confidence in institutions, Gallup World Poll
    JEL: D12 D83 E31 E58
    Date: 2023–10
  26. By: Mr. Luis Brandão-Marques; Mr. Gaston Gelos; Mr. David J Hofman; Ms. Julia Otten; Gurnain Kaur Pasricha; Zoe Strauss
    Abstract: We examine whether changes in the distribution of household inflation expectations contain information on future inflation. We first discuss recent shifts in micro data from the US, UK, Germany, and Canada. We then zoom in on the US to explore econometrically whether distributional characteristics help predict future inflation. We find that the shape of the distribution of household expectations does indeed help predict one-year-ahead CPI inflation. Variance and skewness of household expectations’ distributions add predictive power beyond and above the median, especially in periods of high inflation. Remarkably, qualitatively, these results hold when including market-based measures and moments of the distribution of professional forecasts.
    Keywords: Inflation; inflation expectations; survey expectations; household expectations
    Date: 2023–10–27
  27. By: Fernando M. Martin
    Abstract: Inflation remains well above the Fed’s 2% target. How did the COVID-19 pandemic change the sources of inflationary pressures and inflation’s distribution among consumer spending?
    Keywords: COVID-19; inflation; consumer spending
    Date: 2023–05–08
  28. By: Fernando M. Martin
    Abstract: A new analysis examines inflationary pressures as demand for services continues to recover after its sharp fall during the COVID-19 pandemic.
    Keywords: inflation
    Date: 2022–10–17
  29. By: Maximiliano Dvorkin; Maggie Isaacson
    Abstract: High-frequency wage data from private sources, such as Homebase, can provide timely insight into the current state of U.S. wage inflation.
    Keywords: wage inflation
    Date: 2022–11–08
  30. By: Yu-Ting Chiang; Jesse LaBelle
    Abstract: The federal government benefits from unexpected bouts of inflation since the real value of its debt falls. However, this also hurts its debtholders.
    Keywords: inflation; federal debt
    Date: 2023–06–27
  31. By: Fabio Bagarello; Biagio Bossone
    Abstract: According to the Accounting View of Money (AVM), the money issued by commercial banks in the form of demand deposits features a hybrid nature, since deposits can be shown to consist of a share of deposits bearing the characteristics of debt (debt-deposits) and a share of deposits bearing the characteristics of equity (equity-deposits), in a mix that depends on factors that relate to the issuing banks and the environment where they operate and interact, which may change over time. Following this important finding of the AVM, it is only consequential to associate the hybrid nature of bank deposits with the dual nature of the objects which is typical in quantum physics, and to investigate whether and how the application of quantum analytical methods and ideas to a form of money showing dualistic features could be used to extract valuable economic information.
    Date: 2023–11
  32. By: Carlos Carvalho; Andrea Ferrero; Felipe Mazin; Fernanda Nechio
    Abstract: We explore the implications of demographic trends for the evolution of real interest rates across countries and over time. To that end, we develop a tractable three-country general equilibrium model with imperfect capital mobility and country-specific demographic trends. We calibrate the model to study how low-frequency movements in a country's real interest rate depend on its own and other countries' demographic factors, given a certain degree of financial integration. The more financially integrated a country is, the higher the sensitivity of its real interest rate to global developments is, and the less its own real rate determinants matter. We then estimate panel error correction models relating real interest rates to many of its possible determinants-demographics included-imposing some restrictions motivated by lessons from our structure model. Results corroborate the importance of accounting for time-varying financial integration, and show global factors and life expectancy are relevant determinants of real interest rates.
    Keywords: life expectancy; population growth; demographics; real interest rates; neutral rate; capital flows; secular stagnation
    JEL: E52 E58 J11 A11
    Date: 2023–10–24

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