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on Monetary Economics |
| By: | Anahit Matinyan (Central Bank of Armenia); Ardash Kilejian (Central Bank of Armenia); Gevorg Minasyan (Central Bank of Armenia); Aleksandr Shirkhanyan (Central Bank of Armenia) |
| Abstract: | Central banks increasingly rely on communication to anchor inflation expectations, yet evidence from developing economies is limited. This paper uses a randomized survey experiment in Armenia to examine how central bank communication affects inflation perceptions and expectations. The experiment tests three treatments: actual inflation, the Central Bank of Armenia’s (CBA) 4 percent target, and an unrelated numerical cue. Information on actual inflation improves perceptions and expectations, aligning them with observed inflation, while the CBA’s target influences expectations indirectly through perceptions. In contrast, the irrelevant numerical cue has no effect, underscoring the role of context and informational relevance. Comparing results with similar survey data from Armenia’s high-inflation episode in 2023 shows that target communication is more effective when inflation is elevated. Taken together, these findings offer new evidence on the effectiveness of central bank communication, emphasizing the importance of informational relevance and its dependence on the prevailing inflationary environment. The paper also contributes to the literature by showing how personal inflation experiences – anchored in salient “marker products†– shape perceptions and expectations in a developing economy context. |
| Keywords: | Monetary Policy, Inflation Expectations, Inflation Perceptions, Central Bank Communication, Randomized Controlled Trial, Anchoring |
| JEL: | E31 E52 D84 C93 E58 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ara:wpaper:wp-2025-02 |
| By: | Luigi Bocola; Alessandro Dovis; Kasper Jørgensen; Rishabh Kirpalani |
| Abstract: | Policymakers often cite the risk that inflation expectations might “de-anchor” as a key reason for responding forcefully to inflationary shocks. We develop a model to analyze this trade-off and to quantify the benefits of stable long-run inflation expectations. In our framework, households and firms are imperfectly informed about the central bank’s objective and learn from its policy choices. Recognizing this interaction, the central bank raises interest rates more aggressively after adverse supply shocks and accepts short-run output costs to secure more stable inflation expectations. The strength of this reputation channel depends on how sensitive long-run inflation expectations are to surprises in interest rates. Using high-frequency identification, we estimate these elasticities for emerging and advanced economies and find large negative values for Brazil. We fit our model to these findings and use it to quantify how reputation building motives affect monetary policy decisions, and the role of central bank's credibility in promoting macroeconomic stability. |
| JEL: | E52 E58 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34436 |
| By: | Rubén Fernández-Fuertes |
| Abstract: | I develop a multi-agent LLM framework that processes Federal Reserve communications to construct narrative monetary policy surprises. By analyzing Beige Books and Minutes released before each FOMC meeting, the system generates conditional expectations that yield less noisy surprises than market-based measures. These surprises produce theoretically consistent impulse responses where contractionary shocks generate persistent disinflationary effects and enable profitable yield curve trading strategies that outperform alternatives. By directly extracting expectations rather than cleaning surprises ex post, this approach demonstrates how multi-agent LLMs can implement narrative identification at scale without contamination in high-frequency measures. |
| Keywords: | Monetary Policy Shocks, Central Bank Communication, Large Language Models, FOMC, Federal Reserve, Natural Language Processing, High-Frequency Identification, Term Structure |
| JEL: | E52 E58 E43 G14 C45 C55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp25257 |
| By: | Nicolas Fanta (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | We ask whether ECB communication outside monetary policy meeting days moves the EUR/USD exchange rate within minutes. We build an event study on one-minute prices and a Reuters-based corpus of 1, 868 statements coded as dovish, neutral, or hawkish from 2008 to 2016. Identification combines strict exclusion windows for macro and central bank confounders, time-of-day–matched controls, and Monte Carlo resampling to test sensitivity. We also open four splits that theory suggests may matter: President, conventional versus unconventional topics, Purdah versus outside the pre-meeting window, and the regime before and during the zero lower bound. Across the full sample and every split, price responses are small and short-lived. Cumulative abnormal returns remain within a few basis points by t=+20, and scattered significant minutes are not sequential. Volatility reacts only modestly. After intraday seasonality adjustment in the matched-difference design, dovish items are associated with a brief decline in volatility in the first half hour, while neutral and hawkish items are statistically similar to controls. The contribution is twofold. First, we provide a comprehensive intraday assessment of ECB communication outside meeting days for the EUR/USD market over a consistently coded 2008–2016 window. Second, we deliver a transparent identification template for high-frequency communication research by combining time-of-day–matched controls with systematic resampling. Together, the results indicate that such communication does not generate lasting directional moves; any impact appears as small and short-lived changes in realised volatility. |
| Keywords: | central bank communication, monetary policy, ECB, exchange rates, AI, event study |
| JEL: | E52 E58 F31 C55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2025_23 |
| By: | Antoine Camous; Dmitry Matveev |
| Abstract: | In a multi-sector economy, conventional monetary policy alone is insufficient for achieving optimal economic stabilization. We examine whether a central bank can leverage private information about economic conditions to enhance policy effectiveness and improve outcomes. Our normative analysis emphasizes that the central bank should refrain from manipulating private beliefs and, if disclosure is optimal, should communicate information truthfully. However, such a communication policy is generally not credible, as even a benevolent policymaker faces sequential incentives to influence the beliefs of price-setting firms to reduce price dispersion and its negative welfare effects. In the absence of commitment, reputation becomes crucial in shaping these incentives. Specifically, a policymaker who strategically discloses information may secure significant stabilization gains during her term, but at the cost of long-term economic inefficiency. |
| Keywords: | Strategic Communication, Monetary Policy, Credibility, Reputation, Bayesian Learning |
| JEL: | D82 E52 E58 E61 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1013 |
| By: | Garriga, Ana Carolina |
| Abstract: | This paper investigates the existence and extent of a gender gap in satisfaction with the Bank of England’s performance in controlling inflation. Descriptive data and previous research report gender gaps in attitudes towards monetary institutions and outcomes. Much of this research, however, disregards potential biases arising from women’s lower propensity to express an opinion, and to answer “don’t know” instead. Using the Bank of England’s Inflation Attitudes survey (2001-2025), and modelling selection into substantive answers, I find a statistically significant –yet, substantively small and not persistent– gender gap in satisfaction with the Bank of England. This gender gap remains after controlling for inflation perception and monetary knowledge. I also find that women do not overestimate inflation, and they do not seem to “punish” more harshly the Bank for high inflation or deflation. Therefore, variance in this gender gap can be attributed to a different propensity to report more “extreme” opinions, and to different reactions to high inflation or deflation. These findings highlight gendered dimensions for the understanding of monetary institutions and finance, contributing to the literature on satisfaction with the performance of institutions. |
| Keywords: | Bank of England; central banks; gender gap; inflation; public opinion; satisfaction |
| JEL: | E03 E39 E58 E59 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126113 |
| By: | unal, umut |
| Abstract: | This study estimates Turkey’s monetary policy reaction function over 2005–2025 using quarterly data and a suite of OLS, ARDL, and ECM specifications. The results reveal pronounced interest-rate smoothing and a sub-Taylor inflation semi-elasticity, while output gaps, unemployment indicators, and real exchange rate pressures contribute little explanatory power once persistence is controlled. Rolling regressions uncover regime dependence. Responsiveness was moderate under early inflation targeting, strengthened during the 2018 crisis tightening, collapsed under the post-2021 heterodox easing, and has only partially recovered with the return to orthodoxy after mid-2023. Formal stability diagnostics, including CUSUM, Quandt–Andrews, Chow, and Bai–Perron procedures, locate structural breaks clustered around 2018 and 2021, delineating three regimes: pre-2018 experimentation, crisis-induced orthodoxy from 2018 to 2021, and post-2021 heterodoxy. Across specifications, the long-run response to inflation remains below one for one and the speed of error correction is slow, implying weak tethering to a rule-like anchor. Policy implications are direct. Durable disinflation requires a transparent reaction function with more than unit inflation pass-through, faster adjustment, and institutional commitments that prevent episodic reversals and rebuild credibility. |
| Keywords: | Taylor Rule, VAR, ARDL, ECM |
| JEL: | E31 E5 E52 E58 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126223 |
| By: | Lekha S. Chakraborty; C. Prasanth |
| Abstract: | Using high-frequency macro data from a financially deregulated regime, this paper examines whether there is any evidence of financial crowding out in India. The macroeconomic channel through which financial crowding out occurs is the link between the fiscal deficit and the interest rate determination. The results revealed that the fiscal deficit does not significantly determine interest rates in the post-pandemic monetary policy stance in India. The long-term interest rates were strongly influenced by the short-term interest rates, a fact which reinforces that the term structure is operating in India. The results further revealed that long-term interest rates were also positively influenced by capital flows and inflation expectations, while inversely impacted by the money supply. These inferences have policy implications on the fiscal and monetary policy coordination in India, where it is crucial to analyze the effect of a high-interest-rate regime on public corporate investment. Our results showed that public infrastructure investment and rate of interest are significant determinants of private corporate investment. Our results counter the popular belief that deficits determine interest rates in the context of emerging economies and "crowd out" private corporate investment. |
| Keywords: | fiscal deficit; interest rate determination; asymmetric vector autoregressive model; financial crowding out |
| JEL: | E62 C32 H6 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1085 |
| By: | Arce, Fernando; Bengui, Julien; Bianchi, Javier |
| Abstract: | We propose a macroprudential theory of foreign reserve accumulation that can rationalize the secular trends in public and private international capital flows. In middle-income countries, the increase in international reserves has been associated with elevated private capital inflows, both in the aggregate and in the cross-section, and economies with a more open capital account have accumulated more reserves. We present an open economy model of financial crises that is consistent with these features. We show that optimal reserve management policy leans against the wind, raising gross private borrowing while improving the net foreign asset position and reducing exposure to crises. |
| Keywords: | Macroprudential policy;International reserves;Financial Crises;Gross capital flows |
| JEL: | E58 F31 F32 F34 F51 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14336 |
| By: | Erwan Gautier; Jérémi Montornès |
| Abstract: | This paper documents how inflation expectations as reported by households in the European Central Bank's Consumer Expectations Survey vary with the tenure of survey respondents. Inflation expectations are significantly lower after some months of repeated participation in the survey, by about 2 percentage points after one year. Panel conditioning effects are much stronger if households are initially less attentive to inflation. We also document that these negative effects could be partly due to survey fatigue increasing with tenure. Finally, we find that the panel conditioning effects are not specific to inflation: they are also strong for other macroeconomic variables such as unemployment but they are not significant for households' perceptions of their own consumption or income growth. |
| Keywords: | Consumer Expectations Survey, Inflation, Survey Methods |
| JEL: | D83 D84 E31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1007 |
| By: | Joerg Bibow |
| Abstract: | For the past hundred years or more, payments have been primarily associated with banking, and banking as we know it today--being the result of many centuries of evolution--features a bundling of (at least) three main lines of business: lending, deposit-taking, and payment services. In the past 15 years or so, banks have come under severe competition as providers of payment services. Will "banking on payments" become outmoded and payments untethered from banking, or will payments still have a place in the future of banking? This paper sets out to explore this question and to address the following two related issues. First, what are the likely consequences (especially for the financing of growth and the provision of liquidity in the form of bank deposits) of the apparent "unbundling" of the traditional connections in banking between lending, deposit-taking, and payment services? Second, what are the implications of the evolution (or revolution) of money, payments, and banking for public policy, monetary theory, and the theory of monetary policy? |
| Keywords: | banking; money; payments; financial intermediation; bank regulation; monetary policy |
| JEL: | B22 E12 E42 E58 G21 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1091 |
| By: | Olivo, Victor |
| Abstract: | This document revisits Milton Friedman's extended monetary framework, specifically focusing on his Monetary Theory of Nominal Income. Friedman’s extended monetary framework remains robust in explaining the dynamic relationship between money supply changes and nominal income fluctuations over more than 150 years of U.S. data. Despite major economic events, this relationship has been stable and significant. The empirical analysis with more recent data continues supporting Friedman's contention that money plays a special role in macroeconomic dynamics, stronger than fiscal variables or interest rates. The methodological debate between Friedman and his critics underscores the importance of empirical causality and practical explanatory power in economic theory. The document concludes that Friedman’s Marshallian approach offers valuable insights that have endured and continue to inform monetary economics. |
| Keywords: | Quantity Theory; Income-Expenditure Model; Price Level; Inflation; Nominal Income; Money Supply; Causality; Dynamic Models; Time Series Models. |
| JEL: | E00 E31 E51 E52 |
| Date: | 2025–08–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125716 |
| By: | Gáti, Laura; Handlan, Amy |
| Abstract: | We model how a central bank communicates its noisy forecasts (forward guidance) while taking into account its own uncertainty (confidence) and the public’s perception of the bank’s uncertainty (reputation for confidence). This creates a mismatch between the public and central bank’s interpretation of the bank announcement which induces the bank to communicate with partial transparency and deliberate imprecision. Moreover, with higher confidence (lower reputation) announcements are more precise. With text data from internal Fed documents and newspapers, we find communication patterns are largely consistent with the model except the Fed’s communication strategy underreacts to reputation compared to the model. JEL Classification: E52, E58, C49 |
| Keywords: | cheap talk, communication, forward guidance, reputation, text analysis |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253141 |
| By: | Arce, Fernando; Bengui, Julien; Bianchi, Javier |
| Abstract: | In this paper, we revisit the scope for macroprudential policy in production economies with pecuniary externalities and collateral constraints. We study competitive equilibria and constrained-efficient equilibria and examine the extent to which the gap between the two depends on the production structure and the policy instruments available to the planner. We argue that macroprudential policy is desirable regardless of whether the competitive equilibrium features more or less borrowing than the constrained-efficient equilibrium. In our quantitative analysis, macroprudential taxes on borrowing turn out to be larger when the government has access to ex-post stabilization policies. |
| Keywords: | Macroprudential policy;Overborrowing;Underborrowing |
| JEL: | E58 F31 F32 F34 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14343 |
| By: | Victor Le Coz (LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Nolwenn Allaire (European Central Bank - European Central Bank); Michael Benzaquen (LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Damien Challet (MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay, FiQuant - Chaire de finance quantitative - MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay) |
| Abstract: | Using the secured transactions recorded within the Money Markets Statistical Reporting database of the European Central Bank, we test several stylized facts regarding interbank market of the 47-largest banks in the eurozone. We observe that the surge in the volume of traded evergreen repurchase agreements followed the introduction of the LCR regulation and we measure a rate of collateral re-use consistent with the literature. Regarding the topology of the interbank network, we confirm the high level of network stability but observe a higher density and a higher in-and out-degree symmetry than what is reported for unsecured markets. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05273325 |
| By: | Lala AlAsadi; Oluwasegun Bewaji; Aayush Gugnani; Tarush Gupta; Ronald Heijmans |
| Abstract: | This paper investigates the volatility dynamics of USD-backed stablecoins, challenging the assumption of inherent stability. Using a multi-level econometric framework, including GARCH, SVAR, and TVP-VAR models, we analyze how stablecoins respond to macro-financial shocks such as monetary policy changes, market uncertainty, and crypto volatility. Results show that USDC and TUSD are highly sensitive to external disturbances, while USDT and DAI remain relatively resilient. Stablecoins primarily absorb volatility but become more connected to systemic risk during crises. Frequency-domain analysis reveals short-term spillovers dominate during stress events, with long-term integration increasing post-2021. The findings highlight the heterogeneous nature of stablecoins and their growing ties to traditional finance, underscoring the need for tailored regulation and ongoing monitoring to mitigate systemic vulnerabilities. |
| Keywords: | stablecoins; volatility; financial markets; monetary policy |
| JEL: | F31 G14 E42 E58 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:846 |
| By: | Gabriel Montes-Rojas; Fernando Toledo; Nicol\'as Bertholet; Kevin Corfield |
| Abstract: | We study optimal monetary policy when a central bank maximizes a quantile utility objective rather than expected utility. In our framework, the central bank's risk attitude is indexed by the quantile index level, providing a transparent mapping between hawkish/dovish stances and attention to adverse macroeconomic realizations. We formulate the infinite-horizon problem using a Bellman equation with the quantile operator. Implementing an Euler-equation approach, we derive Taylor-rule-type reaction functions. Using an indirect inference approach, we derive a central bank risk aversion implicit quantile index. An empirical implementation for the US is outlined based on reduced-form laws of motion with conditional heteroskedasticity, enabling estimation of the new monetary policy rule and its dependence on the Fed risk attitudes. The results reveal that the Fed has mostly a dovish-type behavior but with some periods of hawkish attitudes. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.24362 |
| By: | Jacopo Timini |
| Abstract: | This paper reexamines the effects of the Latin Monetary Union (LMU) - a 19th century agreement among several European countries to standardize their currencies through a bimetallic system based on fixed gold and silver content - on trade. Unlike previous studies, this paper adopts the latest advances in gravity modeling and a more rigorous approach to defining the control group by accounting for the diversity of currency regimes during the early years of the LMU. My findings suggest that the LMU had a positive effect on trade between its members until the early 1870s, when bimetallism was still considered a viable monetary system. These effects then faded, converging to zero. Results are robust to the inclusion of additional potential confounders, the use of various samples spanning different countries and trade data sources, and alternative methodological choices. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.25487 |
| By: | Kaito Takano; Masanori Hirano; Kei Nakagawa |
| Abstract: | Accurately forecasting central bank policy decisions, particularly those of the Federal Open Market Committee(FOMC) has become increasingly important amid heightened economic uncertainty. While prior studies have used monetary policy texts to predict rate changes, most rely on static classification models that overlook the deliberative nature of policymaking. This study proposes a novel framework that structurally imitates the FOMC's collective decision-making process by modeling multiple large language models(LLMs) as interacting agents. Each agent begins with a distinct initial belief and produces a prediction based on both qualitative policy texts and quantitative macroeconomic indicators. Through iterative rounds, agents revise their predictions by observing the outputs of others, simulating deliberation and consensus formation. To enhance interpretability, we introduce a latent variable representing each agent's underlying belief(e.g., hawkish or dovish), and we theoretically demonstrate how this belief mediates the perception of input information and interaction dynamics. Empirical results show that this debate-based approach significantly outperforms standard LLMs-based baselines in prediction accuracy. Furthermore, the explicit modeling of beliefs provides insights into how individual perspectives and social influence shape collective policy forecasts. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.02469 |
| By: | Michelle Majid (Department of Economics, University of Reading); Akeem Rahaman (independent researcher, Trinidad and Tobago); Scott Marc Romeo Mahadeo (Department of Economics, University of Reading) |
| Abstract: | The migration literature shows that labour-seeking and remittance-driven motives are central determinants of movement, with identifiable push and pull factors shaping flows across countries. Yet, the role of foreign exchange (FX) availability remains unexplored despite its relevance in small, open economies. We address this gap by introducing the concept of currency- seeking migration, where limited access to convertible currency acts as a push factor and the ability to earn FX abroad functions as a pull factor. Using Trinidad and Tobago, a country facing protracted FX shortages, we estimate autoregressive distributed lag (ARDL) models using data from 1975 to 2016 and find a long-run relationship in which a decline in net official reserves reduces net migration, signalling greater emigration pressures. We also observe a slow error- correction process, indicating that there is a sluggish adjustment toward long-run equilibrium as pressures or short-run disturbances persist once triggered. Our results are robust across multiple specifications using different measures of FX positions. We recommend improving access to FX as an essential step to reduce emigration pressures, achievable in the short-run through export reform, via more targeted protectionist policies, and export diversification. This can assist in stabilising the external balance and pave the way for more long-term structural reforms through exchange rate liberalisation. |
| Date: | 2025–11–02 |
| URL: | https://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2025-04 |
| By: | Valentin Burban; Sophie Guilloux-Nefussi |
| Abstract: | Inflation in the euro area reached its peak at 10.6% in October 2022 and receded quickly afterwards. Solidly anchored inflation expectations proved instrumental to this disinflation. But how can we gauge anchoring in practice? This blog post reviews various metrics to monitor the anchoring of inflation expectations in the euro area. <p> L’inflation dans la zone euro a atteint son pic à 10, 6 % en octobre 2022 et a reflué rapidement par la suite. Les anticipations d’inflation solidement ancrées se sont révélées déterminantes dans le processus de désinflation. Mais comment évaluer l’ancrage dans la pratique ? Ce billet de blog examine diverses mesures afin de suivre l’ancrage des anticipations d’inflation dans la zone euro. |
| Date: | 2025–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:412 |
| By: | Carlos Segura-Rodriguez (Department of Economic Research, Central Bank of Costa Rica) |
| Abstract: | This study proposes a methodology for forecasting inflation in Costa Rica based on a disaggregated analysis of the 289 items that comprise the Consumer Price Index (CPI). ARIMA models are used for most items, while ARIMAX models —which incorporate exogenous variables— are applied to those with higher weights and more volatile prices. The inclusion of specific information, such as the exchange rate, international commodity prices, and weekly agricultural prices, significantly improves forecast accuracy over short-term horizons. The disaggregated approach consistently outperforms more aggregated models or those without exogenous variables by reducing errors in sensitive items such as food, fuel, regulated goods, and products priced in U.S. dollars. The results highlight the value of integrating additional information into forecasting strategies based on disaggregated data and suggest that this methodology can effectively complement the short-term inflation forecasting models currently used by the Central Bank. ***Resumen: Este estudio propone una metodología para el pronóstico de la inflación en Costa Rica basada en el análisis desagregado de los 289 artículos que conforman el Índice de Precios al Consumidor (IPC). Se emplean modelos ARIMA para la mayoría de los artículos y modelos ARIMAX —que incorporan variables exógenas— para aquellos con mayor ponderación y precios más volátiles. La inclusión de información específica, como el tipo de cambio, precios internacionales de materias primas y precios agrícolas semanales, mejora significativamente la precisión de los pronósticos en horizontes de corto plazo. El enfoque desagregado supera sistemáticamente a modelos más agregados o sin variables exógenas, al reducir errores en productos sensibles como alimentos, combustibles, bienes regulados y aquellos cotizados en dólares. Los resultados evidencian el valor de integrar información adicional en estrategias de pronóstico basadas en datos desagregados, y sugieren que esta metodología puede complementar eficazmente los modelos de pronóstico de corto plazo utilizados por el Banco Central. |
| Keywords: | Stress Tests, Yield Curve Estimation, Financial Crisis, Pruebas de tensión, Curvas de rendimiento, Crisis financieras |
| JEL: | G21 G28 C63 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:apk:doctra:2509 |
| By: | LUNARDELLI, ANDRE |
| Abstract: | The notion that much of the reduction in disinflation costs in recent decades is due to better anchoring converges with the proposition of Dow, Simonsen and Werlang's (1993) that part of the sacrifice ratios of poorly anchored economies may be caused by coordination problems, which they modeled as ambiguity. The present paper associates ambiguity in disinflation with fairness in the labor market, but modeling it without an effective reduction in effort, and with inflation persistence, thus presenting similarities with Driscoll and Holden (2004). Bayesian inference with North American data with the model shows that the pattern here associated with ambiguity and fairness was especially pronounced during the Volcker disinflation, had local peaks after the oil shocks during the great inflation, did not happen following the wave of adverse productivity shocks after Volcker's macroeconomic anchorage, nor did it happen in the disinflation immediately after the COVID-19 pandemic. To make this inference, this paper models wage markup shocks by including in them factors such as an ambiguity premium, in contrast with the format that restricts them solely to shocks in the elasticity of substitution between different kinds of labor. This provides an explanation for the results of some well-known works with evidence compatible with the idea that increases in the (wide concept of) wage markups were a major cause of the increase of the unemployment rate and of the decrease in output during the Volcker disinflation. The paper concludes by briefly discussing ambiguity in disinflations of high and moderate inflations under both inflation targeting and exchange rate anchors. |
| Keywords: | Disinflation, ambiguity, fairness, wage markups, sacrifice ratios, inflation persistence, Phillips curve, inflation targeting, Central Bank coordination of expectations. |
| JEL: | D81 E31 E42 E50 J30 J60 |
| Date: | 2025–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126505 |
| By: | Roudy Sassine |
| Abstract: | Lebanon's longstanding fixed exchange rate regime collapsed in the wake of the country's 2019 financial crisis. This paper examines the underlying monetary factors that contributed to the collapse, offering a new policy framework based on a floating exchange rate system and detailing its superior qualities. However, the paper cautions against a hasty transition without strengthening economic fundamentals. Instead, it argues that transition should proceed first by adopting a managed float, during which the country can increase its fiscal space to enable increased investment in idle capacity and the productive sectors, balancing flexibility with financial stability. Further economic imperatives must be addressed before a fully floating regime can be adopted. The paper concludes by outlining a roadmap for a smooth transition from the fixed exchange rate to a managed float and finally to a fully floating system. |
| Keywords: | Financial crisis; Monetary policy; Monetary sovereignty |
| JEL: | F30 N10 N14 P16 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1094 |
| By: | Mr. Giovanni Melina; Stefania Villa |
| Abstract: | This paper investigates the macroeconomic implications of the rising wave of investment in information and communication technology (ICT)—including AI-related hardware and software—in the U.S. economy. The analysis uses a structural macroeconomic model that treats ICT as a distinct type of capital and explores the degree to which ICT complements or substitutes for labor. The findings reveal three key insights. First, labor and ICT have historically been only moderately substitutable. Second, technological innovations that make it easier to turn ICT investment into productive capital act like demand shocks, boosting output and inflation. Third, given the uncertainty surrounding the interaction between AI-driven ICT capital and labor, the paper presents scenarios of possible trajectories for ICT investment under alternative assumptions. When ICT tends to complement labor, the economy experiences strong gains in output, but also inflationary pressure; the natural interest rate increases, requiring tighter monetary policy. Conversely, if ICT tends to replace labor, the same ICT investment path warrants a looser monetary policy stance. |
| Keywords: | Artificial Intelligence; Generative AI; ICT investment; Natural rate of interest; Monetary policy; DSGE modeling |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/224 |
| By: | Barry Eichengreen; Raul Razo-Garcia |
| Abstract: | In a paper 20 years ago, we analyzed the evolution of the international monetary system over the preceding 20 years and projected its evolution 20 years into the future, on the assumption of unchanged transition probabilities. Here we compare those projections with outcomes and provide new projections, again 20 years into the future. Although the world as a whole has seen financial opening and movement away from intermediate exchange rate regimes, as projected, movement has been slower than projected on the basis of observed transition probabilities in the 20 years preceding our forecast. New projections again based on unchanged transition probabilities but allowing countries to shift between advanced, emerging and developing country groupings and reclassifying exchange rate regimes to accord with current practice again suggest that policy regimes will be modestly different in 2045 than today. There will be a continued decline in intermediate exchange rate arrangements, and gains for hard pegs, as emerging markets move in this direction, and for more freely floating rates, driven by developing countries. There will be a further increase in the share of countries with open capital accounts, driven by emerging markets and developing countries. |
| JEL: | F0 F33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34416 |
| By: | Adam Golinski; Sophie Guilloux-Nefussi; Jean-Paul Renne |
| Abstract: | This paper expands upon conventional shadow rate models, which typically concentrate on the term structure of nominal yields, by integrating real interest rates. Close to zero-lower bound periods, real rates inherit part of the non-linearity stemming from the constraints that apply to nominal rates. We introduce a specific macro-finance adaptation of our real/nominal shadow rate model and apply it to U.S. data spanning the last five decades. We exploit the model to calculate real and nominal term premiums and to examine how the dynamic responses of real and nominal rates to economic shocks are constrained during zero-lower bound periods. |
| Keywords: | Shadow Rate, Real and Nominal Risk Premiums, Yield Curve |
| JEL: | E31 E43 E52 E58 G12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1014 |
| By: | Yuji Sakurai |
| Abstract: | This paper presents a comprehensive framework for determining haircuts on collateral used in central bank operations, quantifying residual uncollateralized exposures, and validating haircut models using machine learning. First, it introduces four haircut model types tailored to asset characteristics—marketable or non-marketable—and data availability. It proposes a novel model for setting haircuts in data-limited environment using a satallite cross-country model. Key principles guiding haircut calibration include non-procyclicality, data-drivenness, conservatism, and the avoidance of arbitrage gaps. The paper details model inputs such as Value-at-Risk (VaR) percentiles, volatility measures, and time to liquidation. Second, it proposes a quantitative framework for estimating expected uncollateralized exposures that remain after haircut application, emphasizing their importance in stress scenarios. Illustrative simulations using dynamic Nelson-Siegel yield curve models demonstrate how volatility impacts exposure. Third, the paper explores the use of Variational Autoencoders (VAEs) to simulate stress scenarios for bond yields. Trained on U.S. Treasury data, VAEs capture realistic yield curve distributions, offering an altenative tool for validating VaR-based haircuts. Although interpretability and explainability remain concerns, machine learning models enhance risk assessment by uncovering potential model vulnerabilities. |
| Keywords: | Haircuts; Uncollateralized Exposure; Machine Learning |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/225 |