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on Monetary Economics |
| By: | Kohei Hasui; Tomohiro Sugo; Yuki Teranishi |
| Abstract: | This paper shows that the recent Fed's exit strategy reflects the conduct of optimal monetary policy in a liquidity trap. We use the conventional new Keynesian model for the U.S economy, incorporating recent inflation persistence. As observed in the Fed's liftoff policy, optimal monetary policy shows inflation overshooting and prolonged zero interest rate policy under high inflation beyond the 2 percent target. With greater persistence of inflation, inflation overshooting becomes larger, yielding better consistency with the data. Our analysis also indicates the presence of a forward guidance puzzle in the Fed's exit policy. Under optimal monetary policy, the discounted Euler equation successfully dampens forward guidance effects and better describes the output gap. |
| Keywords: | liquidity trap, optimal monetary policy, inflation persistence, forward guidance |
| JEL: | E31 E52 E58 E61 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-03 |
| By: | FUJITA, Shumpei; IIBOSHI, Hirokuni; SHINTANI, Mototsugu |
| Abstract: | We evaluate the macroeconomic effects of unconventional monetary policy (UMP) in Japan, focusing in particular on the Quantitative and Qualitative Monetary Easing (QQE) implemented during Governor Haruhiko Kuroda’s tenure. To identify UMP shocks, we impose narrative sign restrictions on structural shocks and on historical decompositions, exploiting three major policy episodes that generated significant surprises in financial markets. Our results indicate that expansionary UMP shocks increase both output and the inflation rate. The exchange rates, stock prices, and bank lending also respond to the UMP shock in a manner consistent with standard macroeconomic theory. Furthermore, narrative sign restrictions resolve some puzzling responses observed with Cholesky decomposition and tighten the wide credible intervals typical of standard sign restrictions. |
| Keywords: | Monetary policy shock, narrative restrictions, structural vector autoregressive models |
| JEL: | E31 E32 E44 E52 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-156 |
| By: | Mucai Lin (Huaqiao University); Zhiwu Hong; Linlin Niu |
| Abstract: | China's monetary policy employs a dual-target framework, where announcements explicitly adjust one target while silently signaling the other. Existing single-shock models ignore this embedded dual-shock structure. We propose identification via ordered heteroskedasticity: loud-news shocks exhibit higher variance than silent-news shocks. Applied to Chinese Treasury yields, our model outperforms single-shock specifications. Silent news---particularly price signals within quantity announcements---provides potent forward guidance that predicts future policy adjustments. Both news types trigger significant and persistent responses in yields and money-market rates. These findings highlight the role of silent news in central bank communication and deepen understanding of China's dual-target policy transmission. |
| Keywords: | Monetary Policy Announcements; Silent News; Heteroskedasticity; Dual-Shock Identification |
| JEL: | E43 E52 E58 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:wyi:wpaper:002615 |
| By: | Kelsey O'Flaherty |
| Abstract: | The 2021-2022 inflation episode presented the first opportunity to examine inflation and price dispersion using U.S. scanner data in a high-inflation environment. Data from 50, 000 outlets reveals that price changes across similar goods grew more dispersed in 2022 before falling again in 2023. This paper documents how price change dispersion interacts with households’ product choices to generate substantial inflation heterogeneity. Household-level inflation rates exhibit a 1.4 percentage point interquartile range in 2019, which grew to 4.0 percentage points in 2022 before falling back to 1.6 percentage points in 2023. Households offset little of their implied budget shocks through substitution. A model with idiosyncratic preferences rationalizes household behavior and implies that households’ inflation rates represent convenient, observable bounds on their welfare losses. When inflation peaked in 2022, households at the 10th and 90th percentiles of the inflation distribution and average grocery expenditures faced welfare losses of $573 and $1, 145, respectively. |
| Keywords: | Inflation; Prices; Consumer economics; Welfare economics |
| JEL: | D11 D12 E21 E31 |
| Date: | 2026–01–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:102371 |
| By: | KANO, Kazuko; KANO, Takashi |
| Abstract: | This paper studies how currency conversion can disrupt relative prices by impairing the unit-ofaccount function of money. We examine Okinawa’s 1972 conversion from the U.S. dollar to the Japanese yen, following the collapse of a previously shared unit-of-account triggered by the Nixon shock. Using wholesale price data for perishable goods, we showthat relative prices exhibited sharp changes despite flexible prices. By contrast, Okinawa’s 1958 currency conversion used a single, clearly announced rate and left relative prices stable. The comparison highlights the importance of institutional clarity for a shared unit of account and stable relative prices. |
| Keywords: | Unit of Account, Monetary Singleness, Relative Price Distortion, Currency Conversion, Okinawa Reversion |
| JEL: | E42 E31 D40 N15 |
| Date: | 2026–01–24 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-155 |
| By: | William L. Gamber |
| Abstract: | I study how fluctuations in business formation and destruction affect inflation and the transmission of monetary policy. To do this analysis, I extend a New Keynesian model to include endogenous business formation and destruction and heterogeneous producers. A decline in the number of producers puts upward pressure on inflation, and I find that this mechanism can explain about half of the missing deflation following the Great Recession. I then study the transmission of monetary policy in this framework. I show that endogenous fluctuations in entry generate an intertemporal trade-off in monetary policy; a contractionary shock leads employment and inflation to decline on impact, but inflation later overshoots, as the shock also causes a decline in entry and an increase in exit. |
| Keywords: | Dynamic stochastic general equilibrium (DSGE) models; Monetary policy transmission; Business formation |
| JEL: | E52 L11 |
| Date: | 2026–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:102373 |
| By: | Mohammad Al-Hashel (Qatar University); Atef Alrashidi (Saudi Central Bank); Youssef Saidi (Gulf Monetary Council) |
| Abstract: | This paper investigates the role of oil supply and demand shocks in monetary policy stance among the Gulf Cooperation Council (GCC) countries using a panel vector autoregressive (PVAR) framework and annual panel data over the period 1980-2019. The impulse response functions show that under the symmetric definition of oil shocks (‘all’ shocks), the inflation shock leads to a contractionary monetary policy in GCC countries. Nevertheless, based on asymmetric supply-driven and demand-driven specifications, we find clear evidence of a differentiated reaction of monetary policy to asymmetric oil-induced inflation shocks. Following an oil demand-induced inflation shock, the monetary policy stance remains neutral or becomes accommodative (Dovish). On the other side, the real interest rate in GCC countries increases in response to the anticipated oil supply-induced inflation shock, suggesting that monetary policy stance may become contractionary (Hawkish). With regard to policy implications, as previously experienced, the monetary policy stance in GCC countries must be sensitive to the source of the oil-induced inflation shocks. |
| Date: | 2024–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1735 |
| By: | Joseph Abadi (Federal Reserve Bank of Philadelphia); Jesús Fernández-Villaverde (University of Pennsylvania, NBER, and CEPR); Daniel Sanches (Federal Reserve Bank of Philadelphia) |
| Abstract: | We present a micro-founded monetary model of the world economy to study international currency competition. Our model features “unipolar” equilibria, with a single dominant international currency, and “multipolar” equilibria, in which multiple currencies circulate internationally. Long-run equilibria are highly history-dependent and tend towards the emergence of a dominant currency. Governments can compete to internationalize their currencies by offering attractive interest rates on their sovereign debt, but large economies have a natural advantage in ensuring the dominance of their currencies. We calibrate the model to assess the quantitative importance of these mechanisms and study the international monetary system’s dynamics under several counterfactual scenarios. |
| Keywords: | Dominant currency, international monetary system, strategic complementarities, history dependence |
| JEL: | E42 E58 G21 |
| Date: | 2026–01–28 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-003 |
| By: | Gersbach, Hans; van Buggenum, Hugo; Zelzner, Sebastian |
| Abstract: | Stablecoins are rapidly expanding as money-like assets for payments, trading, settlement, and cross-border transfer. In response, policymakers are moving quickly to develop new regulatory frameworks to safeguard the monetary and financial system. This article develops a forward-looking, research-based policy agenda for stablecoins, drawing on monetary theory, recent market developments (including stress events), our own analytical framework, and the broader academic literature. In our view, a world in which stablecoins reach scale requires a coherent package of measures: tools to preserve financial stability and resilience against liquidity crises; protections for monetary sovereignty and the singleness of money; rules on stablecoin remuneration; constraints on platform market power alongside interoperability requirements; robust financial-integrity rules; and international coordination to limit regulatory arbitrage and close cross-border loopholes such as multi-issuer structures. We also highlight several areas that require further evaluation prior to policy adoption, including whether (and under what conditions) a public liquidity backstop for systemic issuers or central-bank reserve access is warranted, as well as modernization pathways within the traditional monetary system. We benchmark our agenda against the U.S. GENIUS Act and the EU's MiCA and provide a cross-jurisdictional comparison. |
| Keywords: | Stablecoins, Private digital money, Regulation and policy, MiCA, GENIUS Act |
| JEL: | E4 E5 G1 G2 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cfswop:335903 |
| By: | Michael Junho Lee; Antoine Martin |
| Abstract: | Programmability is at the heart of ongoing work on the future of money and payments by central banks around the world. Despite its potential, there is growing concern that programmability conflicts with the provision of “good” money. This paper overviews key principles of “good” money and argues that the discourse on programmability inadequately differentiates between programmable money, which is generally negatively viewed, and programmable payments, which is generally accepted as part of the future. We provide a framework for programmable monetary systems that sharply distinguishes between programmable money and programmable payments. We show that our framework nests a broader set of financial arrangements and revisit the debate on programmability in the design of monetary systems. |
| Keywords: | digital money; programmability; payments; monetary systems |
| JEL: | E42 E58 G28 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102413 |
| By: | Simone Lenzu |
| Abstract: | The relationship between inflation and real economic activity has long been central to debates in macroeconomics and monetary policy. At the core of this debate is the Phillips curve (PC), which measures how strongly inflation reacts to movements in economic conditions. The steepness of this curve matters enormously for monetary policy: if the PC is steeper, inflation rises faster during booms and falls faster in recessions, which entails central banks having to act more forcefully if they want to stabilize inflation around their target. Prior analysis found astonishingly small estimates of the slope of the PC, which suggests that the curve is “flat” (or even dead). In this post, I present evidence from coauthored research showing that, contrary to the conventional view, the Phillips curve is alive and steep, and it captures inflation volatility remarkably well once real marginal cost is used instead of standard real economic activity measures. |
| Keywords: | price level; inflation; business fluctuations; Phillips curve |
| JEL: | E31 E32 |
| Date: | 2026–02–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102400 |
| By: | Linlin Niu; Haoran Bai; Zhiwu Hong |
| Abstract: | The U.S. Treasury yields reached a 20-year high under acute inflation pressure in the post-pandemic era amid aggravated geopolitical conflicts. To quantify the underlying effects of regional geopolitical risks (GPRs) of key U.S. strategic interests, we employ an extended affine term structure model with unspanned GPRs and conventional macroeconomic drivers. We find that GPR shocks, particularly those manifesting U.S.-China rivalry, contribute more to expectations and variations of inflation and yields than shocks to U.S. macroeconomic variables. The results warn on the adequacy of monetary policy in curbing inffation in a fragmented global order with escalating GPRs. |
| Keywords: | geopolitical risk; yield curve; inflation; term structure model |
| JEL: | C32 E31 E43 E44 F51 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:wyi:wpaper:002616 |
| By: | Serpil Kahraman (Yasar University, Izmir, Turkiye); Merve Keser (Yasar University, Izmir, Turkiye) |
| Abstract: | Central Banks have traditionally managed and conducted monetary policy tools to achieve macroeconomic policy goals. Green Central Banking is a subset of central banking that acknowledges the profound impact of climate change on the economy. The measures undertaken by central banks to address these environmental issues are referred to as “green central banking.†Since the European Central Bank (ECB) introduced this concept in July 2021, central banks have begun to integrate this tool into monetary policy. This study provides a comprehensive overview of central banks' roles and actions in the context of environmental issues through a systematic literature review using WoS and Scopus databases. The results indicate that two main research questions are extensively examined by a large body of literature: (1) whether green monetary policies have an impact on climate change, and (2) whether climate change has an impact on green central banking as a converse causality. The existing literature tends to support the view that there is a bidirectional interaction between green central banking and climate change. It can also be said that the nascent body of literature lacks complementary research questions on how the greening of central banks, considering the costs and benefits of the policies. Thus, the literature focuses on three key rationales: the role of climate policy on green central banking and its monetary policies, the converse interaction from green central banking to climate policy, and the bidirectional interaction between the two. |
| Keywords: | monetary policy, central banking, green central banking |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:smo:raiswp:0584 |
| By: | Simone Lenzu |
| Abstract: | Inflation does not always respond to cost and demand pressures in the same way. When shocks are small, the mapping from costs to prices is roughly proportional—double the shock, double the inflation response. But when the economy is hit by large shocks, this proportionality breaks down. As the recent surge and subsequent decline of global inflation showed, price growth can accelerate—or decelerate—by more than one-for-one relative to the size of the disturbance. Economists refer to this pattern as nonlinear inflation dynamics. In this post, I discuss what these nonlinearities mean, how they relate to the slope of the Phillips curve discussed in a companion post, and how firm-level data can help us understand the mechanisms behind them. |
| Keywords: | price level; inflation; business fluctuations; Phillips curve |
| JEL: | E31 E32 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102405 |
| By: | Vipin P Veetil |
| Abstract: | Empirical evidence suggests that there is little to no correlation between the rate of inflation and the size of price change. Economists have hitherto taken this to mean that monetary shocks do not generate much deviation in relative prices and therefore inflation does not hurt the economy by impeding the workings of the price system. This paper presents a production network model of inflationary dynamics in which it is well possible for inflation to have near-zero correlation with the size of price change yet cause significant distortion of relative prices. The relative price distortion caused by inflation critically depends on the spectral gap, degree distribution, and assortativity of the production network. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.18544 |
| By: | Xuesong Huang; Todd Keister |
| Abstract: | We study how the type of money used in blockchain-based trade affects interest rates, investment, and welfare. Stablecoins in our model are backed by safe assets, while banks issue deposits (both traditional and tokenized) to fund a portfolio of safe and risky assets. Deposit insurance creates a risk-shifting incentive for banks, and regulation increases banks’ costs. If regulatory costs are large and risk-shifting is limited, we show that allowing only tokenized deposits to be used in crypto trade raises welfare by expanding bank credit. If regulation is lighter and the risk-shifting incentive is strong, in contrast, allowing only stablecoins is desirable despite crowding out credit. In between these cases, allowing stablecoins and tokenized deposits to compete is optimal. The tradeoffs between these policies are reminiscent of both historical and recent debates over the desirability of narrow banking. |
| Keywords: | stablecoins; money creation; narrow banking; bank regulation |
| JEL: | E42 G21 G28 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102411 |
| By: | Mohamed Safouane Ben Aıssa (University of Tunis ElManar); Firas Nfikha (University of Tunis ElManar) |
| Abstract: | We evaluate the transmission of monetary policy in an economy characterized by heterogeneous households and a sizable informal sector. We construct a consumption-based measure of informality at the household level which we use to estimate the Informality Engel Curve. The results are then reproduced endogenously in a dual-sector Heterogeneous Agent New Keynesian (HANK) Model. We test the effects of informality across different model specifications and at different informal sector sizes and then estimate the model’s dynamics for the Tunisian economy using the Bayesian method in a novel framework. Our results reveal that: (i) Monetary shocks from our HANK model are stronger and more effective, in terms of sacrifice ratio, than in other specifications, but within our model, the prevalence of informality dampens transmission and increases its cost. (ii) Accounting for informality doesn’t appear to undermine the transmission of monetary shocks in Tunisia but restrictive policy favors the expansion of the informal sector and affects informal workers the least. (iii) Wealth remains the primary factor influencing household responses to monetary shocks, but employment status is particularly significant among lower-wealth households. |
| Date: | 2025–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1820 |
| By: | Joana Sousa-Leite |
| Abstract: | This paper studies how banks’ balance sheets before the negative interest rate policy (NIRP) shaped credit supply and loan pricing around the ECB’s first move into negative territory in June 2014. We identify heterogeneous credit responses by comparing the lending decisions of different banks lending to the same firm. We find that banks with higher reliance on deposit funding prior to NIRP contract credit supply and cut loan rates more over the subsequent months, consistent with deposit rate rigidity and banks’ funding structure shaping the adjustment of both credit supply and loan pricing when policy rates turn negative. In contrast, banks with stronger liquidity positions expand credit more and cut loan rates less, suggesting that securities holdings provide a buffer that supports lending under negative policy rates. The effects on lending volumes are concentrated among ex-ante safer firms, indicating that balance sheet constraints primarily operate through credit reallocation towards borrowers with greater access to alternative funding sources. |
| Keywords: | monetary policy, negative interest rate policy, bank lending channel, deposits channel, portfolio rebalancing. |
| JEL: | E50 E52 E58 G21 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp04042026 |
| By: | McCann, Ewen; Giles, David |
| Keywords: | Agribusiness, Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:262891 |
| By: | McClung, Nigel |
| Abstract: | This note offers a brief snapshot of selected insights from the literature on monetary-fiscal interactions and their implications for inflation-targeting central banks in an era of high public debt. It highlights the fiscal foundations of price stability and potential coordination issues when multiple fiscal authorities exist. The discussion emphasizes the challenges of active fiscal policy, as well as practical suggestions for incorporating fiscal scenarios into central bank policy analysis. |
| JEL: | E31 E52 E62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofecr:335928 |
| By: | Silvia Miranda-Agrippino; John C. Williams |
| Abstract: | The predictability of monetary policy surprises based on past, public information has been interpreted in two related yet fundamentally different ways. The “Fed information effect” posits that it arises due to markets updating their view of the economy, based on signals implicitly revealed by the FOMC. The “Fed reaction to news” explanation posits that markets update their view of the FOMC’s reaction function instead. We show that interest rate surprises calculated around macroeconomic releases exhibit the same predictability pattern as monetary policy surprises. Since these occur at a time when there is no scope for markets to learn about the Fed’s behavior, this pattern suggests an additional information channel unrelated to FOMC communication. |
| Keywords: | monetary policy surprises; Fed information effect; Fed reaction to news; Interest rate surprises; monetary policy premium |
| JEL: | E44 E52 E58 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102410 |
| By: | Eric Fortier (PhD Candidate, Simon Fraser University) |
| Abstract: | This study examines how specification choices in local projections influence the estimation of impulse responses to monetary policy shocks. Using monthly U.S. data from 1983 to 2007 and the Aruoba and Drechsel (2024) shock series, I systematically compare levels and long-differences specifications across 12 control sets and multiple lag lengths. The results are evaluated both qualitatively by benchmarking impulse responses against theory, standard beliefs, and prior evidence and quantitatively, using information criteria (AIC, BIC, CV). The findings show that the long-differences specification produces distorted long-term dynamics. In contrast, the levels specification, when paired with a robust control set, generates well-behaved responses. These results stress the importance of careful specification and provide practical guidance for researchers applying local projections to monetary policy shocks. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:sfu:sfudps:dp26-01 |
| By: | Keefer, Philip; Ronconi, Lucas |
| Abstract: | Why are inefficient policies popular? One explanation is incomplete voter information. Evidence from survey experiments in Argentina points instead to inattention. The experiments explore voter evaluations of two anti-inflation policies, price controls and limits on monetary emission. Inattentive individuals should favor policies with simple, easily validated narratives, such as price controls; survey respondents considered price controls to be at least as effective in controlling inflation as limits to monetary emission. Two experimental treatments encouraged respondents to consider more complex policy narratives. Both increased respondent evaluations of the effectiveness of monetary policy relative to price controls. Inattention better accounts for these results: effects were independent of respondent knowledge and beliefs; larger for the evaluation of the more complex policy; and strongest for respondents who were more attentive to the survey. Treatment effects are also independent of the strength of partisan identity and ideological beliefs, indicating that these are low-cost cues for inattentive voters rather than signals of immutable beliefs regarding appropriate policies. The results underscore the role of attention in the spread of political narratives and their influence on voter behavior. |
| Keywords: | rational inattention;cognitive effort;attention allocation;Voter Behavior;Populism |
| JEL: | C90 D72 D80 D83 E71 P30 P50 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14480 |
| By: | Costas Lapavitsas (Department of Economics, SOAS University of London. Russell Square, London WC1H 0XG, UK) |
| Abstract: | Contemporary imperialism is a hierarchical regime of global accumulation enforcing exploitation and subordination without colonial territories. It rests on the structural pairing of internationalised productive capital (multinational-enterprise-led production chains) with globalised financial capital, articulated through the dollar as world money. The article shows that the decisive hinge of domination lies in the monetary hierarchy itself, which became unmistakable after the Great Crisis of 2007–09 as the financialisation of capitalism shifted into a new phase – Financialisation Mark II. Balance-sheet discipline, hierarchical liquidity allocation by the Federal Reserve, payment system control, sanctions, and collateral exactions now function alongside territorial coercion as mechanisms of surplus transfer and crisis adjustment, with monetary instruments predominating at critical moments. Absent a rival world money, productive ascent by peripheral challengers cannot dislodge US hegemony prolonging a coercive interregnum and raising the risk of world war. |
| Keywords: | Contemporary imperialism, Financialisation Mark II, Dollar hegemony, Surplus transfer coercion |
| JEL: | E42 F02 F51 F65 P16 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:soa:wpaper:272 |
| By: | Burcu Duygan-Bump; R. Jay Kahn |
| Abstract: | Between December 2005 and December 2025, the Federal Reserve's balance sheet grew from about $800 billion to roughly $6.5 trillion—an increase from around 6 percent to 21 percent of GDP. This expansion primarily reflected two policy decisions by the FOMC. |
| Date: | 2026–01–14 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:102361 |
| By: | Siklos, Pierre L.; Bohl, Martin T. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263798 |
| By: | Li Tuobang |
| Abstract: | Modern macroeconomic monetary theory suggests that the labor share of income has effectively become a core macroe-conomic parameter anchored by top policymakers through Open Market Operations (OMO). However, the setting of this parameter remains a subject of intense economic debate. This paper provides a detailed summary of these controversies, analyzes the scope of influence exerted by market agents other than the top policymakers on the labor share, and explores the rationality of its setting mechanism. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.13675 |
| By: | Karen Dynan (Peterson Institute for International Economics); David Wilcox (Peterson Institute for International Economics) |
| Abstract: | he COVID era inflation surge was shaped by an unusual confluence of shocks and policy responses. It nonetheless raises enduring questions about the interaction of demand, supply, expectations, and policy frameworks that decision-makers are likely to confront again. In this Policy Brief, Dynan and Wilcox distill lessons from a broad body of work produced as part of the Peterson Institute for International Economics' Understanding the COVID Era Inflation project, which brought together an extensive group of experts to examine the different facets of the inflation surge. Dynan and Wilcox synthesize the group's insights to recount the origin of the surge, evaluate the key causes and consequences, discuss the limits and strengths of policy tools, and offer lessons for policymakers to deal with future undesirable increases in inflation. Key Takeaways Inflation surged globally, but its specific underlying drivers differed across economies, with implications for policy. In the United States, excess demand combined with inelastic supply to generate the inflation surge. On the fiscal side, the difficulty of identifying real-time capacity constraints strengthens the case for greater reliance on automatic stabilizers. On the monetary side, in contrast, policy flexibility is especially critical in environments when uncertainty is elevated, and forecasting errors are likely. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:iie:pbrief:pb26-3 |
| By: | Daniil Bargman; Francesca Medda; Akash Sedai Sharma |
| Abstract: | This paper re-examines the empirical Phillips curve (PC) model and its usefulness in the context of medium-term inflation forecasting. A latent variable Phillips curve hypothesis is formulated and tested using 3, 968 randomly generated factor combinations. Evidence from US core PCE inflation between Q1 1983 and Q1 2025 suggests that latent variable PC models reliably outperform traditional PC models six to eight quarters ahead and stand a greater chance of outperforming a univariate benchmark. Incorporating an MA(1) residual process improves the accuracy of empirical PC models across the board, although the gains relative to univariate models remain small. The findings presented in this paper have two important implications: First, they corroborate a new conceptual view on the Phillips curve theory; second, they offer a novel path towards improving the competitiveness of Phillips curve forecasts in future empirical work. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.11601 |
| By: | Smyth, David J.; Woodfield, Alan E. |
| Keywords: | Agribusiness, Risk and Uncertainty |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:262940 |
| By: | Smyth, David J.; Woodfield, Alan E. |
| Keywords: | Agribusiness, Risk and Uncertainty |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:269544 |
| By: | Bojan Shimbov (University Jaume I, Castellon); Oliver Morrissey (University of Nottingham); Maite Alguacil (University Jaume I, Castellon) |
| Abstract: | Purpose Remittances are a significant source of household income and foreign exchange inflows for the Republic of North Macedonia (MKD) due to the relatively large share of workers who have emigrated, mostly to the EU. This paper analyses data from a survey of almost 2000 households that receive remittances to investigate how households use the income. Although remittances are mostly used for consumption spending, a specific focus of the analysis is on the almost 20% of households that invest or save the money. What are the characteristics of these households, and the determinants of the amount and share invested or saved? The paper then estimates the macroeconomic impact of remittances in terms of the effect on consumption, investment, and saving. Design/methodology/approach This paper makes use of a survey of almost 2000 households receiving remittances in North Macedonia (MKD) in 2021 to empirically investigate how the income is used and if this is related to characteristics of the migrants and households. Unfortunately, the survey was only for receiving households (it is not possible to compare with non-receiving households), data on household characteristics are limited, and it is only a cross-section (although some retrospective questions were included). The decision of how to use remittances received is analyzed by a set of discrete choice models. On the one hand, we have considered the characteristics of the households receiving the remittances (family income, employment, age, gender, ethnicity, settlement type, place of residence), and on the other hand, we have considered factors like: i) remittance timing, ii) trends, and iii) migrant’s home country attachment. For robustness checks, we have used PPLM regressions like I/S/C (%)*total RR and the Zero-inflated Model. Findings North Macedonia is facing a growing trend of migration, which, if not addressed, can potentially cause significant socio-economic disruptions in the country going forward. The stock of migrant population to total population ratio stood at 37 percent in 2020, which is the third highest in the region after Albania and Bosnia and Herzegovina, and well above the average for developing countries. Most of the migrants go to the EU (mostly Germany and Italy) or Switzerland, as well as to Turkey. Finally, migrants from North Macedonia tend to be young people in their most productive years, which may pose serious challenges to development going forward. Figure 1: Stock of migrants from North Macedonia and migration rate |
| Keywords: | Migration, Remittances, Economic growth |
| JEL: | F22 F24 F43 E21 |
| Date: | 2025–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:aoh:conpro:2025:i:6:p:293-298 |