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on Monetary Economics |
| By: | Michal Marencak (National Bank of Slovakia); Giang Nghiem (Leibniz University Hannover) |
| Abstract: | Using ECB Consumer Expectations Survey microdata, we construct household-level inflation measures for the euro area. Four findings emerge. (1) Personal inflation varies systematically across households, countries, and over time, with disparities widening markedly during the 2022–23 inflation surge. (2) Greater dispersion in personal inflation is closely associated with stronger disagreement in both perceived and expected inflation. (3) A one-percentage-point increase in personal inflation raises one-year-ahead inflation expectations by up to 0.2 percentage points. (4) Personal inflation affects consumption primarily through inflation expectations channel. |
| JEL: | D30 D84 E31 E52 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1125 |
| By: | Olivier De Jonghe (European Central Bank); Konstantıns Benkovskis (Latvijas Banka); Karolis Bielskis (Bank of Lithuania); Diana Bonfim (Banco de Portugal; Católica Lisbon); Margherita Bottero (Banca d’Italia); Tamás Briglevics (Central Bank of Hungary); Martin Cesnak (Národná banka Slovenska); Mantas Dirma (Bank of Lithuania); Marina Emiris (National Bank of Belgium); Pálma Filep-Mosberger (Central Bank of Hungary); Valentin Jouvanceau (Bank of Lithuania); Nicholas Kaiser (Central Bank of Ireland); Dmitry Khametshin (Banco de España); Tibor Lalinskı (Národná banka Slovenska); Viola M. Grolmusz (Central Bank of Hungary); Laura Moretti (Central Bank of Ireland); Arturs Janis Nikitins (Latvijas Banka); Angelo Nunnari (Banca d’Italia); Maria Rodriguez-Moreno (Banco de España); Elitsa Stefanova (European Central Bank); Lajos Tamás Szabó (Central Bank of Hungary); Karlis Vilerts (Latvijas Banka); Sujiao Emma Zhao (Banco de Portugal) |
| Abstract: | We study heterogeneity in households’ credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-2024 using granular credit register data. We first document substantial between- and withincountry variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the pass-through of the ECB’s recent tightening cycle to household borrowing costs, and assess its heterogeneous impact across households. Pass-through is nearly complete for mortgages (around 0.9) but considerably weaker for consumer credit (around 0.4). While mortgage pass-through is relatively homogeneous across countries, consumer credit shows pronounced cross-country differences that cannot be explained by borrower or loan characteristics. Younger households face stronger mortgage pass-through but weaker consumer credit pass-through relative to older borrowers, and longer maturities areassociated with stronger pass-through in both credit markets. |
| JEL: | E52 G21 D14 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1131 |
| By: | Barauskaitė Griškevičienė, Kristina; Brand, Claus; Nguyen, Anh Dinh Minh |
| Abstract: | We analyze the sources of the pandemic-era inflation surge in the euro area using a Bayesian vector autoregression (BVAR) model. By applying narrative, sign, zero, and inequality restrictions, this study is the first that jointly analyzes the inflationary effects of energy and non-energy supply and policy and non-policy demand factors, including fiscal policy, conventional and unconventional monetary policy. Factoring in that energy price dynamics also responded to aggregate demand conditions, we find that the pandemic-era inflation surge in the euro area was driven by a combination of supply and demand factors. Energy-related supply side constraints, even if less important than often estimated, were a key factor in the run up of inflation. Fiscal and monetary policies were accommodative but not the dominant drivers. JEL Classification: C11, C32, E31, E52 |
| Keywords: | energy supply, fiscal policy, inflation, monetary policy, pandemic |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263201 |
| By: | Amado, Lindorf |
| Abstract: | Standard economic models often treat money as a social construct independent of physical laws. This paper proposes a unified thermodynamic theory of value, positing that monetary systems are information protocols evolved to maximize entropy production in dissipative structures (civilizations). By analyzing 10, 000 years of economic history—from the Neolithic era to the Digital Age—we demonstrate a strict linear relationship (R2 = 0:9934) between the Real Cost of Energy (E) and the Granularity of Money (G). We derive the Equation of Value, G / E, where the value of the accounting unit scales directly with the energy cost of labor. This framework resolves historical anomalies such as the collapse of the Roman Denarius and the failure of the 20th-century Gold Standard, interpreting them not as policy errors, but as thermodynamic phase transitions. The theory predicts that the current decline in the marginal cost of energy (via AI and renewables) necessitates a transition to a monetary substrate with near-infinite divisibility and zero friction. |
| Keywords: | Thermodynamics, Monetary Theory, Entropy, Granularity, Econophysics, AI, Gold Standard, Collapse, Deterministic |
| JEL: | B52 C10 E42 N10 O33 |
| Date: | 2025–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128172 |
| By: | Cassim, Lucius; Mallick, Debdulal |
| Abstract: | We investigate whether public debt in least developed countries (LDCs) is serviced through fiscal adjustments or by triggering inflation. Using time series data from LDCs for the 1980-2023 period and employing the Bayesian structural vector auto-regressive model, we estimate the response of public liabilities to positive surplus shocks. We find support for the latter hypothesis of the Fiscal Theory of Price Level that these countries are characterized by non-Ricardian fiscal regimes. One important implication of our findings is that the conventional monetary policy may not be effective in stabilizing inflation in these countries. In contrast, when we replicate the same exercise for developed countries, we find support for the former hypothesis. We further explore the role of institutional development in explaining the fiscal (in)discipline in LDCs. |
| Keywords: | Non-Ricardian fiscal regime; Fiscal theory of price level; Bayesian SVAR; Central bank; Monetary policy; Least developed countries; Institutions. |
| JEL: | C11 C32 E02 E58 E62 E63 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127592 |
| By: | Ali, Amjad; Anjum, Rana Muhammad Adil; Irfan, Muhammad |
| Abstract: | This study investigates the impact of different exchange rate regimes on financial stability across both developed and developing countries from 2005 and 2023. Exchange rate policy is a critical component of a nation's macroeconomic framework, influencing key financial indicators and institutional dynamics. Employing a mixed-methods approach, data sources are the International Monetary Fund, World Bank, and Bank for International Settlements. The regression analysis reveals that developed economies tend to perform better under floating exchange rate regimes, owing to stronger institutional frameworks and greater policy flexibility. Furthermore, the study highlights the significant influence of regime type on financial indicators such as inflation, foreign reserves, and current account balances. It underscores the importance of institutional strength, credible monetary policy, and effective governance in the successful implementation of exchange rate regimes. These findings offer valuable insights for policymakers in tailoring exchange rate strategies to national economic contexts. The study recommends that countries align their regime choices with local economic conditions, reinforced by disciplined macroeconomic management and enhanced transparency. |
| Keywords: | Exchange Rate Regimes, Financial Stability, Monetary Policy, Inflation Volatility |
| JEL: | E4 E5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127533 |
| By: | Bahaj, Saleem; Reis, Ricardo |
| Abstract: | While the USD dominates cross-border transactions today, a few other currencies are also used internationally. This paper shows that central bank policies that reduce the volatility of borrowing costs for foreign firms in domestic currency can trigger a jumpstart of the currency’s international status, because firms’ choices of the currency of their working capital complement their sales invoicing. Empirically, the creation of swap lines by the People’s Bank of China between 2009 and 2018 supports this theoretical claim. Signing a swap line with a country is associated with an increase in the probability that the country would use the RMB at all by 12%, and a four-fold increase in the value of the country’s RMB payments. |
| Keywords: | lender of last resort; internationalization; dollar dominance |
| JEL: | E44 E58 F33 F41 G15 |
| Date: | 2026–02–27 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128001 |
| By: | Ondrej Kusenda (National Bank of Slovakia); Michal Marencak (National Bank of Slovakia) |
| Abstract: | During the 2022-2023 inflation surge, the gap between households’ inflation expectations and realized inflation in Slovakia widened from 7 to 17 p.p., contradicting the view that greater attention to inflation might mitigate the upward bias. Using LASSO and other machine-learning variableselection techniques, we find that movements in food prices which rose faster than headline inflation are strongly associated with the upward bias increase. This evidence highlights selective attention in expectation formation and suggests that, when sectoral price dynamics greatly exceed aggregate inflation, central banks might assign those sectors greater weight in their inflation target. |
| JEL: | C14 C38 C52 D83 D84 E31 E52 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1124 |
| By: | Mr. Eugenio M Cerutti; Melih Firat; Martina Hengge; Takaaki Sagawa |
| Abstract: | We develop novel measures of stablecoin shocks and use them to identify the causal effects of stablecoin adoption on U.S. financial markets. Combining a daily narrative dataset of stablecoin-specific news with changes in the combined market capitalization of USDC and USDT, we measure high-frequency movements in stablecoin market capitalization and implement heteroskedasticity-based identification within an event-study and SVAR-IV framework. Stablecoin demand shocks have triggered persistent declines in short-term Treasury yields, a depreciation of the U.S. dollar, and gradual spillovers into crypto and equity markets. We also document heterogeneous effects across firms: payment providers benefit from greater stablecoin adoption, whereas banks—including community and small banks—show no evidence of priced disintermediation risk. Our findings highlight stablecoin demand as a novel channel of asset-market transmission. |
| Keywords: | Stablecoin; Payment Systems; Crypto; Financial Markets |
| Date: | 2026–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/044 |
| By: | Marijn A. Bolhuis; Rui Mano; Hedda Thorell |
| Abstract: | This paper studies the macroeconomic consequences of undermining central bank independence through politically motivated transitions of central bank governors. Leveraging a new panel dataset covering 132 central bank governor transitions in 28 advanced and emerging market economies since 2000, we document the timing, frequency, and political drivers of these leadership changes. Tenures of governors with politically motivated appointments are associated with higher and more volatile inflation, realized and expected. Professional forecasters also tend to expect such governors to be more dovish when responding to shifts in inflation. Using local projections in a difference-in[1]difference setting, we find that following the announcement of a politically motivated governor transition nominal and real short rates decline and expected and realized inflation rise. At the same time, GDP growth increases in the aftermath of such transitions, consistent with an expansionary short-run macroeconomic impulse. These effects are more pronounced when the incoming governor professes unorthodox views on monetary policy, suggesting that political interference in central bank leadership induces a temporary growth–inflation trade-off. Long-term inflation expectations only rise in the case of unorthodox governors with politically motivated appointments, suggesting costs to central bank credibility are much more pronounced in those cases. |
| Keywords: | Central bank independence; political interference; central bank governors; monetary policy credibility; inflation dynamics |
| Date: | 2026–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/040 |
| By: | Pablo Aguilar (BANCO DE ESPAÑA AND ECB); Rubén Domínguez-Díaz (BANCO DE ESPAÑA); José-Elías Gallegos (BANCO DE ESPAÑA); Javier Quintana (BANCO DE ESPAÑA) |
| Abstract: | We analyze how production networks transmit foreign price shocks and reshape monetary policy trade-offs in an open-economy New Keynesian model with domestic and international input–output linkages. Analytically, we show that closing the output gap does not generally stabilize domestic inflation, as sector-level terms-of-trade movements and trade imbalances become additional drivers of inflation dynamics. Quantitatively, we study an international energy price shock in a model calibrated to major euro area countries and their trade partners. We find that production networks significantly amplify the cumulative headline inflation response and substantially worsen monetary policy trade-offs, as measured by the sacrifice ratio. |
| Keywords: | open economy, production networks, New Keynesian, monetary policy |
| JEL: | E31 E32 E52 E70 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2607 |
| By: | Juan Camilo Laborde Vera (Universidad de los Andes) |
| Abstract: | How does the current account respond to a monetary policy shock? The answer to this perennial question is theoretically ambiguous and empirical evidence is particularly scarce in emerging markets due to challenges in identifying exogenous policy variation. I construct a novel dataset of monetary policy shocks using analysts’ forecasts of policy rate decisions for an unbalanced panel of five emerging market economies in Latin America during 1999-2024. I estimate impulse response functions using local projections and find that a monetary tightening shock leads to a “J curve” pattern in the current account: a short-run contraction followed by a medium-run expansion. The response is heterogeneous in the cross-section and depends on the strength of the exchange rate appreciation resulting from the monetary contraction and the country’s export-import structure. The panel estimation results show that exports and imports exhibit a hump-shaped pattern and decline by 4.5 and 5.9 per cent, respectively, as a result of a one-percentage-point policy tightening shock. The results are robust to using alternative measures of high-frequency monetary shocks. |
| Keywords: | Monetary Policy, Local Projections, Monetary Policy Shocks, Current Account Adjustment, International Macroeconomics |
| JEL: | E52 F32 F41 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:022354 |
| By: | Schilling, Linda |
| Abstract: | This paper studies why lender-of-last-resort support can fail to stop bank runs. In a nominal bank-run model with equity and multiple banks, I show that delayed Emergency Liquidity Assistance (ELA) shifts losses onto patient depositors and can trigger panic-driven withdrawals, even with sound assets and unlimited central-bank liquidity. The mechanism is a crisis-contingent, economy-wide inflation tax that insures early withdrawals while taxing those who stay, and redistributes resources across banks through the price level. The results highlight that ELA timing and fiscal design are critical for stability and can make regulatory interventions destabilizing rather than stabilizing. |
| Keywords: | Lender of Last Resort, Emergency Liquidity Assistance, financial regu- lation, bank runs, policy effectiveness, bank resolution |
| JEL: | E50 G3 G33 G38 |
| Date: | 2026–02–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128236 |
| By: | Oktay Özden; Alp Erinç Yeldan |
| Abstract: | This paper explores counterfactual scenarios using a two-household stock-flow consistent (SFC) model of the UK economy. Following the COVID-19 pandemic, the UK experienced a sharp surge in inflation, to which the Bank of England responded with monetary tightening measures starting 2023. Scholars have argued that this response was relatively late, limiting its effectiveness. Our analysis shows that post-COVID inflation was primarily driven by import price shocks, further constraining the impact of monetary policy. Counterfactual scenarios indicate that even earlier implementation of monetary tightening would have yielded limited reductions in inflation and could have worsened income distribution. In contrast, scenarios incorporating effective income policies reveal that if such measures had been introduced earlier by 2022, inflation could have been reduced by over 2 percentage points, while significantly improving income distribution. These findings highlight the critical role that targeted income policies could play, alongside conventional monetary interventions, in addressing post-pandemic inflation. |
| Keywords: | post-COVID inflation, stock-flow consistent model, incomes policy, monetary policy, UK economy |
| JEL: | E12 E17 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2606 |
| By: | Alicia Aguilar (Banco de España, Madrid); Adriana Lojschová (National Bank of Slovakia); Carlos Canizares Martınez (Banque Centrale du Luxembourg, Luxembourg) |
| Abstract: | This paper estimates the effects of standard monetary policy shocks on housing and other macro variables in Slovakia, a CESEE country. For that purpose, we use a non-linear local projection model which uncovers asymmetries in these effects around three different dimensions: high versus low economic growth, interest rates and inflation. The main findings in this study are as follows. First, we often find no evidence of standard monetary policy eliciting a contractionary response in house prices or housing investment. Second, evidence is weakest during recessions and periods of low interest rates or low inflation. Third, these findings may be linked to the inability of monetary policy to trigger significant contractionary effects on household lending, which in turn may be linked to the effective lower bound on interest rates, the predominance of fixed-rate mortgages in Slovakia, or interaction between monetary and macroprudential policy. We also provide a discussion on the possible country characteristics that might drive these results and policy implications. |
| JEL: | C32 C36 E42 E52 E58 R21 R31 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1134 |
| By: | Federico Favaretto and Donato Masciandaro |
| Abstract: | This chapter, using a political economy approach, uncovers the relationships between populism, on the one side, and monetary and banking policies, on the other side. The analysis is based on three assumptions. First, both monetary and banking policies can produce redistributive effects. Second, political consensus can be associated with redistribution. Third, populists, being politicians, are myopic players, hence heavily influenced by citizens’ financial and group heterogeneities. Given these assumptions, two different models are studied. Concerning monetary policies, a nexus between populism and central bank (in)dependence (CBI) can emerge where the populist aim to influence the monetary policy design after a macroeconomic shock that requires public bailouts. Regarding banking policy, our chapter defines populism as Democratic Rioting, in which citizens are assumed to be heavily influenced in their policy choice by psychological group dynamics. This explains why populist consensus emerges and may deliver different policy choices depending on non-banking news such as public welfare choices and immigration. |
| Keywords: | Populism, Political Economics, Monetary Policy, Banking Policy, Inequality, Central Bank Independence, Behavioural economics |
| JEL: | D72 D78 E31 E52 E58 E62 E71 P16 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp26267 |
| By: | Mick Dueholm |
| Abstract: | Inflation expectations were highest among people in Arkansas, Mississippi and Tennessee in the years following the end of the COVID-19 recession. |
| Date: | 2024–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00100:102732 |
| By: | Changaya, Frederick; Comstock, Andrew; De Weerdt, Joachim; Duchoslav, Jan; Jamali, Andrew; Kamanga, Frank; Kumchulesi, Grace; Pauw, Karl |
| Abstract: | The current exchange rate regime in Malawi is untenable. It results in multiple effective parallel rates, which impose significant costs on the economy and the daily lives of citizens. A key concern underpinning the existence of the regime is that its removal would trigger rampant inflation and worsen livelihoods. However, the widespread importation of both food and nonfood products at informal exchange rates means that the average citizen derives little real benefit from the maintenance of the official rate. After two major fuel price hikes in recent months, pump prices have nearly converged with the cost that would prevail at market-determined exchange rates. Drawing on a combination of price multiplier and food demand simulations, this policy note shows that an exchange rate regime rationalization – through devaluing the official exchange rate to eliminate the informal premium and allowing the Malawi kwacha to trade at market-clearing levels – would not lead to runaway inflation or harm household welfare. Recent fuel price increases – in October 2025 and January this year – have pre-emptively absorbed much of the inflationary impact that would have been associated with exchange rate reform. Our analysis documents the direct, short-run effects of exchange rate unification on domestic prices and finds them to be relatively modest. Longer-term economic growth and sustained price stability will hinge on the effective execution of a coherent set of complementary reforms. Exchange rate unification is a necessary component of this package, but it is not sufficient. Implemented in isolation or treated as a one-off devaluation followed by business as usual, it will bring little relief. It must be accompanied by sound fiscal and monetary policy and sustained export growth to restore macroeconomic stability. We do not discuss the trade-offs inherent to these accompanying measures, as they have been addressed at length in AfDB et al. (2025) and Engel et al. (2025). Critically, there must be a credible and durable switch toward a more flexible and transparent exchange rate regime. It will take time for exports and growth to pick up after a devaluation, and whether they do will depend on economic actors believing that macroeconomic conditions will remain stable over the lifetime of their investments. It will require careful preparation to get the cocktail right. Politically, the current administration might just have one shot at this: failure will make future reform attempts much harder. |
| Keywords: | exchange rate; prices; controlled prices; price policies; Malawi; Africa; Sub-Saharan Africa; Eastern Africa |
| Date: | 2026–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:impass:181860 |
| By: | Felipe Alves; Giovanni L. Violante |
| Abstract: | As the economy emerges from a crisis, macroeconomic policy confronts a dilemma: a protracted stimulus can foster a more inclusive labor market recovery, yet risks igniting inflation that ultimately undermines workers’ welfare through real income erosion. This tension amplifies in the presence of the ZLB and aggregate capacity constraints. We embed this insight into a quantitative model of the US economy. We study how monetary and fiscal policies managed this inflation-inclusion trade-off after the pandemic, contrasting actual outcomes with counterfactual scenarios. Our experiments yield five findings: (i) the trade-off was unusually difficult because policy was squeezed between these two constraints; (ii) inflationary pressures arose from the joint deployment of prolonged monetary and fiscal stimulus; either policy alone would have produced milder price dynamics; (iii) either inclusive fiscal policy or inclusive monetary policy in isolation would have been sufficient to contain the negative labor market hysteresis at the bottom of the distribution; (iv) inclusive fiscal policy combined with a more traditionally inflation-focused central bank would have achieved higher welfare for the vast majority of households; (v) welfare effects reflect mostly corrections of incomplete-market inefficiencies rather than gains from aggregate stabilization. |
| JEL: | E21 E24 E31 E32 J24 J30 J64 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34894 |
| By: | Aman, Muhammad; Ali, Amjad; Audi, Marc |
| Abstract: | This research investigates the potential role of Bitcoin as a hedge against inflation across various countries, utilizing data spanning from 2015 to 2024. As central banks confront the inflationary pressures intensified by the global pandemic and fluctuations in international money supply, Bitcoin has gained increased attention. Proponents of Bitcoin contend that, similar to gold and in contrast to government-issued currencies, it is decentralized and has a limited supply, which theoretically protects it from inflationary erosion. However, due to the high volatility and speculative nature of cryptocurrencies, their practicality for facilitating monetary transactions remains contentious. Grounded in the positivist paradigm, this study employs ordinary least squares regression, dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity, panel fixed effects, and quantile regression methods, using monthly data on Bitcoin returns, inflation levels, and financial benchmarks across both developed and emerging economies. Empirical findings reveal that Bitcoin returns exhibit no significant correlation with inflation, either across the full sample or within advanced economies. The evidence explains that Bitcoin's valuation responds more to variables like exchange rates, interest rates, and speculative investor behavior than to inflation itself. Comparative performance analysis indicates that Bitcoin underperforms traditional inflation hedging instruments. During inflationary episodes, assets such as gold and Treasury Inflation-Protected Securities offer more reliable financial protection than Bitcoin. The study concludes that while Bitcoin does not effectively hedge against inflation, it may serve as a risk-diversification tool within portfolios under specific conditions. Due to its volatility, regulatory limitations, and weak inflation linkage, Bitcoin remains unsuitable for integration into conventional central banking frameworks. These insights offer practical implications for investors, portfolio managers, and policymakers navigating inflationary periods. Although Bitcoin may serve niche purposes, it should not be equated with traditional risk-hedging financial assets. |
| Keywords: | Bitcoin, Inflation Hedge, Cryptocurrency, Emerging Markets |
| JEL: | E4 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127489 |
| By: | Meghana Ayyagari; Vojislav Maksimovic; Rodimiro Rodrigo; Ariel Weinberger |
| Abstract: | The yen depreciation from 2012–2015 reduced robot prices for U.S. firms. Paradoxically, financially constrained firms dramatically increased adoption relative to their unconstrained peers. We rationalize this with a collateral model: robots are pledgeable assets requiring non-pledgeable intangibles, raising the effective cash invoice for constrained firms and amplifying their elasticities. Linking robot and automation machinery imports to Compustat, we find constrained firms are twice as responsive to exchange rate and interest rate shocks, with capital prices dominating (45-60% larger) borrowing costs. Results reveal a collateral channel reallocating technology adoption toward constrained incumbents, with implications for technology diffusion and competitive dynamics. |
| Keywords: | automation, robots, financial constraints, investment, prices of capital goods, technology adoption, monetary policy, foreign exchange |
| JEL: | E22 E52 F31 L10 O14 D22 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12526 |
| By: | Lena Best (Kiel University); Benjamin Born (University of Bonn); Manuel Menkhoff (University of Copenhagen) |
| Abstract: | We study how firms’ investment responds to interest rate changes based on a German firm survey, combining hypothetical vignettes, open-ended questions, and rich firm data. We estimate a 7 percent semi-elasticity of investment to loan rates—about half the total corporate investment response to monetary policy shocks. Adjustment is heterogeneous: many firms do not react, citing cash buffers or a lack of opportunities, while adjusters revise sharply. Managers’ narratives about monetary policy transmission to investment emphasize direct borrowing-cost effects and rarely mention general-equilibrium channels. Local projections show this direct channel is central to output dynamics after monetary policy shocks. |
| Keywords: | Interest rates, firm investment, survey experiment, monetary policy, narratives, hurdle rates, aggregate investment |
| JEL: | D25 E43 E52 G31 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:394 |
| By: | Kaori Ochi (Bank of Japan) |
| Abstract: | Following the COVID-19 pandemic, the surge in inflation which defined its aftermath created a heightened interest amongst academics and policy makers to identify the structural factors of inflation dynamics. Against this backdrop, this paper uses a structural vector autoregression (SVAR) with narrative sign restrictions to characterize how the inflation episode of the COVID-19 pandemic compared across Japan and the U.S. The findings are threefold: (1) Japan and the U.S. share similar cyclical patterns in the sense that the initial inflation run-up was driven by supply and global shocks, followed by pent-up demand factors, which ultimately led to inflationary pressures from labor market tightening shocks, (2) labor market tightness shows the non-negligible contributions on inflation for both countries, and (3) narrative sign restrictions are informative as a strategy for the identification of structural shocks. |
| Keywords: | Inflation; structural vector autoregression; labor market tightness; narrative sign restrictions |
| JEL: | C32 E31 |
| Date: | 2026–03–05 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp26e04 |
| By: | Argente, David (Yale University); Hsieh, Chang-Tai (University of Chicago); Lee, Munseob (University of California, San Diego) |
| Abstract: | Measuring aggregate inflation is subject to two opposing biases: unobserved quality and variety growth, and the use of incorrect weights when new varieties are misclassified. We show that it is possible to measure an aggregate price index free of these biases when we have a subset of products where these two errors average to zero. This procedure does not require us to distinguish new from existing goods, measure quality attributes directly, or classify new varieties into the appropriate category. We implement this approach using BEA data from 1959 to 2019, approximating the official PCE price index with a CES aggregate of BEA prices at the product level. Our estimate of the inflation rate exceeds the CES aggregate of BEA prices by 0.3 to 1.0 percentage points per year on average. The aggregate bias was close to zero prior to the BLS introducing hedonic adjustments, which suggests that only adjusting for quality bias can lead to an underestimation of overall inflation, particularly in quality-adjusted categories. |
| Keywords: | price index, inflation |
| JEL: | D11 D12 E01 E31 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18423 |
| By: | Benk, Szilárd; Gillman, Max |
| Abstract: | This study examines how U.S. monetary policy shocks influence global asset prices by tracing their effects through real oil prices and the excess stock returns of oil-exporting nations. We show that expansionary U.S. monetary policy raises real oil prices, which in turn increase excess stock premiums in countries dependent on oil exports. These resource-driven wealth effects intensify geopolitical dynamics between the United States and major oil-exporting economies. Building on structural VAR frameworks that incorporate global oil market fundamentals, we augment the model with U.S. monetary variables, including money supply, inflation expectations, and measures of monetary policy uncertainty. Our results provide robust evidence that monetary-policy-induced oil price shocks elevate excess stock returns in oil-exporting nations, thereby identifying a new transmission channel through which U.S. policy actions shape international financial and strategic outcomes. |
| Keywords: | US monetary policy shocks; real oil prices; SVAR; oil exporting nations; excess premiums; US money supply and inflation expectations |
| JEL: | E31 E51 Q43 |
| Date: | 2026–01–04 |
| URL: | https://d.repec.org/n?u=RePEc:cvh:coecwp:2026/01 |
| By: | Wataru Takahashi (Research Institute for Economics and Business Administration, Kobe University, JAPAN); Taiji Inui (ISO/TC68, ISO20022 Payments & Securities SEG, and Citron Systems, JAPAN) |
| Abstract: | Central Bank Digital Currencies (CBDCs) are planned in many countries (central banks) and implemented in some countries. CBDCs issued as legal tender by central banks must guarantee both security and anonymity. This paper discusses network infrastructure requirements for securely transmitting digital assets having value themselves like CBDCs. For this purpose, a method to implement an infrastructure to securely transmit CBDCs using Public Key Infrastructure (PKI) is discussed. |
| Keywords: | CBDC; ADCC; Central bank; Two-tier system; PKI; DLT; CA; Digital device |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2026-06 |
| By: | Stefan Durmeier (Charles University, Institute of Economic Studies, Prague, Czech Republic); Evzen Kocenda (Charles University, Institute of Economic Studies, Prague, Czech Republic; Mendel University, Faculty of Business and Economics, Brno, Czech Republic; CESifo, Munich, Germany; IOS, Regensburg, Germany) |
| Abstract: | The COVID-19 pandemic ended a long period of subdued inflation in Japan and renewed attention to the role of expectations in the transmission of monetary policy. This paper analyzes how Japanese households formed inflation expectations between 2006 and 2022, focusing on periods of unconventional monetary policy and the pandemic shock. Using a structural vector autoregressive framework with Bayesian estimation, we examine the joint role of global energy prices, broad money growth, long-term government bond yields, and the nominal effective exchange rate. We find that expectations rise in response to global energy prices, broad money supply growth, and past expectations, while they decline with higher long-term bond yields or an appreciation of the yen. During Quantitative and Qualitative Easing (QQE), launched by the Bank of Japan in 2013, the impact of money supply remained significant, but the effect of bond yields weakened and operated only with a delay. Importantly, the model suggests early warning signals of rising inflation from 2021 onward, with expected inflation shifting during the pandemic from near zero to around 0.5 percent per quarter. These findings highlight the importance of monitoring household surveys, the continued relevance of monetary aggregates, and the limits of interest-rate channels in managing inflation expectations in Japan, while also underscoring the role of financial intermediation and banks in transmitting shocks to the broader economy. |
| Keywords: | Inflation expectations; Monetary policy; Qualitative and Quantitative easing; Bank of Japan; Banks; COVID-19 Pandemic; Structural Vector Autoregression; Bayesian Estimation |
| JEL: | C51 C54 E31 E58 F41 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_01 |
| By: | Castillo Martinez, Laura; Reis, Ricardo |
| Abstract: | Central banks have a primary goal of price stability. They pursue it using tools that include the interest they pay on reserves, the size and the composition of their balance sheet, and the dividends they distribute to the fiscal authority. We describe the economic theories that justify the central bank's ability to control inflation and discuss their relative effectiveness in light of the historical record. We present alternative approaches as consistent with each other, as opposed to conflicting ideological camps. While interest-rate setting may often be superior, having both a monetarist pillar and fiscal support is essential, and at times pegging the exchange rate or monetizing the debt is inevitable. |
| Keywords: | monetary policy; policy rules; determinacy; effectiveness |
| JEL: | E31 E43 E52 E58 E62 F31 G21 |
| Date: | 2026–03–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128408 |
| By: | Altavilla, Carlo; Boucinha, Miguel; Burlon, Lorenzo; Adalid, Ramón; Fortes, Roberta; Maruhn, Franziska |
| Abstract: | This paper studies the effects of stablecoin adoption—crypto-assets designed to maintain a stable value relative to a reference asset—on bank intermediation and the transmission of monetary policy. Using evidence from the rapid expansion of stablecoins combined with confidential granular data on euro area banks and their individual borrowers, we document three main findings. First, stablecoin adoption induces a deposit-substitution mechanism, whereby funds shift from retail bank deposits to digital assets. This reallocation increases banks’ reliance on wholesale funding and can ultimately constrain their intermediation capacity. Second, we show that stablecoins alter the passthrough of policy rates to bank funding costs and lending conditions and potentially weaken the predictability of policy actions. These effects are nonlinear and depend critically on the scale of stablecoin adoption, their design features, and their regulatory treatment. Third, we document a potential risk associated with the growing prevalence of foreign-currency-denominated stablecoins. Their diffusion is likely to increase banks’ reliance on foreign-currency wholesale funding. We show that banks with greater exposure to this source of funding exhibit a weaker loan-supply response to domestic monetary policy shocks, indicating a weakening of monetary policy transmission and a potential erosion of monetary sovereignty. JEL Classification: E52, E44 |
| Keywords: | bank lending, deposit substitution, monetary transmission, stablecoins |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263199 |
| By: | KÄ rlis Vilerts (Latvijas Banka); Sofia Anyfantaki (European Central Bank); KonstantÄ«ns Beņkovskis (Latvijas Banka); Sebastian Bredl (Deutsche Bundesbank); Massimo Giovannini (Bank of Malta); Florian Horky (National Bank of Slovakia); Vanessa Kunzmann (Deutsche Bundesbank); Tibor Lalinskı (National Bank of Slovakia); Athanasios Lampousis (Bank of Greece); Elizaveta Lukmanova (Central Bank of Ireland); Filippos Petroulakis (Bank of Greece); KlÄ vs Zutis (Latvijas Banka) |
| Abstract: | Does the maturity of the relevant risk-free rate influence the strength of monetary policy pass-through to interest rates on new loans? To address this question, we present novel empirical evidence on lending practices across all euro area countries, using AnaCredit data covering nearly seven million new loans issued to non-financial corporations in 2022–2023. We document substantial variation in (a) the prevalence of fixed- vs floating-rate loans, (b) rate fixation periods, and (c) reference rates. This variation results in lending rates being exposed to different segments of the risk-free rate yield curve which, in turn, influence their sensitivity to monetary policy changes. We show that loans linked to shorter-maturity riskfree rates experience more pronounced monetary pass-through. Importantly, this effect is not purely mechanical, as part of the effect is offset by adjustments in the premium, revealing previously less-explored heterogeneity in the pass-through to lending rates. |
| JEL: | E52 E43 G21 E58 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1123 |
| By: | Jaison R. Abel; Richard Deitz; Nick Montalbano |
| Abstract: | Businesses experienced substantial cost pressures in 2025 as the cost of insurance and utilities rose sharply, while an increase in tariffs contributed to rising goods and materials costs. This post examines how firms in the New York-Northern New Jersey region adjusted their prices in response to these cost pressures and describes their expectations for future price increases and inflation. Survey results show an acceleration in firms’ price increases in 2025, with an especially sharp increase in the manufacturing sector. While both cost and price increases intensified last year, our surveys reveal that these do not contribute to firms believing that inflation will be on the rise in the short or longer term. In fact, firms’ inflation expectations have moderated compared to what was expected a year ago. Firms now anticipate inflation of 3 percent in the year ahead, lower than what was expected last year at this time. Importantly, like last year, longer-term inflation expectations also remain well anchored. |
| Keywords: | costs; inflation; prices |
| JEL: | E31 C83 |
| Date: | 2026–03–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102873 |