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on Monetary Economics |
| By: | Bindseil, Ulrich |
| Abstract: | This paper analyses the role of layering in the architecture of money and payment systems and how recent technological innovations affect it. Layering in payments, whereby payment ledgers are hierarchical to each other, and senior ledgers allow for interoperability between junior ledgers, has historically emerged from efficiency, risk management, and governance considerations. The paper develops a framework to classify ledger hierarchies and types of payment ledgers and uses it to assess innovations including central bank digital currencies, instant payment systems, public blockchains, tokenized multi-asset platforms, expanded access of non-bank payment service providers to central bank accounts, and stablecoins. The analysis shows that many innovations do not eliminate layering but instead reorganize it, often preserving the fundamental tiered structure in which central bank money anchors the monetary system. Innovations should normally improve payment efficiency but also introduce new risks and policy challenges that must be addressed, implying the need for regulatory modernization and an evolving role for central banks in shaping payment architectures and safeguarding the singleness of money. |
| Keywords: | Layering of payment systems, Monetary architecture, Central bank money, Stablecoins, Tokenization and payment infrastructures |
| JEL: | E42 E58 G21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:339609 |
| By: | Martin, Reiner; Klacso, Jan; Mohácsi, Piroska Nagy; Evdokimova, Tatiana; Ponomarenko, Olga |
| Abstract: | Central bank communication on financial stability has been less studied than on monetary policy. Our paper aims to contribute to the growing literature in this area. Our focus is the region of Central Europe, where financial sectors are intertwined through close cross-border ownership, and about half of the countries are members of the euro area. Using large language models (LLMs) combined with country-specific contextual analysis, we study executive summaries of Financial Stability Reports (FSRs) published since the early 2000s by seven Central, Eastern, and Southeastern European (CESEE) central banks, as well as by Austria and the European Central Bank (ECB). We construct a novel financial stability sentiment index and document that central bank communication is strongly risk-focused, most notably in the case of the ECB. In addition, prior to the Global Financial Crisis, the Austrian central bank was much less concerned than other central banks in the region although Austria plays a pivotal role in the financial system in the region. Our analysis of the link between financial stability sentiment communication and macroprudential policy action highlights that many central banks actively use and communicate about borrower-based measures, while most countries activated non-zero counter-cyclical capital buffers belatedly or not at all. Finally, comparing central banks’ communication on financial stability and monetary policy, we find that euro area national central banks and the ECB’s FSR communicated about the rising risks of post-Covid inflation in a timely manner, ahead of the ECB’s monetary policy communication. JEL Classification: C55, E58, E61, H12, D83 |
| Keywords: | central banking, Central Europe, communication, euro area, European Central Bank, financial policy, macroprudential policy |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:srk:srkwps:2026154 |
| By: | Magin, Jana Anjali; Neyer, Ulrike; Stevens, Alexandra |
| Abstract: | Many Central banks around the world are considering the introduction of a Central Bank Digital Currency (CBDC) as a new means of payment. One of the reasons for introducing a CBDC is a change in payment behavior towards an increasing use of electronic forms of payment. This paper examines the introduction of a CBDC as a new means of payment. We conduct a controlled laboratory experiment to assess how adoption costs and anonymity affect the demand for CBDC compared to established means of payment such as cash and deposits. We use a 2x2 treatment design in which CBDCs differ in adoption costs and anonymity. We find that adoption costs play an important role in the decision to use CBDC as a new means of payment and that anonymity plays a role in the allocation of experimental money between different means of payment. |
| Keywords: | Central bank digital currencies, experimental economics, payment methods, anonymity, adoption costs |
| JEL: | E41 E42 C92 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dicedp:339605 |
| By: | Wilman Arturo Gomez; Carlos Esteban Posada |
| Abstract: | Since the beginning of this century the Colombian monetary authority has conducted monetary policy under a strategy based on setting targets for interest rate and inflation, while allowing the exchange rate of the U.S. dollar in domestic currency to float freely. This paper takes that strategy into account in order to explain inflation. Our econometric results were obtained by applying the Generalized Method of Moments to test the hypotheses derived from the structural form of our model. The main findings indicate: a. the validity of a Phillips curve.That is, a positive relationship between the inflation rate and the output gap, conditional on inflation expectations; b. that the monetary authority has reacted to shocks in inflation and in the output gap by adjusting its policy in the appropriate direction but, up to the end of 2025, without being able to claim that its responses have always been timely and consistently forceful. In other words, it can be said that the monetary authority has not been aggressive in ensuring that observed inflation returns rapidly to levels consistent with the inflation target range. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.26928 |
| By: | Cristina Conflitti; Daniel Enderle; Ludmila Fadejeva; Erwan Gautier; Alex Grimaud; Eduardo Gutiérrez; Valentin Jouvanceau; Jan-Oliver Menz; Alari Paulus; Pavlos Petroulas; Pau Roldan-Blanco; Elisabeth Wieland |
| Abstract: | We use CPI micro data for nine euro area countries to document new evidence on consumer price stickiness in the euro area during the 2021-2024 inflation cycle. In 2022, the monthly frequency of price changes reached 12%, compared with an average of 8% over 2010–2019, roughly a four percentage-point increase; it then fell quickly in 2023 and more slowly in 2024, ending close to its pre-pandemic level. The decline in the frequency of price changes was faster for food and nonenergy industrial goods (NEIG) than for services, where frequencies remained elevated in 2024. The overall frequency rose mainly because there were more price increases, while the magnitude of the average size of the price increases or decreases changed only marginally during the surge. Products with a larger imported-energy cost share responded more strongly, and hazard-rate evidence shows that the probability of price adjustments increases with the gap between actual and optimal prices, consistent with state-dependent pricing and a steepening of the Phillips curve. To illustrate the implications of this state dependence, a macro model suggests that peak inflation would have been almost 1 percentage point lower if the frequency had not responded to the inflation surge. |
| Keywords: | Price Rigidity, Euro Area, Inflation Surge, Micro Price Data |
| JEL: | E31 E52 F33 L11 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1038 |
| By: | Jonathan Adams |
| Abstract: | When inflation is low, the Calvo model is a good approximation of sticky prices. But when inflation is high, menu costs matter for macroeconomics. Drawing from recent work on mean field games, I derive an analytical solution to the menu cost model with trend inflation in response to small shocks. The solution includes dynamics of the value function, distribution of price gaps, and aggregate variables. Then, I consider a discrete time approximation that is tractable enough for use in standard DSGE models. Menu costs modify the usual Calvo Phillips curve with a single variable: the frequency of price adjustment. Accounting for the frequency matters in an inflationary economy; when trend inflation is zero, the term disappears. But surprisingly, the effect of trend inflation on the Phillips curve is first-order. The modified system is a function of the microfoundations and can be calibrated to match pricing statistics, a useful result even without trend inflation. Finally, I embed the price-setting block in an otherwise standard New Keynesian model and show how menu costs and trend inflation affect monetary policy. |
| Keywords: | State-dependent pricing; menu costs; inflation; Phillips curve; optimal monetary policy |
| JEL: | C60 E31 E52 |
| Date: | 2026–03–13 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:102919 |
| By: | Grebe, Moritz; Tillmann, Peter |
| Abstract: | This paper studies the response of inflation expectations to an exogenous shift in central bank preferences. We use the unexpected announcement of the resignation of Jens Weidmann, the president of the Deutsche Bundesbank, in 2021 as a natural experiment constituting a rare case of an exogenous shift in the composition of the ECB's Governing Council. As a member of the Governing Council, he was a known policy hawk and a vocal critic of the ECB's asset purchases. Our evidence from survey data suggests that the news about the resignation causes a strong increase in individual inflation uncertainty of German households and a significant fall in the level of trust in the ECB. The effect on the mean inflation expectations remains inconclusive. Thus, the shift in policy preferences exerts a strong effect on second moments, while the first moment effect remains weak. |
| Keywords: | Monetary policy delegation, central bank governor, household survey, inflation uncertainty, trust |
| JEL: | E52 E43 E32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:339583 |
| By: | Iñaki Aldasoro; Paula Beltrán; Federico Grinberg |
| Abstract: | Using data on four USD-pegged stablecoins and 27 fiat currencies, this paper documents spillovers from stablecoin-based foreign exchange (FX) to traditional FXmarkets. We document a gap between the cost of acquiring dollars via stablecoins and via the spot FX market (parity deviations). To establish a causal link between stablecoin flows and FX markets, we use a granular instrumental variable that exploits idiosyncratic shocks to stablecoin net inflows in other currencies. Our estimates indicate that a 1% exogenous increase in net stablecoin inflows raises parity deviations by 40 basis points, depreciates the local currency, and widens the dollar premium in synthetic funding markets (covered interest parity (CIP) deviations). A model of constrained arbitrage rationalizes these findings and provides structural foundations for the identification strategy. Counterfactual simulations show that halving cross-market frictions would attenuate CIP spillovers by roughly one-half and cut exchange rate effects by nearly one-third. A dynamic extension that closely matches the empirical impulse responses shows that spillovers grow disproportionately when intermediaries suffer losses, as depleted capital reduces their capacity to absorb further shocks. Our results establish stablecoins as an emerging segment of global currency markets with direct implications for financial stability. |
| Keywords: | stablecoins, foreign exchange, market segmentation, capital flows, arbitrage |
| JEL: | F31 G15 G12 G23 F38 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1340 |
| By: | Hegemann, Hendrik; Wieland, Volker |
| Abstract: | In this note, we provide a brief first quantitative assessment of possible consequences of the energy price shock for euro area inflation. We consider different scenarios of more or less persistent increases of gasoline, diesel, natural gas, kerosine price increases on headline and core HICP inflation. The quantitative analysis is based on an estimated Bayesian Vector Autoregression model for the euro area. The model also accounts for transmission via electricity prices. The baseline scenario is based on the recent, average, price increases extending for two to three months, followed by a development determined endogenously within the BVAR. In this case, year-on-year inflation rises by about 1.5 percentage points by the first half of 2027. Core inflation rises by about 0.5 percentage points. If energy prices are assumed to return to February 2026 levels within a few months, the effects are much smaller and less persistent. Monetary policy should not respond directly to movements in energy prices and headline consumer price inflation. However, monetary policy would need to tighten in response to rising core HICP and domestic inflation. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:339582 |
| By: | Farina, Tatiana; Franke, Günter; Heider, Florian; Krahnen, Jan Pieter; Subrahmanyam, Marti G. |
| Abstract: | This SAFE White Paper presents a structured economic framework for assessing asset-backed stablecoins in their capacity as privately issued, fiscally anchored monetary instruments. Specifically, we evaluate the implications of stablecoins for financial intermediation, sovereign debt markets, and monetary transmission while devoting particular attention to differences between the United States and European Union. To this end, we characterize the basic economics of stablecoins by comparing their balance-sheet structure to narrow banks, money market funds, commercial banks, and central banks, highlighting that issuers engage in minimal maturity transformation and hold predominantly high-quality liquid assets against par-redeemable digital liabilities. Furthermore, we examine the regulatory design of the US GENIUS Act and the EU's MiCAR framework, showing how differences in reserve composition and supervisory architecture shape incentives for regulatory arbitrage and influence whether stablecoin growth reallocates existing sovereign debt holdings or generates net additional demand. For the euro area, the central question is whether digital liquidity remains anchored in domestic sovereign assets or shifts toward foreign-currency stablecoins, with implications for monetary sovereignty and financial stability. We conclude that Europe requires an active response: advancing a digital euro, strengthening global supervisory coordination, and reinforcing cross-border AML enforcement in public blockchain environments to safeguard monetary sovereignty and financial stability. |
| Keywords: | Stablecoins, treasury markets, digitial currency |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewh:339581 |
| By: | Ruopu Hu (Kobe University); Andreas Schabert (University of Cologne) |
| Abstract: | Since U.S. bank capital holdings began rising almost concurrently with the monetary policy change after 2008, we examine the role of capital requirements for monetary policy regimes. While standard models predict that equilibrium determination and responses to aggregate shocks are fundamentally affected at the zero lower bound (ZLB), we show that these effects are absent when bank capital requirements are binding. Estimating a model version with occasionally binding capital requirements, we find that they have been almost permanently binding after 2008. We further show that capital requirements neither restore relevance of money supply nor amplify responses to macroeconomic shocks above the ZLB. |
| Keywords: | Capital Regulation, Monetary Policy, Local Equilibrium Determinacy, Regimeswitching Estimation, Zero Lower Bound |
| JEL: | E52 G28 C11 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:397 |
| By: | Abubakar Addy (African Department, International Monetary Fund); Alexander Mihailov (Department of Economics, University of Reading); Stephen Kwame (Finance Department, University of Ghana Business School, University of Ghana) |
| Abstract: | This paper contributes to the literature by providing a comparative analysis of inflation targeting (IT) across groups of countries and time periods. We estimate via Bayesian techniques the central bank policy preferences of African inflation targeters (AfITs), employing the medium-scale New Keynesian small open economy model under complete asset markets (CAM) proposed by Kam et al. (2009), with application to advanced-country inflation targeters (ACITs), as extended also to incomplete asset markets (IAM) by McKnight et al. (2020), with application to Latin American inflation targeters (LAITs), and including or not real exchange-rate concerns in the social loss function of IT central banks. Our study convincingly selects CAM over IAM in a Bayesian model comparison of 4 model versions and compares the estimated weights of 4 typical IT central bank policy choices for 2 AfITs, 5 LAITs, and 3 ACITs in a common recent sample period, 2009:Q1-2021:Q4, as well as referring back to the sample periods in the cited original studies, starting in the early 1990s or early 2000s and with no or minimal overlap. Our findings confirm that all 10 IT central banks are firmly committed to their price stability mandate in the sense of prioritizing inflation stabilization, with an estimated almost unchanged 40-60% share across space and time. Adapting to real-world global developments as the millennium was unfolding, IT approaching the age of 40 seems to have evolved toward more ‘flexible’ regimes with increased ‘fear of floating’, but we also point to nuances or specificities across the 3 groups or 10 countries compared. |
| Keywords: | Bayesian model comparison, complete vs incomplete asset markets, inflation targeting mandates and actions, fear of floating, small open economies, medium-scale New Keynesian SOE DSGE models |
| JEL: | C51 E52 F41 |
| Date: | 2026–03–26 |
| URL: | https://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2026-02 |
| By: | Ali Kakhbod; Amir Kermani; Bernardo Maciel |
| Abstract: | Does the Federal Reserve react to all inflation equally? We systematically analyze FOMC meeting records from 1937 to 2025 to construct meeting-level measures of the Fed’s real-time attribution of inflation to demand and supply pressures. We document substantial variation in these narratives over time and show that, since Volcker, the Fed has responded more aggressively to perceived demand-driven inflation. Consistent with this asymmetry, supply pressures have more persistent effects on realized inflation, while demand pressures' impact dissipates quickly. Financial markets also reflect this distinction: demand imbalances primarily move risk-neutral yields, whereas supply imbalances raise term premia and equity risk premia. |
| JEL: | E31 E43 E52 E58 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35016 |
| By: | Xakousti Chrysanthopoulou; Moïse Sidiropoulos |
| Abstract: | This paper revisits the debate on whether limited asset market participation (LAMP) is relevant for the design of monetary policy. While LAMP can substantially alter the monetary transmission mechanism - potentially reinforcing or reversing the contractionary demand effects of interest rate increases and challenging standard policy prescriptions - its importance depends critically on labor market institutions. We develop a New Keynesian DSGE model with LAMP that incorporates sector-specific labor unions whose wage-setting behavior accounts for broader macroeconomic conditions. The analysis shows that when wage bargaining is sufficiently centralized, particularly under monopoly union structures, LAMP becomes largely irrelevant for monetary policy design, and the Taylor Principle once again ensures equilibrium determinacy. These findings highlight the structure of wage bargaining as a key determinant of how asset market participation shapes the effectiveness and conduct of monetary policy. |
| Keywords: | Limited asset market participation; unions; monetary policy; Taylor principle; determinacy; centralized wage setting |
| JEL: | E52 E44 E24 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2026-11 |
| By: | Rui Sun |
| Abstract: | The standard wage Phillips curve aggregates away from which workers reset wages when. I show this aggregation omits a first-order term: the covariance between workers' cost-push exposure and their reset frequency. I introduce two sufficient statistics and embed them in a multi-country HANK model calibrated to six euro-area economies. The omitted term generates 7 percent more cumulative core inflation in the baseline and 10--26 percent more when monetary policy is delayed. Two economies with identical openness can differ by 6.6 percentage-point-quarters solely from within-country composition. Targeted essentials subsidies reduce welfare loss by 32 percent relative to aggressive tightening. Out of sample, the model correctly predicts the persistence ranking across the UK, the US, and Japan. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.29154 |
| By: | Justin Bloesch; Jacob P. Weber |
| Abstract: | We argue that secular change in both the production and composition of investment goods has weakened investment’s role in the transmission of monetary policy to labor earnings and consumption. We show analytically that fluctuations in the production of investment goods amplify the response of consumption to monetary policy shocks by varying labor income for hand-to-mouth agents. We document three secular changes weakening this channel: (i) labor’s share of value added in investment goods production has declined, (ii) the import share of investment goods has risen, and (iii) the composition of investment has shifted towards components that are less responsive to monetary policy. A small open economy, two agent New Keynesian model calibrated to match these facts implies a 23 percent weaker response of labor income and a 17 percent weaker response of consumption to real interest rate shocks in a 2020s economy relative to a 1960s economy. |
| Keywords: | monetary policy; investment; labor income; marginal propensity to consume |
| JEL: | E21 E22 E32 E52 F41 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102964 |
| By: | Rui Sun |
| Abstract: | We characterize optimal monetary policy when policy endogenously moves risk premia through redistribution across agents who differ in their willingness to bear risk. The analytical core is Marginal Risk Capacity, the covariance of monetary policy exposures with marginal propensities to take risk. This sufficient statistic governs this channel as MPCs govern the consumption channel. MRC enters the Ramsey criterion as a risk premium wedge that breaks divine coincidence, vanishes if and only if macroprudential tools are available, and generates a new inflation bias under discretion. Solving the Ramsey problem globally reveals a risk capacity trap where transmission collapses, and optimal policy preemptively prevents it. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.21044 |
| By: | Hattori, Keisuke |
| Abstract: | This paper analyzes a vertical market structure in which downstream firms compete imperfectly in quantities while upstream banks endogenously determine loan rates. Banks' pricing depends on the policy rate, lending volume, and banking conduct (profit-maximizing versus contestable). With contestable banking, average-cost loan pricing creates feedback between lending and loan rates, making monetary transmission state-dependent. We show that monetary policy, financial regulation, and competition policy---typically delegated to separate authorities---interact non-additively through this upstream channel. Tighter financial regulation amplifies monetary transmission under contestable banking; competition policy can either strengthen or weaken it depending on banking pass-through. These results imply that policy evaluation requires treating the three instruments as a mix rather than in isolation. Extensions with default risk show that policy tightening and weaker competition can be welfare-improving. |
| Keywords: | Imperfect Competition; Endogenous Finance; Monetary Transmission; Financial Regulation; Competition Policy |
| JEL: | D43 G21 L13 |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127924 |
| By: | Fahmi, Taher E. (University of Warwick) |
| Abstract: | This work quantifies the welfare cost of unorthodox monetary policy conduct in Turkiye during 2021-2023 through a counterfactual experiment based on an estimated Markov-switching DSGE (MS-DSGE) model. This episode marks a sharp departure fromHow NOT to Conduct Monetary Policy : The Case of Turkiye conventional, inflation-stabilizing policy despite rising inflation, providing an ideal setting for evaluating welfare losses caused by politically driven departures from or thodoxy. The analysis uses quarterly data from 2006Q1 to 2025Q1 and specifies four candidate models, three of which allow for regime-switching in Taylor rule parameters and shock volatilities. Estimation results indicate that the model with the best fit is one with switching in the inflation-response and interest-rate smoothing parameters, alongside volatility switching in cost-push shocks. Using the best fitting model, the counterfactual experiment estimates welfare gains of 155–177% had the central bank refrained from unorthodoxy during said episode |
| Keywords: | Unorthodox MonetaryPolicy ; Markov-Switching DSGE model ; Bayesian Estimation ; Turkiye JEL classifications: C11 ; C63 ; E31 ; E32 ; E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wrkesp:95 |
| By: | Shigenori SHIRATSUKA (Faculty of Economics, Keio University) |
| Abstract: | In this paper, I extend the dataset to include the post-COVID-19 period of consumer price increases and reassess the effectiveness of core inflation indicators for consumer prices. Specifically, following the analytical framework for evaluating core inflation indicators, I apply statistical methods to measure their accuracy from two perspectives: (1) their capacity to represent current underlying trends, and (2) their predictive power regarding future underlying trends. I especially examine how the effectiveness of different core inflation indicators shifts over the analysis period. It is evident that the reliability of core inflation indicators depends on the economic context. Therefore, while continuing to use the all-items index excluding fresh food as the primary measure, it is essential to compare and analyze a broader range of core inflation indicators, taking into account each indicator's characteristics. |
| Keywords: | Consumer price index, Underlying inflation, Distribution of price changes by item |
| JEL: | C43 E31 E52 |
| Date: | 2026–03–23 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2026-006 |
| By: | Guglielmo Maria Caporale; Luis Alberiko Gil-Alana; Oluwadare O. Ojo; Ruka O. Jimoh |
| Abstract: | This paper uses fractional integration methods to analyse the long-memory and persistence properties of inflation in the Shanghai Cooperation Organization (SCO) countries over the period from 1 January 1997 to 8 January 2025. This approach is more general than standard models based on the I(0) versus I(1) dichotomy, and is particularly suitable in the case of emerging countries such as the SCO ones, who have experienced structural change and different policy frameworks. Regardless of the assumption made about the errors in the model, the estimates of the fractional differencing parameter are found to imply unit root or explosive behaviour. This means that the effects of shocks tend to be long-lived, and thus decisive monetary policy actions appear to be required to bring inflation under control. Further, the subsample analysis suggests that the Russian invasion of Ukraine did not affect significantly the stochastic properties of the series under examination. |
| Keywords: | Shanghai Cooperation Organization (SCO), inflation persistence, long-memory, fractional integration |
| JEL: | C22 E31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12578 |
| By: | Hiroyuki Oi; Shigenori Shiratsuka; Shunichi Yoneyama |
| Abstract: | Shadow short-term interest rate (SSR) models are expected to provide effective monetary policy indicators under the effective lower bound (ELB) constraint on nominal interest rates. This paper revisits the SSR models using yield curve data from the prolonged ultra-low interest rate environment in Japan. Specifically, this paper compares the various specifications of the SSR models based on the Nelson-Siegel model by focusing on a trade-off between estimation performance and theoretical consistency. This paper highlights the importance of evaluating monetary policy easing effects using the entire yield curve fluctuations, rather than relying solely on SSR estimates, especially in the ultra-low interest rate environment in Japan. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:tcr:wpaper:e228 |
| By: | UZ AKDOGAN, Idil; Halicioglu, Ferda |
| Abstract: | This study derives an exchange market pressure (EMP) index using a weighted, scaled sum of variables, including exchange rate depreciation, official foreign exchange intervention, and interest rate differentials, for the period 1999-2023. Using the US dollar as a reference currency, it includes various balance of payments components of the EMP to compare and analyse capital flow pressures for emerging economies such as Argentina, Brazil, China, India, Indonesia, Korea, Mexico, Russia, South Africa, and Turkey. The study also analyses the impact of EMP volatility in response to capital inflow and capital outflow controls, utilising EGARCH econometric estimates. Our findings indicate that higher capital controls are generally associated with greater EMP, though the effects differ between inflow and outflow restrictions. We also find that EMP volatility reacts asymmetrically to shocks, with stronger responses to positive developments (‘good news’) than to negative ones (‘bad news’). These results highlight the importance of tailoring capital flow management tools to country-specific vulnerabilities and global financial conditions. |
| Keywords: | Exchange Market Pressure, Capital Flows, Exchange Rates, Foreign Exchange Intervention |
| JEL: | F32 F41 G11 G20 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128311 |
| By: | Adil Boutfssi (UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)); Tarik Quamar (UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)) |
| Abstract: | This paper examines the short-run transmission of monetary policy to bank credit granted to the non-financial corporate sector in Morocco, a bank-based emerging economy. Using monthly macro-financial data over the period of 2014–2024, the study estimates a reduced-form VAR model to analyze the dynamic interactions between the policy rate, bank credit, banks' holdings of sovereign securities, credit risk indicators, and short-term market spreads. Impulse response functions and forecast error variance decompositions indicate that a one-standard-deviation monetary policy shock is associated with a small and short-lived response of non-financial corporations bank credit at a monthly horizon, accounting for only a limited share of its forecast error variance, while the same shock is more strongly reflected in market spreads and banks' balance-sheet reallocations toward sovereign assets, alongside temporary movements in credit risk indicators. Overall, these results are consistent with a reduced-form transmission pattern in which monetary policy appears to affect bank credit primarily through indirect financial channels related to risk perception, portfolio reallocation, and balance-sheet management, rather than through immediate changes in aggregate credit volumes. This interpretation is conditional on the VAR specification and short-run horizon considered, and suggests an attenuation of the interest rate–credit channel in a bank-dominated emerging economy, rather than evidence of a structural breakdown of monetary transmission. |
| Abstract: | Cet article examine la transmission à court terme de la politique monétaire aux crédits bancaires accordés au secteur des entreprises non financières au Maroc, une économie émergente à système bancaire rigide. À partir de données macrofinancières mensuelles couvrant la période 2014-2024, l'étude estime un modèle VAR à forme réduite afin d'analyser les interactions dynamiques entre le taux directeur, les crédits bancaires, les avoirs des banques en titres souverains, les indicateurs de risque de crédit et les spreads de marché à court terme. Les fonctions de réponse impulsionnelle et les décompositions de la variance des erreurs de prévision indiquent qu'un choc de politique monétaire d'un écart-type est associé à une réaction faible et de courte durée des crédits bancaires aux entreprises non financières à un horizon mensuel, n'expliquant qu'une part limitée de la variance des erreurs de prévision. Ce même choc se répercute plus fortement sur les spreads de marché et les réallocations de bilan des banques vers les actifs souverains, parallèlement aux variations temporaires des indicateurs de risque de crédit. Globalement, ces résultats concordent avec un modèle de transmission simplifié où la politique monétaire semble influencer le crédit bancaire principalement par des canaux financiers indirects liés à la perception du risque, à la réallocation de portefeuille et à la gestion du bilan, plutôt que par des variations immédiates du volume global de crédit. Cette interprétation dépend du modèle VAR et de l'horizon de court terme considérés, et suggère une atténuation du canal taux d'intérêt-crédit dans une économie émergente dominée par le secteur bancaire, plutôt qu'une défaillance structurelle de la transmission monétaire. |
| Keywords: | monetary policy short-run monetary transmission credit risk bank balance sheets, monetary policy, short-run monetary transmission, credit risk, bank balance sheets |
| Date: | 2026–03–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05541737 |
| By: | Kris Boudt; Arno De Block; Feliciaan De Palmenaer; Elsa Laura Verbeken (-) |
| Abstract: | Bank transaction data are increasingly used to nowcast real GDP growth due to their high frequency and broad coverage. A key challenge is the choice of an appropriate price deflator to transform nominal transaction values into real terms, as transaction values reflect invoiced amounts that are observed with a delay and based on prices quoted in earlier periods. This timing mismatch complicates the use of contemporaneous inflation measures. We find that using one-quarter lagged inflation, in particular, of the GDP deflator, and of an equally weighted estimate of the first lags of price indices, consistently outperforms the benchmark model that does not adjust for inflation and models using contemporaneous inflation, across different settings and periods. At its best, the model using the one-quarter lag of the GDP deflator outperforms the benchmark in 68% of cases and achieves a maximum RMSFE reduction of 5.5%. The equally weighted prediction of models using the one-quarter lag of price indices, improves the benchmark in 54% of cases and attains a maximum RMSFE reduction of 3.78%. These findings suggest that relying on the most recent inflation data or nowcasting delayed figures like the GDP deflator may be unnecessary or even counterproductive, as lagged inflation data often offer more stable and informative signals for real-time analysis. |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:26/1139 |
| By: | Jean-Paul Renne; Sarah Mouabbi; Adrien Tschopp |
| Abstract: | Post-pandemic inflation highlighted tensions between price stability and growth objectives. We evaluate this risk using probabilistic responses from professional forecasters’ surveys. Our dynamic factor model with time-varying uncertainty and asymmetry captures the joint dynamics of inflation and growth and decomposes them into demand and supply components. We find that tail risk is prominent in US data in the 1980s and during the Great Recession for inflation, and during the 1980s and in the period following COVID-19 for GDP growth. The post-pandemic inflation is driven by temporary adverse supply and persistent positive demand. The model-implied correlation between inflation and growth is time-varying, negatively related to nominal term premiums and on average positive, suggesting that professional forecasters do not have stagflationary beliefs. In 2022, stagflation risks increased after three decades of near-zero probabilities. |
| Keywords: | Dynamic Factor Model with Stochastic Volatility, Uncertainty, Asymmetry, Tail Risk, Inflation, Output Growth, Demand, Supply, Trend, Cycle |
| JEL: | C32 E31 E32 E44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1036 |
| By: | Nicoletta Berardi; Cécile Chenesseau; Lalouette Laure; Soledad Zignago |
| Abstract: | In times of great economic uncertainty, central banks face several possible future scenarios, some of which may be contradictory. Rather than choosing a single scenario, this post shows how to weight different economic scenarios to inform and guide monetary policy decision-making. <p> En période d’incertitude économique élevée, les banques centrales font face à plusieurs futurs possibles, parfois contradictoires. Plutôt que de choisir un scénario unique, ce billet montre comment pondérer différents scénarios économiques pour informer et guider la prise d’une décision de politique monétaire. |
| Date: | 2026–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:439 |
| By: | Hardhik Mohanty; Bhaskar Krishnamachari |
| Abstract: | Daily probability changes in Kalshi macro prediction markets forecast cryptocurrency realized volatility through two distinct channels. The monetary policy channel, measured by Fed rate repricing on KXFED contracts, predicts Bitcoin volatility in sample with t = 3.63 and p |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.01431 |
| By: | Alexander Copestake; Cage Englander; Maria Soledad Martinez Peria; Mr. Germán Villegas-Bauer |
| Abstract: | We examine whether financial market participants, in aggregate, expect stablecoins to play an important role in payments. Using high-frequency variation in stock prices, we estimate that U.S. legislation supporting the use of stablecoins in payments reduced the market value of listed incumbent payment firms by 18% or approximately $300 billion, consistent with stablecoins increasing competition in the payments sector. This impact is larger than that of other recent pro-competitive regulatory shocks and (i) proportionately larger for incumbents focused on cross-border payments, (ii) smaller for incumbents protected by network effects, and (iii) smaller for incumbents already offering crypto-related services. |
| Keywords: | Crypto Assets, Stablecoins, Payments, Stock Returns |
| Date: | 2026–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/052 |
| By: | Adil Boutfssi (UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)); Youssef Zizi (USMBA - Université Sidi Mohamed Ben Abdellah [Fès, Maroc]); Tarik Quamar (UH2C - Université Hassan II de Casablanca = University of Hassan II Casablanca = جامعة الحسن الثاني (ar)) |
| Abstract: | This study examines the transmission of monetary policy to bank credit granted to the non-financial private sector in Morocco, a bank-dominated emerging economy where non-financial corporations play a central role in investment, employment, and economic growth. Using monthly data over the period 2006–2023, the analysis relies on an ARDL–ECM framework that distinguishes short-run credit dynamics from long-run adjustment processes while accounting for potential structural breaks. The results indicate that changes in the policy rate do not exert a statistically significant effect on bank credit in the short run, suggesting a high degree of credit inertia. The bounds test supports the existence of a stable long-run equilibrium relationship in credit, although no significant long-run elasticities with respect to monetary policy or credit risk variables are identified. Instead, credit dynamics appear to be driven primarily by short-run adjustment mechanisms, largely shaped by credit risk and balance-sheet allocation. Overall, these findings suggest that monetary transmission in Morocco operates gradually and indirectly, mainly through prudential and balance-sheet channels rather than the conventional interest-rate channel. This implies that the effectiveness of monetary policy depends critically on prevailing risk conditions and their interaction with prudential frameworks in bank-based emerging financial systems. |
| Abstract: | Cette étude examine la transmission de la politique monétaire au crédit bancaire accordé au secteur privé non financier au Maroc, une économie émergente dominée par les banques où les entreprises non financières jouent un rôle central dans l'investissement, l'emploi et la croissance économique. À partir de données mensuelles couvrant la période 2006-2023, l'analyse s'appuie sur un modèle ARDL-ECM qui distingue la dynamique du crédit à court terme des processus d'ajustement à long terme, tout en tenant compte des ruptures structurelles potentielles. Les résultats indiquent que les variations du taux directeur n'ont pas d'effet statistiquement significatif sur le crédit bancaire à court terme, ce qui suggère une forte inertie du crédit. Le test de coexistence confirme l'existence d'une relation d'équilibre stable à long terme pour le crédit, bien qu'aucune élasticité significative à long terme par rapport à la politique monétaire ou aux variables de risque de crédit ne soit identifiée. La dynamique du crédit semble plutôt être déterminée par des mécanismes d'ajustement à court terme, largement influencés par le risque de crédit et l'allocation du bilan. Globalement, ces résultats suggèrent que la transmission monétaire au Maroc opère progressivement et indirectement, principalement par le biais de canaux prudentiels et de bilan plutôt que par le canal conventionnel des taux d'intérêt. Cela implique que l'efficacité de la politique monétaire dépend crucialement des conditions de risque en vigueur et de leur interaction avec les cadres prudentiels dans les systèmes financiers émergents à base bancaire. |
| Keywords: | portfolio adjustments, balance-sheet effects, long-run dynamics, emerging markets, credit risk, bank credit, monetary transmission mechanism, monetary transmission mechanism bank credit credit risk portfolio adjustments balance-sheet effects long-run dynamics emerging markets |
| Date: | 2026–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05541741 |
| By: | Hegemann, Hendrik; Wieland, Volker |
| Abstract: | The ECB anticipates stable growth and inflation, while Europe is faced with geopolitical threats, lack of competitiveness and fiscal challenges. At such a time, central bankers need to consider the dynamics of risk scenarios that arise from potentially mis-aligned or mis-perceived trends and policy-relevant parameters and prepare for timely policy responses. This paper focusses on potentially unsustainable fiscal trends, potential growth misperceptions and their implications for inflation developments and the policy stance. It highlights risks for fiscal inflation in the euro area. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 26 February 2026. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:339584 |
| By: | Alice Algot-Samé; Paul Hubert; Patrice Tauzin; Benoît Usciati |
| Abstract: | The short-term debt market plays a key role in financing banks and businesses. We show that, over the period between January 2005 and November 2024, there was complete pass-through of monetary policy after one month for all categories of issuers. For companies, pass-through was relatively faster than for intermediated credit. <p> Le marché de la dette de court terme joue un rôle clé en matière de financement des banques et des entreprises. Nous montrons que, sur la période janvier 2005 – novembre 2024, la transmission de la politique monétaire y a été totale au bout d’un mois pour toutes les catégories d’émetteurs. Pour les entreprises, la transmission y est relativement plus rapide que pour le crédit intermédié. |
| Date: | 2026–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:442 |
| By: | Ryan Kim; Justin H. Leung; Ariel Weinberger |
| Abstract: | This paper investigates how immigration affects consumer prices. Using scanner data and instrumenting county-level immigration with historical ancestry patterns, we find that an inflow of 10, 000 immigrants lowers four-year price growth by 0.58 percentage points. Leveraging variation in firm exposure through sales versus production locations, we show price declines stem entirely from the product demand channel: firms lower prices in response to immigrants in sales markets, not production locations. Evidence suggests that immigrants search more intensively, exhibit higher demand elasticity, pay lower prices for identical products, and shift expenditure toward lower-appeal products — consistent with a model of heterogeneous price sensitivity. |
| Keywords: | immigration, consumer prices, search, demand elasticity |
| JEL: | F22 E31 L11 J61 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12588 |
| By: | Margaret Chitiga-Mabugu; Joseph Feyertag; Heinrich Bohlmann; Jessika Bohlmann |
| Abstract: | This paper examines the implications of physical climate change risks for South Africas labour market and the resulting challenges for fiscal and monetary policymakers. |
| Date: | 2026–03–30 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11101 |
| By: | Shrey Lingampalli |
| Abstract: | The institutionalization of stablecoins has led to a paradigm shift in reserve management, accelerated by the 2025 Green Energy and National Infrastructure Underpinning Stablecoins (GENIUS) Act. This study investigates the "Climate-Liquidity Nexus, " defined as the structural vulnerability arising from the use of environmentally sustainable but secondary-market-thin assets as collateral for high-velocity digital payment instruments. Utilizing a Vector Error Correction Model (VECM) and GARCH(1, 1) volatility frameworks on high-frequency data from 2024 to 2026, we demonstrate that the transition toward green reserves introduces significant "Liquidity Hysteresis." My empirical results indicate that while green bonds fulfill ESG regulatory mandates, they compromise the information-insensitivity of the 1.00 USD peg. Following exogenous climate-finance shocks, the recovery half-life of green-backed stablecoins is found to be 5.4 times longer than that of traditional Treasury-backed counterparts. We find that the "Greenium" paid by issuers acts as a volatility multiplier rather than a safety buffer. These findings suggest that the current regulatory trajectory may inadvertently catalyze systemic fragility during physical risk events, necessitating a redesign of liquidity backstop facilities. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.24842 |
| By: | François Geerolf (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research) |
| Abstract: | This article examines the methodological differences between the two inflation indices published by the French National Statistical Institute (Insee): the national Consumer Price Index (CPI, IPC), used for domestic indexation purposes, and the Harmonised Index of Consumer Prices (HICP, IPCH), used at the European level. It shows that these differences are neither minor nor purely technical, but instead lead to systematic discrepancies in the measurement of inflation in France. In particular, the treatment of healthcare expenditures -based on gross prices before reimbursements in the CPI, unlike the net-of-reimbursement approach used in the HICP - results in a structural understatement of the inflation actually borne by households. Additional methodological differences, including private school fees, public broadcasting licence fee or gambling, further contribute to the observed gaps between the two indices. The article argues that, in the French case, the HICP is more consistent with international statistical recommendations and better suited for measuring purchasing power and real incomes, for example to measure rates of change "in constant euros". |
| Abstract: | Cet article analyse les différences méthodologiques entre les deux indices d'inflation publiés par l'Insee : l'indice des prix à la consommation (IPC), utilisé pour les indexations nationales, et l'indice des prix à la consommation harmonisé (IPCH), utilisé au niveau européen. Il montre que ces divergences ne sont ni marginales ni purement techniques, mais qu'elles affectent de manière systématique la mesure de l'inflation en France. En particulier, le traitement des dépenses de santé - fondé dans l'IPC sur des prix bruts avant remboursement, contrairement à l'IPCH - conduit à une sous-estimation structurelle de l'inflation effectivement supportée par les ménages. D'autres écarts méthodologiques (frais de scolarité privée, redevance audiovisuelle, jeux de hasard) contribuent également aux différences observées entre les deux indices. L'article soutient que l'IPCH est, dans le cas français, plus conforme aux recommandations internationales et mieux adapté à l'analyse du pouvoir d'achat et des revenus réels, par exemple pour mesurer les évolutions dites « en euros constants ». |
| Keywords: | Purchasing power, Price index methodology, France, Consumer Price Index (CPI), Inflation measurement, Harmonised Index of Consumer Prices (HICP), Méthodologie des indices de prix, Pouvoir d’achat, Indice des prix à la consommation harmonisé (IPCH), Indice des prix à la consommation (IPC), Mesure de l’inflation |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05502577 |
| By: | Wishnu Badrawani; Elsa Dyahpitaloka; Ahmad F. F. Alanshori; Imam Mukhlis |
| Abstract: | This study investigates the relationship between coin demand, payment innovation, COVID-19, and a coin's purchasing power, particularly in emerging countries like Indonesia. The rapid advancement of payment platforms, combined with high adoption during the pandemic, has positioned non-cash payments as a complement or substitute for coin money for transactions. However, there is notably limited coin-money-related research in the economic literature. Employing the autoregressive distributed lag (ARDL) bounds test methodology's cointegration approach using monthly data from 2011 to 2022, our findings reveal a long-term relationship between coin demand and its determinants: payment innovations, the pandemic, coin depreciation, and income. Despite the swift advancement of payment innovations and their usage, coins remain vital to the economy and are unlikely to become obsolete soon. Our study offers essential policy recommendations and enriches the field of knowledge on coin money demand. Policymakers must understand the driving factors of coin demand in both economic and non-economic contexts to improve coin production-related issues and coin circulation policies. Reviewing the Rupiah denomination structure is crucial in addressing the problem of ineffective coin circulation in the economy. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.27717 |
| By: | Emre Akusta |
| Abstract: | This study analyses the potential of renewable energy to reduce inflationary pressures arising from energy imports in Turkiye. Annual data for the period 1980-2022 are used in the analysis. In this study, unit root properties are examined using the Zivot-Andrews and Lee-Strazicich tests, both of which explicitly account for structural breaks. Cointegration is investigated via the Johansen and Hatemi-J cointegration tests. Long-run coefficients are subsequently estimated using the DOLS and FMOLS estimators. The robustness of the empirical findings is further assessed using the ARDL approach. In addition, an interaction term is constructed to measure the impact of renewable energy in alleviating inflationary pressures arising from energy imports. The results show that energy imports and exchange rate have an increasing impact on inflation, while renewable energy and the interaction term have a decreasing impact. DOLS, FMOLS, and ARDL results support each other. Moreover, in both models, the impact of renewable energy in mitigating inflationary pressures stemming from energy imports is stronger than the direct disinflationary impact of renewable energy. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.21815 |