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on Monetary Economics |
| By: | Ludolph, Melina; Nghiem, Giang; Tonzer, Lena |
| Abstract: | We examine whether combining factual information on inflation levels and forecasts with a narrative can persistently shape consumers' inflation expectations. In a preregistered randomized controlled trial with a representative sample of 3, 000 German consumers, participants received either numerical or textual information about inflation rates, with or without an accompanying narrative. All treatments immediately lower inflation expectations, with numerical information eliciting stronger adjustments. Adding a narrative produces no additional immediate effect, confirming that it conveys no new information. However, only the combination of numerical information with a narrative yields a lasting reduction in inflation expectations and forecast uncertainty still observable after four weeks. Our results suggest that combining precise information with a narrative enhances information retention and can lead to more persistent shifts in consumers' beliefs. The effects are strongest when respondents perceive the narrative as relatable and emotionally engaging, and among those with low financial literacy and limited knowledge of inflation. |
| Keywords: | central bank communication, inflation expectations, narratives |
| JEL: | D84 D91 E31 E58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:341628 |
| By: | Opatrny, Matej; Opatrny, Martin; Havranek, Tomas; Irsova, Zuzana; Hampl, Mojmir |
| Abstract: | We revisit the optimal long-run inflation rate using 777 estimates from 116 primary studies published between 1989 and 2026, the largest sample assembled to date. To our knowledge, this is among the first meta-analyses in economics whose primary-data extraction is performed end-to-end through a documented and auditable large-language-model pipeline, calibrated against a hand-coded training set and released for replication. Across publication-selection and selection-on-significance diagnostics that are applicable in this calibration-dominated corpus, the literature points to an optimum of roughly 0.6 percentage points per year, well below the two-percent targets commonly used by advanced-economy central banks. Bayesian model averaging over the full structural-moderator schema shows that cross-study variation is driven by genuine modelling choices, the choice of monetary benchmark (Friedman rule vs. laissez-faire), the transactions-frictions technology, the assumed shock structure, and the class of nominal-rigidity contract, rather than by selective reporting. |
| Keywords: | optimal inflation rate, Meta-analysis, large language models |
| JEL: | E31 E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:341462 |
| By: | Bianchi, Michele Leonardo; Ruzzi, Dario; Segura, Anatoli |
| Abstract: | We use granular regulatory data on euro interest rate swap trades over the period 2021-2024 to analyse the dynamics of Italian banks’ hedging of interest rate risk in their securities portfolio. We find that on average and over the full period, banks use swaps as hedging instruments: a third of the value losses on securities following a 100 basis points upward shift of the yield curve are offset by the associated gains on swap positions. The intensity in securities hedging through swaps increases by 6% after policy rates rise in mid-2022. Causality of such increase is assessed with an analysis based on monetary policy surprises. The increase in hedging intensity during the tightening period is more important for banks with initially lower capital and less stable funding. |
| JEL: | G11 G21 E43 E52 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21588 |
| By: | Bono Beriša (University of St Andrews Business School, UK); Ivan Mužić and Jurica Zrnc (Faculty of Economics and Business, University of Rijeka); Jurica Zrnc (Croatian National Bank) |
| Abstract: | We study the effects of a government initiative aimed at increasing the passthrough of monetary tightening to deposit rates. A large state-owned bank responded first to the initiative with a sharp and unexpected deposit rate increase. Competing banks quickly followed, albeit with substantial heterogeneity. The resulting deposit-rate shock led to a sizable increase in term deposits, driven primarily by ex-ante liquidity-rich individuals. Using matched deposit and residential real-estate purchase data at the individual level, we document a strong portfolio-rebalancing effect away from real estate. At the same time, consumption remains unchanged. Despite the sizable deposit reallocation, the shock does not affect the supply of loans to firms or households, consistent with high pre-existing bank liquidity. This setting provides a unique opportunity to uncover the effects of increased deposit competition and the ensuing deposit-rate shock on household portfolios, consumption, and bank lending. |
| Date: | 2026–06–17 |
| URL: | https://d.repec.org/n?u=RePEc:hnb:wpaper:75 |
| By: | Bianchi, Francesco; Faccini, Renato; Melosi, Leonardo; Wehrhöfer, Nils |
| Abstract: | We study how debt news shapes firms' inflation expectations in a monetary union. In an active-control experiment, German firms receive optimistic or pessimistic projections of France, Italy, and Spain's debt-to-GDP ratios. Pessimistic news raises debt beliefs and increases one- and three-year inflation expectations, with no detectable effect at five years. The response is driven by low-trust firms and by firms expecting relatively low ECB policy rates. A salient German debt-financed fiscal shock generates no comparable response. Within a Fisherian framework, the evidence suggests that debt news becomes inflationary when firms perceive incomplete fiscal backing and expect monetary accommodation. |
| JEL: | E31 E52 E62 D84 C93 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21595 |
| By: | Bartels, Bernhard; Eichengreen, Barry; Schumacher, Julian; Weder di Mauro, Beatrice |
| Abstract: | Unprecedented balance sheet expansion in recent years has resulted in heightened financial risk for central banks, reflected initially in higher profits and subsequently in significant losses. Combining data on central bank balance sheets with market data on asset prices, we provide evidence on the evolution and determinants of financial risk-taking by 18 advanced economy central banks. Based on the estimated Value at Risk (VaR), we document that average central bank balance sheet risk increased to about 3 percent of GDP. Central banks took more risk in periods of low policy rates, less expansionary fiscal policies, and more favorable growth prospects. Less independent central banks were more risk averse than their more independent peers, contrary to the fiscal dominance view. |
| Keywords: | Monetary policy; Central bank independence |
| JEL: | E52 E58 E63 G32 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21570 |
| By: | Etienne Fakaba Sissoko; Khalid Dembélé (Université des sciences sociales et de gestion de Bamako - USSGB - Université des sciences sociales et de gestion de Bamako) |
| Abstract: | Digital monetary infrastructures are transforming the institutional architecture of money. In the West African Economic and Monetary Union (WAEMU), the Central Bank of West African States (BCEAO) has moved toward interoperable instant payments through the PI-SPI platform, while policy discussions on central bank digital currencies have opened the question of a possible regional retail instrument, here designated as the e-CFA. This article examines whether these instruments should be read as neutral technical innovations, as mechanisms of financial inclusion, or as institutional devices that redistribute monetary power. The analysis combines monetary institutionalism, banking intermediation theory and critical approaches to algorithmic regulation. It uses a qualitative documentary method and a comparative reading of three CBDC experiences: China's e-CNY, Nigeria's eNaira and the Bahamian Sand Dollar. The article argues that the core issue is not digitization itself, but the governance of programmability, transaction metadata, technical infrastructure and the future role of banks. PI-SPI can reduce fragmentation and transaction delays, but it also creates a common operational locus for payment flows. A direct retail e-CFA, if designed without tiering, holding limits, legal safeguards and bank participation, could intensify deposit migration and weaken the financing capacity of commercial banks. Conversely, a regulated two-tier design could requalify banks as trusted interfaces, credit providers and value-added service institutions. The article contributes the concept of distributed monetary sovereignty: a model in which public monetary authority is preserved while algorithmic rules, data governance and operational infrastructures remain legally bounded, auditable and institutionally plural. |
| Keywords: | financial inclusion JEL codes: E42, O55, O33, G21, E51, algorithmic governance, banking disintermediation, monetary sovereignty, WAEMU, BCEAO, e-CFA, PI-SPI, central bank digital currency, central bank digital currency PI-SPI e-CFA BCEAO WAEMU monetary sovereignty banking disintermediation algorithmic governance financial inclusion JEL codes: E42 E51 G21 O33 O55 |
| Date: | 2026–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05607364 |
| By: | Laura Pilossoph; Jane M. Ryngaert; Jesse J. Wedewer |
| Abstract: | This paper studies the effect of unanticipated inflation in the labor market. When wages are contracted in nominal terms, inflation reduces real wages, leading workers to intensify on-the-job search to obtain wage-adjusting outside offers. Both the search effort and the resulting job mobility are costly, yet that same mobility raises output by moving workers toward more productive matches. To quantify these costs and benefits, we extend the canonical job ladder of Postel-Vinay and Robin (2002) to a nominal environment with privately chosen search effort, and calibrate it to standard moments from the pre-pandemic US labor market. A one-time inflation shock scaled to the COVID episode generates an average welfare loss of 0.44% of consumption, with workers at the top of the wage distribution bearing losses over six times those at the bottom. Once the offsetting transfer of surplus to firms and productivity gains from reallocation are accounted for, the net aggregate cost is close to zero. Second, inflation volatility imposes asymmetric costs: worker welfare is approximately invariant to the volatility regime because firms compensate workers for expected search costs at hiring, but social welfare declines meaningfully because the resource cost of search effort is not undone by compensation. This second finding identifies a distinct, labor-market source of welfare costs from inflation volatility, complementing the price-dispersion costs emphasized in the New Keynesian literature. |
| JEL: | E0 E24 E31 J63 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35369 |
| By: | Francesco Bianchi; Renato Faccini; Leonardo Melosi; Nils Wehrhöfer |
| Abstract: | We study how debt news shapes firms’ inflation expectations in a monetary union. In an active-control experiment, German firms receive optimistic or pessimistic projections of France, Italy, and Spain’s debt-to-GDP ratios. Pessimistic news raises debt beliefs and increases one- and three-year inflation expectations, with no detectable effect at five years. The response is driven by low-trust firms and by firms expecting relatively low ECB policy rates. A salient German debt-financed fiscal shock generates no comparable response. Within a Fisherian framework, the evidence suggests that debt news becomes inflationary when firms perceive incomplete fiscal backing and expect monetary accommodation. |
| JEL: | C93 D84 E31 E32 E62 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35341 |
| By: | Joshua Aizenman; Jamel Saadaoui; Gazi Salah Uddin; Naoki Yago |
| Abstract: | This paper studies the role of foreign exchange and gold reserves in mitigating the US monetary policy spillovers to exchange rates at times of geopolitical fragmentation and de-dollarization. US dollar reserves mitigate depreciation driven by US monetary tightening, while non-dollar reserves do not. Gold reserves are also associated with smaller exchange-rate responses, though less strongly than dollar reserves, suggesting novel complementarity between dollar and gold reserves. Moreover, the estimated effects of dollar and gold reserves are concentrated in countries without swap and repo lines. These findings are consistent with recent large-scale purchases and sales of gold reserves by emerging economies amid sanctions-related restrictions and geopolitical concerns about access to dollar liquidity. Our results suggest that not only the aggregate volume but also the composition of foreign exchange and gold reserves and access to dollar liquidity facilities are empirically relevant for exchange-rate responses to US monetary shocks. Finally, we exploit cross-country heterogeneity and show that countries with large dollar exposure exhibit smaller exchange-rate responses when dollar and gold reserve holdings are larger. |
| JEL: | E52 F31 F32 F41 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35337 |
| By: | Elton Beqiraj; Giuseppe Ciccarone; Giovanni Di Bartolomeo |
| Abstract: | Most comparative analyses explaining the 1970s and 1990s/2000s inflation performance, focusing on good/bad policy versus good/bad luck, assume that price- and wage-setting institutions remained constant. While studies acknowledge institutional changes, they typically overlook sources of intrinsic persistence of wage and price inflation. This paper contributes to this ongoing debate by revisiting the U.S. business cycle. We account for time variations in pricing and wage-setting behavior due to institutional changes and for switches in inflation-intrinsic persistence, which we formally represent as changes in the shape of the hazard function. By analyzing how policy and shocks interact within different institutional settings in our model economy, we trace the existing contrasting evidence back to an identification problem that biases regime estimates and leads to misleading interpretations. Once we account for persistence switches, the empirical outcomes strongly support, but refine, the luck interpretation over the policy interpretation. The 1970s were characterized not only by larger shocks but also by more pronounced transmission mechanisms of supply shocks, driven by the price- and wage-setting institutions of the time. Additionally, the data suggest reinterpreting monetary regimes more in line with central bankers' views and show that structural changes in price and wage adjustments play essential, opposing roles in the Great Inflation. Finally, our analysis yields two important general findings. First, it emphasizes the critical role that changes in price- and wage-setting institutions play in influencing the propagation of shocks. Second, it validates the use of a generalized time-dependent rule to represent nominal rigidities. |
| Keywords: | duration-dependent wage adjustments, intrinsic inflation persistence, DSGE models, hybrid Phillips curves, Markov-switching |
| JEL: | E24 E31 E32 C11 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00204 |
| By: | Pavel Trunin (Gaidar Institute for Economic Policy); Alexandra Bozheckkova (Gaidar Institute for Economic Policy); Alexander Knobel (Gaidar Institute for Economic Policy) |
| Abstract: | In 2025, the Bank of Russia’s monetary policy was conducted as the economy gradually |
| Keywords: | Russian economy, monetary policy, money market, exchange rate, inflation, balance of payments, fiscal policy |
| JEL: | E31 E43 E44 E51 E52 E58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:gai:ppaper:ppaper-2026-1626 |
| By: | Asger Lau Andersen; Andreas Jakobsen; Mads Rahbek Jørgensen; Niels Johannesen |
| Abstract: | We study the transmission of rising interest rates to consumption using granular customer data from a major bank in Denmark. We show that households with adjustable-rate mortgages gradually reduced spending and increased deposits as market rates soared in 2022 but made no further spending cuts when their mortgage rates eventually reset to a higher level in 2023-2024. These patterns are consistent with forward-looking households who respond to new information about future mortgage costs and use liquid buffers to smooth consumption. The cash-flow channel of monetary policy may therefore operate almost instantaneously even when mortgage rates reset with a significant lag. |
| Keywords: | consumption, saving, cash-flow effect, monetary policy, mortgage |
| JEL: | D12 D14 E21 E43 E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12748 |
| By: | Stefano Fasani; Giuseppe Pagano Giorgianni; Valeria Patella; Lorenza Rossi |
| Abstract: | This paper investigates the macroeconomic effects of a belief distortion shock, an unexpected increase in the wedge between household and professional forecaster inflation expectations. Using survey and macro data alongside machine-learning techniques, we identify this shock and examine its effects within and outside the ZLB, while conditioning on the degree of inflation disagreement. The shock increases unemployment during normal times, whereas it reduces it in the ZLB, when the monetary stance is accommodative. Inflation disagreement instead dampens the expansionary effects of the shock. A New Keynesian model with belief distortion shocks replicates these dynamics and reproduces the inflation disagreement empirical patterns. |
| Keywords: | Inflation, Belief Distortion Shock, Inflation Disagreement, Households Expectation, Machine Learning, Local Projections, New Keynesian model, Monetary Policy, ZLB |
| JEL: | E31 C22 D84 C32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00187 |
| By: | Goodhart, Charles; Lastra, Rosa |
| Abstract: | This paper provides a critical approach to the current political and economic debate on the state of financial regulation. It discusses why setting capital regulatory requirements causes tensions between bank managers and shareholders on the one hand and taxpayers on the other, leading to a Minsky cycle. It also re-imagines the central bank’s Lender of Last Resort Role, with the aspiration that the central bank becomes again “Leader of Last Resort†. The paper also considers bank competitiveness and its interaction with regulation and takes into account the counter-regulation movement in the US. |
| Keywords: | Financial regulation; Capital; Liquidity; Central banking; Lender of last resort |
| JEL: | E44 E58 G18 G28 G38 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21590 |
| By: | Hwee Kwan Chow (School of Economics, Singapore Management University); Jordan Lee (Singapore Management University) |
| Abstract: | This study empirically assesses the drivers of risks to the inflation outlook for a small open economy like Singapore. We apply the inflation-at-risk framework of López-Salido and Loria (2020) and incorporate projections from the Survey of Professional Forecasters (SPF) as point forecasts of inflation. Our findings show that macro-financial risk factors—shaped by Singapore’s openness, role as a financial hub, and exchange rate–centered monetary policy framework—enter nonlinearly into inflation risk models and exert differentiated effects. Foreign price pressures heighten upside risks, and exchange rate policy has proven effective at mitigating them. Tighter global financial conditions amplify inflation risks through cost-push channels, whereas demand weakness produces only muted downside effects. We also record sharp gains in log predictive scores for one-quarter ahead conditional distributions relative to unconditional ones during the post-pandemic inflation surge. One-year-ahead predictive distributions become markedly right‑skewed ahead of the surge, effectively signalling a heightened probability of extreme inflation outcomes. Overall, incorporating inflation risk measures improves both the in-sample fit and the forecast accuracy of predictive distributions of inflation one and four quarters ahead, offering insights for central banks navigating uncertain global conditions. |
| Keywords: | Inflation-at-risk; survey of professional forecasters; quantile regressions; forecast accuracy |
| JEL: | C21 C53 E31 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:ris:smuesw:022912 |
| By: | Ulrike Malmendier; Stefan Nagel; Ulrike M. Malmendier |
| Abstract: | Empirical evidence commonly cited as indicating that inflation expectations have become better anchored includes the declining sensitivity of expectations to inflation surprises over time, particularly around the adoption of inflation targeting. These patterns are typically attributed to the influence of explicit or implicit inflation targets on inflation expectations. We show that this evidence is consistent with a model of experience-based learning in which individuals learn solely from their life-time history of realized inflation, without anchoring their expectations to an announced inflation target. In this model, the prolonged experience of low short-run inflation persistence in the pre-COVID decades renders long-run expectations insensitive to inflation surprises, matching the patterns observed in empirical anchoring tests. A unique prediction of the experience-based learning model is also borne out in the data: the decline in surprise sensitivity since the 1980s is strongest among younger individuals. The memory of low inflation persistence experiences further explains why long-run inflation expectations remained stable in the face of the post-COVID inflation surge. At the same time, simulations indicate that the sensitivity of long-run expectations to inflation surprises would rise sharply if individuals were to experience another sustained episode of highly persistent inflation. Overall, long-run inflation expectations may be less firmly anchored than commonly believed. |
| Keywords: | Inflation expectations, anchoring, monetary policy, learning from experience |
| JEL: | E31 E52 E71 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12750 |
| By: | Boris Hofmann; Matthias Kaldorf; Matthias Rottner |
| Abstract: | We analyse the macroeconomic impact of stablecoins using a quantitative macroeconomic model. Stablecoins influence the economy through two opposing channels: (i) a bank lending channel, as household demand for stablecoins raises deposit rates, increases bank funding costs, and reduces loan supply; and (ii) a fiscal space channel, as stablecoin issuers' demand for Treasury bills lowers sovereign borrowing costs, expands fiscal space for tax reductions or higher spending. Calibrated to the U.S., the model predicts that widespread stablecoin adoption modestly reduces long-run output, as the bank lending channel outweighs the fiscal space channel. However, the overall long-run impact may shift under alternative scenarios about stablecoin reserve asset regulation, the level of public debt and the strength of foreign demand. Moreover, the fiscal space channel activates more quickly than the bank lending channel, resulting in significantly positive short-term output effects during the transition phase. Additionally, the model suggests a strengthening of monetary policy transmission via the bank lending channel. |
| Keywords: | stablecoins, macroeconomic model, regulation, credit supply, fiscal policy, monetary policy |
| JEL: | E42 E43 G12 G23 G28 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1363 |
| By: | Andrade, Philippe; Dietrich, Alexander; Leer, John; Schoenle, Raphael; Zakrajšek, Egon; Tang, Jenny |
| Abstract: | Do firms adjust prices to realized costs, expected costs, or both? We address this question using a new survey of U.S. businesses that separately measures realized cost changes since the last price adjustment and expected cost changes over the subsequent year, including the portion attributable to new trade policies introduced in 2025. We use individual perceived tariff exposure as an instrument to identify the causal effects of realized and expected costs on price changes. We find an incomplete pass-through, of about 68 percent, of current costs to reset prices. In addition, reset prices incorporate about 43 percent of expected costs over the next year. The importance of these channels varies across firms: Frequent price adjusters respond mainly to current costs, while sticky-price firms place more weight on expectations; goods producers adjust more contemporaneously, whereas services firms are more forward-looking, similar to firms with high trade uncertainty. While several pricing models can rationalize a role for expected costs, the evidence favors endogenous pricing frameworks in which uncertainty reshapes the reset-price kernel across horizons or imperfect-information models in which uncertainty can amplify the role of expectations. |
| Keywords: | Survey; Pass-through |
| JEL: | E31 C83 C26 F14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21583 |
| By: | Asger Lau Andersen; Niels Johannesen; Jens Brøndum Petersen; Sonja Settele; Johannes Wohlfart |
| Abstract: | How do households respond when deposit rates drop below zero? Using administrative micro data and exploiting cross-bank variation in interest rate policies, we study a major episode of negative deposit rates in Denmark affecting two thirds of household deposits. We find that households strongly reduced deposit balances when exposed to negative deposit rates, allocating funds to stock portfolios and consumption. In a large-scale survey, we document important roles for loss aversion, perceived unfairness, intertemporal substitution and return considerations in driving these responses. Our findings suggest that monetary policy can have strong consumption effects in negative territory. |
| Keywords: | negative interest rates, households, consumption, monetary policy |
| JEL: | D14 D83 D84 D91 E21 E43 E52 E71 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12732 |
| By: | Arvai, Kai; Coimbra, Nuno; Pinchetti, Marco |
| Abstract: | This paper investigates the determinants of international investors' portfolio choices between gold and sovereign bonds in an environment shaped by economic and geopolitical shocks. We develop an endogenous portfolio choice model where reserve safety has a political dimension — sovereign bonds issued by the dominant reserve country are more liquid but exposed to the issuer's sanctions authority, while gold offers sanctions protection at the cost of lower liquidity. Our model implies that US convenience yields fall during periods of high sanction risk, as safe-asset demand fragments along geopolitical lines. Empirically, periods of elevated geopolitical risk coincide with higher gold prices and 10-year Treasury yields. In such periods, the average composition of official reserves shifts toward gold, with countries less aligned with the US in UN voting patterns increasing their holdings by a greater extent. |
| Keywords: | Dominant currency; Safe assets; Sanctions; Gold |
| JEL: | E42 F02 F33 N10 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21575 |
| By: | Elton Beqiraj; Stefano Di Bucchianico; Mario Di Serio; Michele Raitano |
| Abstract: | We use high-frequency Italian administrative data on private-sector employees to examine the impact of monetary policy shocks on wage inequality from 1999 to 2018. We estimate the impulse responses of various wage distribution indicators to exogenous monetary policy shocks, focusing on mean wages, key percentiles, and the Gini index, and distinguishing impacts on monthly gross earnings and full-time equivalent daily wages. Our findings reveal that expansionary monetary policy shocks significantly increase mean wages and reduce wage inequality, in addition to their positive effects on employment and economic activity. These distributional gains mainly accrue to workers in the medium-low segments of the wage distribution. Comparing monthly and unitary wages reveals markedly different responses, indicating that the intensive margin plays a crucial role. Two additional findings emerge when distinguishing workers' subgroups. First, workers employed in small and medium-sized firms benefit comparatively more from expansionary monetary shocks, pointing to a more substantial easing of firms' financial constraints. Second, the wage gap between blue-collar and white-collar workers narrows. |
| Keywords: | Monetary policy shocks, Wage inequality, Employment levels, Administrative data, Labour market, Italy |
| JEL: | D63 E50 E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00201 |
| By: | Thomas Lustenberger; Enzo Rossi; Anna Zeitz |
| Abstract: | Drawing on a novel dataset of more than 10, 000 speeches from 1914 to 2024, we track the evolution of Federal Reserve communication and identify three stylized facts. (1) Although the overall volume of speeches has declined over the past decade, the composition of Fed communication has remained notably consistent for forty years, with Federal Reserve Bank (FRB) presidents accounting for the majority of public engagements. Variation in communicative participation is driven primarily by dispositional factors, including professional background, gender, and other speaker-specific idiosyncrasies, rather than the particular time frame in which the speeches were delivered. (2) While governors' communication reacts to financial stability, FRB presidents' schedules remain decoupled from both regional shifts in their districts and broader macroindicators. (3) A "complexity paradox" has emerged: while the syntactic structure simplifies during crises, the conceptual density increases. When adjusted for abstractness, the communication patterns of governors and FRB presidents appear remarkably similar. |
| Keywords: | Federal Reserve System, Central bank communication, Content analysis, Language complexity |
| JEL: | E52 E58 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2026-06 |
| By: | Zhengyang Jiang; Arvind Krishnamurthy; Hanno Lustig; Robert J. Richmond |
| Abstract: | We quantify the impact of the loss of reserve currency status in goods and asset markets. In goods markets, the loss of seigniorage (1% of GDP per annum) makes American households spend less, mostly on U.S. goods, leaving an excess supply of U.S. goods to be cleared by a real depreciation of the dollar. The larger the home bias and the lower the elasticity of substitution between home and foreign goods, the larger the required depreciation. Standard parameters imply an 8.8% real depreciation of the dollar. In asset markets, about 50% of GDP in dollar bonds must be reabsorbed by home investors, raising the U.S. real interest rate. Standard parameters imply a 90 basis points rise, leading to an aggregate wealth loss of roughly one year of U.S. GDP. |
| JEL: | F0 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35328 |
| By: | Bence Bardóczy; Gideon Bornstein; Sergio Salgado |
| Abstract: | This paper studies how labor market power affects the transmission of monetary policy. Using administrative U.S. Census data, we show that firms with high monopsony power—defined as those accounting for over 10 percent of the local wage bill—respond less to monetary policy in terms of their wage bill and employment. We then develop a New Keynesian model with heterogeneous firms and oligopsonistic competition to interpret these findings. Wage stickiness combined with firms’ labor market power is key to generating the heterogeneous responses that we document. Our model highlights two channels through which oligopsony shapes the aggregate effects of monetary policy: partial passthrough and misallocation. Calibrated to U.S. labor markets, the model implies that the decline in labor market power since the 1980s has increased the output response to monetary policy by about 10 percent and accounts for about 15 percent of the estimated flattening of the Phillips curve. |
| JEL: | E0 E31 E52 J42 L13 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35335 |
| By: | Neville Francis |
| Abstract: | Standard measures of inflation, such as the Consumer Price Index (CPI), are designed to measure changes in the cost of living, not how households perceive price changes under limited attention and imperfect information. This paper introduces Perceived Inflation (PI), an attention-weighted inflation measure derived from a model in which households allocate attention across goods and observe noisy price signals. I construct monthly PI using disaggregated CPI data and attention proxies based on price salience, volatility, media mentions, and search behavior. The resulting PI series is highly correlated with CPI inflation but exhibits greater short-run volatility, especially during the Global Financial Crisis, the COVID-19 recession, and the 2021–22 inflation surge. A state-space version of the index implies a persistent latent attention component and a time-varying PI wedge. Finally, the paper embeds the estimated PI wedge into a heterogeneous-household model to demonstrate how attention-driven distortions in inflation perceptions affect saving and consumption through perceived real returns. |
| JEL: | C32 D84 E21 E31 E71 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35354 |
| By: | Kumar, Naveen |
| Abstract: | This paper provides novel subnational evidence on the inflationary effects of climate shocks in India using monthly data for 21 states during 2013–2023 and panel local projections. Four main findings emerge. First, temperature shocks persistently raise both headline and food inflation, with no evidence of mean reversion over the medium run. Second, these effects are heterogeneous, with stronger responses in rural areas, post-monsoon months, and agriculture-dependent states. Third, the response is asymmetric: warm anomalies drive most of the inflationary effect through agricultural supply disruptions, while cold anomalies remain statistically insignificant. Fourth, flexible inflation targeting weakens, but does not eliminate, climate induced inflationary pressures. |
| Date: | 2026–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:uj8s3_v1 |
| By: | Francesco Ferlaino |
| Abstract: | This study examines how different types of financial frictions influence household wealth and consumption inequality in response to a contractionary monetary policy shock. The analysis considers two key frictions: those affecting production firms and those related to household borrowing, both incorporated into a HANK model. The results suggest that frictions in the productive sector have a stronger impact on wealth inequality, whereas frictions in household borrowing lead to greater consumption dispersion relative to the counterfactual scenario. This divergence primarily arises from dynamics around the zero-wealth threshold, particularly the behavior of the household borrowing spread. |
| Keywords: | Heterogeneous agents, financial frictions, monetary policy, New Keynesian models, inequalities |
| JEL: | E12 E21 E44 E52 G51 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00191 |
| By: | Bindseil, Ulrich; Daskalova, Svetla; Senner, Richard |
| Abstract: | We analyse the portfolio-reallocation incentives faced by NIIP-surplus economies under cross-border seizure risk. Assets, such as gold, can be physically imported and held domestically in contrast to financial claims on other jurisdictions. Gold purchases not only reduce the NIIP but can also drive steep increases in gold prices. We review the history of gold as an international settlement asset, the evolution of financial sanctions, and the global distribution of NIIP and gold holdings. We calibrate a simple model to recent gold mining cost curves and show that (assuming a current account balance of zero) closing one trillion dollars of NIIP per year through newly mined gold could push prices above USD 8, 500 per ounce, while a ten-trillion-dollar target could be consistent with USD 67, 000 per ounce. In an extended model, NIIP surplus countries face a trade-off between rapid NIIP reduction, with subsequent valuation losses, versus gradual adjustment, which tempers price impacts but lengthens the period of exposure to cross-border seizure risks. We also model the case of an elastic supply from mobilization of existing private holdings in the rest of the world via a simple portfolio re-allocation channel. |
| Keywords: | Gold, foreign reserves, net international investment position |
| JEL: | E3 E5 G1 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:341430 |
| By: | Mark Toth |
| Abstract: | This paper analyzes how the spatial structure of housing affects monetary policy transmission. I integrate spatial structure into a monetary business cycle model with housing. Spatial structure matters economically through households’ location prefer ences and residential externalities. These two features are reflected in two measures of residential concentration. Higher residential concentration dampens consumption responses to interest rate changes through housing demand. In an empirical analysis, I create model-consistent measures of residential concentration for US and Eurozone regions, using geospatial data based on satellite imagery. I empirically validate the model’s predictions in a state-dependent local projections framework. My paper identifies residential concentration as a fundamental determinant of monetary policy transmission. |
| Keywords: | Monetary policy, business cycle, spatial, housing demand. |
| JEL: | E32 E52 R12 R21 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_762 |
| By: | Artyom Ghazaryan (Central Bank of Armenia); Anahit Matinyan (Central Bank of Armenia); Gevorg Minasyan (Central Bank of Armenia); Aleksandr Shirkhanyan (Central Bank of Armenia) |
| Abstract: | Quantifying the transmission of monetary policy in emerging markets remains a significant challenge due to data scarcity and structural shifts. This study addresses these constraints by identifying monetary policy shocks in Armenia through a dual approach: a high-frequency method following Bu et al. (2021) and a modified narrative strategy adapted from Romer & Romer (1989). We propose a specific modification to the narrative approach that allows identification even when qualitative information is limited, thereby extending the utility of narrative methods to economies outside the advanced-market spectrum. Despite their distinct methodologies, the shocks identified by both approaches exhibit qualitative consistency. Using these shocks within a Local Projection framework, we estimate the impulse responses of the economic activity index, inflation, the real effective exchange rate, and short-term government bond yields. Our findings indicate that while financial variables respond immediately and sharply to monetary policy, the effect on inflation materializes with a lag. These findings provide a refined empirical basis for understanding monetary policy propagation in Armenia and offer a methodological roadmap for identification in data-limited environments. |
| Keywords: | Monetary Policy; Shock Identification; High-Frequency; Narrative; Monetary Policy Transmission |
| JEL: | E52 E58 E65 E31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ara:wpaper:wp-2026-01 |
| By: | Wenqian Huang; Nikola Tarashev; Xinyi Wang |
| Abstract: | Centralised exchanges remunerate stablecoin holders, using the return on the issuer's reserve assets or income from market activity. Under the reserve-based model, yields track policy rates – akin to yields on cash-management instruments – whereas under the activity-based model, yields are much more volatile. By turning stablecoins into substitutes for bank deposits or money market funds or into funding instruments for exchanges' risky activities, remuneration models may shape the macro financial implications of wide stablecoin adoption in the future. |
| Date: | 2026–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:125 |