|
on Monetary Economics |
| By: | Robert Ferstl (Off-Site Banking Analysis and Strategy Division); Bernhard Graf |
| Abstract: | The following study analyzes the transmission of monetary policy to bank lending in the euro area. It focuses particularly on the heterogeneity in the speed and strength of propagation of monetary policy shocks across euro area countries. We employ instrumental variables, based on common euro area wide high-frequency identified monetary policy surprises in combination with local projections, to infer the dynamic effect of monetary policy on bank lending. Local projections are estimated for loan growth to non-financial corporations, allowing for a flexible specification that accounts for potential asymmetries in responses to easing versus tightening monetary policy shocks. The robustness of inferred impulse response functions is examined during the pandemic and across different phases of the monetary policy normalization that began in 2022, including both hiking and easing cycles and extending to the end of 2024. We find that the response of bank lending to monetary policy shocks is generally synchronous across euro area countries in that impulse responses peak after 12 to 18 months. However, the magnitude of peak effects varies considerably pointing to pronounced country heterogeneity in the bank lending channel. Moreover, we find significant asymmetries in country-specific bank lending responses wherein monetary policy tightening shocks are generally less strongly propagated suggesting downward rigidity in the bank lending channel. Taken together our results help policymakers quantify the heterogeneity of common euro-area monetary policy transmission to bank lending across member countries. |
| Keywords: | Monetary policy transmission, Bank lending channel, Country heterogeneity |
| JEL: | E52 F45 G21 |
| Date: | 2026–03–19 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:277 |
| By: | Maximilian Böck; Alina Steshkova (ViennaUniversity of Economics and Business); Thomas Zörner (Oesterreichische Nationalbank (OeNB)) |
| Abstract: | This paper examines how carry trade activity affects the transmission of monetary policy in currency markets. It analyzes a set of developed and emerging market currencies against the U.S. dollar. The U.S. dollar appreciates in response to a conventional monetary policy shock but depreciates to a central bank information shock. A threshold vector autoregressive model is fitted to discriminate between different regimes of speculative carry trade activity. Higher carry trade intensity is associated with larger excess returns and higher crash risk. Across regimes, the differences in exchange rates are mild, while those in interest rates are more pronounced. A currency trading strategy created on the day of central bank announcements, which takes into consideration the joint co-movement of interest rates and stock prices, substantially outperforms the carry trade in terms of the Sharpe ratio and downside risk. |
| Keywords: | Currency markets, Carry Trade Strategy, Monetary Policy, Threshold VAR |
| JEL: | C24 C32 E52 F31 F41 |
| Date: | 2024–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:258 |
| By: | Bowden, Roger; Lorimer, Dawn |
| Abstract: | June 2007 saw the first serious attempt by the Reserve Bank of New Zealand to exercise its currency intervention powers, in an attempt to put a cap on the soaring NZ dollar. Sceptics pointed out that this was inconsistent with the comfort to the foreign exchange carry trade conveyed by signals that the official cash rate would remain high or even tightened further, and intervention attempts could even perversely drive the currency higher. The problem for monetary policy has been that in an incomplete debt market, the only real channel for the official cash rate to impact on fixed rate home mortgage rates is via the indirect feedback from offshore NZ interest rates. This means that the exchange rate becomes the vector. We argue on the basis of forward interest rates that the problem is fixing itself, and from here on will only be hindered by currency intervention or further tightening signals from the central bank. |
| Keywords: | Carry trade, Exchange Rate Intervention, NZ dollar, Uridashis, Official Cash Rate, Term structure, |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:vuw:vuwecf:33474 |
| By: | Philipp Roderweis (Oesterreichische Nationalbank); Alexander Toplitsch (Wirtschaftsuniversität Wien) |
| Abstract: | Using data from the 2023 Austrian Household Finance and Consumption Survey this paper provides first evidence on the role of personality traits in shaping households’ inflation expectations. Extracting and validating the Big Five traits for Austria for the first time, we show personality traits explain substantial variation in inflation expectations, adding 70% to the explained variance accounted for by sociodemographics. For instance, consumers at the 90th percentile of the openness to experience trait report inflation expectations 0.66 percentage points higher than those at the 10th percentile. A large share of Austrian households update expectations adaptively from past experienced inflation rather than anchoring to the ECB’s price stability target. Personality traits predict both this anchoring behavior and households’ absolute forecast error, highlighting their relevance for Taylor-rule effectiveness. Positive policy signals, education and participation in the financial market mediates these effects. The results have direct implications for monetary policy transmission, macroeconomic modeling, and central bank communication strategies. |
| Keywords: | Inflation expectations, personality traits, Big Five, household surveys, monetary policy |
| JEL: | D84 E31 E52 E58 |
| Date: | 2026–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:272 |
| By: | Hall, Viv B. |
| Abstract: | This paper evaluates the governance performance of four small, open economy central banks. Two of these, the Reserve Bank of Australia and the Reserve Bank of New Zealand, are inflation targeting; the other two, the Hong Kong Monetary Authority and the Monetary Authority of Singapore, place major emphasis on exchange rate stability. The four have in common, many elements necessary for excellent governance. But they also display significant differences in principle and in operating procedures, and hence in their monetary policy and corporate governance frameworks. The differences can be associated with different primary goals, different constitutional environments, single-person or "committee" decision-making models, and the central banks having proceeded at different speeds to recognise the need to commit fully to optimal transparency and accountability. There is "no one size fits all" best practice governance framework for central banks, but key desirable principles should be adhered to and two specific suggestions on governance reporting and funding agreements should be considered |
| Keywords: | Central bank governance, Corporate governance, Monetary policy indepedence, Credibility, Transparency, Accountability, Australia, New Zealand, Hong Kong, Singapore, Inflation targeting, Exchange rate targeting, Currency board, |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:vuw:vuwecf:33501 |
| By: | Guido Ascari (De Nederlandsche Bank); Alexandre Carrier (European Central Bank); Emanuel Gasteiger (TU Wien); Alex Grimaud (Oesterreichische Nationalbank); Gauthier Vermandel (Banque de France) |
| Abstract: | We study monetary policy in an environment where price and wage Phillips curves exhibit true curvature. To this end, we propose a New Keynesian (NK) model with endogenous adjustment of price and wage setting frequencies, moving beyond the quasilinear structure of standard nonlinear NK Phillips curves (NKPC). Using euro area data from 1999Q1 to 2024Q4, we estimate and simulate the non-linear model, analyzing the recent inflation surge and the implications of state-dependent prices andwages for monetary policy. Unlike conventional models, our framework does not attribute inflation dynamics primarily to exogenous supply shocks. Instead, the impact of shocks depends on their timing, size, and the business cycle. Consequently, the inflation–output stabilization trade-off is state-dependent: monetary policy is more effective in curbing inflation, and supply shocks have larger effects during periods of high inflation. |
| Keywords: | New Keynesian Phillips Curve, non-linearity, inflation, monetary policy |
| JEL: | C51 E31 E47 E52 |
| Date: | 2025–12–09 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:270 |
| By: | Piero Garcia (Banco Central de Reserva del Perú) |
| Abstract: | This paper studies how exogenous liquidity shocks transmit from central bank balance-sheet operations to bank contract pricing. Using real-time liquidity forecasts from the Central Reserve Bank of Peru (BCRP), I identify reserve-supply shocks from forecast errors in the calibration of daily open market operations. The main analysis quantifies how these shocks affect financial conditions in the banking sector by estimating the dynamic response of lending and deposit spreads relative to safe yields of comparable maturity. I find that a positive liquidity shock to financial institutions generates a sizable and persistent compression of spreads, driven by declines in bank credit and deposit rates while safe yields respond little, consistent with a reduction in the liquidity premia embedded in bank contracts. The results are robust across alternative maturities, liquidity measures, model specifications, and alternative approaches to the measurement of liquidity shocks. These findings imply that balance-sheet and liquidity management policies can influence the effective stance of monetary policy not only through the level of short-term rates, but also through the pricing of liquidity risk that shapes bank spreads and borrowing costs. |
| Keywords: | liquidity premium, monetary policy, non-conventional policy, interbank market, interest rates |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:dt-2026-015 |
| By: | Mirjalili, Seyed hossein; Keshtgar, Nafiseh; Abdurahimian, Mohammad Hossein; Fakhar poor, saeed |
| Abstract: | This study aims to identify the macroeconomic factors influencing the likelihood of a banking crisis in Iran, with a particular focus on macroprudential policy. We employed a discrete econometric model (Logit/Probit) using data from 2011 to 2023. The independent variables include the loan-to-deposit ratio (LTD) as a proxy for macroprudential policy, the interbank interest rate as a proxy for monetary policy, as well as the inflation rate and exchange rate volatility as indicators of macroeconomic instability. The positive and significant coefficient of LTD confirms that liquidity risk arising from excessive credit expansion is the main domestic factor increasing the probability of a crisis. The strong and positive coefficients for inflation and exchange rate volatility suggest that macroeconomic and currency shocks threaten financial stability by deteriorating asset quality and increasing loan defaults. The coefficient for the interbank rate implies the dominance of the disciplinary and supervisory effects of monetary policy over liquidity risk, meaning that a targeted increase in the policy rate by the central bank effectively reduces the probability of a crisis by imposing higher costs on riskier banks. Overall, the findings indicate that financial stability in Iran is influenced by short-term liquidity management and macroeconomic shocks, and that macroprudential policy plays an effective role in curbing risk-taking behavior. |
| Keywords: | Banking crisis; macroprudential policy; Loan to Deposit ratio; Exchange Rate Volatility; Systemic risk. |
| JEL: | G28 |
| Date: | 2025–11–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128879 |
| By: | Greitens, Jan |
| Abstract: | This paper critically examines the relationship between Georg Friedrich Knapp's "State Theory of Money" and today's Neo-Chartalism, often associated with Modern Monetary Theory (MMT). Several contributions have questioned whether the Neo-Chartalists are right to claim Knapp as their predecessor. However, these analyses do not pay sufficient attention to the historical context in which Knapp wrote. This includes contemporary debates and the monetary history of his time. The Neo-Chartalists' reception of Knapp's ideas was almost exclusively through the 1924 translation of the "State Theory of Money". Problematically, this translation has many shortcomings, in particular a narrow focus on the legislative state. But Knapp's focus was on country-specific examples of currencies, in particular the 1892 currency reform in Austria-Hungary. There are significant differences between Knapp's published and unpublished writings. Archival findings reveal Knapp's reflections on inflation, which align him with the Real Bills Doctrine and a proto-Fiscal Theory of the Price Level. He argued that monetary state financing should be used only as a last resort. Contrary to MMT's advocacy for state-funded expenditures, Knapp supported a balanced budget, expressing concern over the impact of monetary inflation on exchange rates. Apart from fairly general principles such as the nominality of money, the similarities between Knapp and the Neo-Chartalists diminish as one critically examines Knapp's writings. Therefore, the claim that MMT is based on Knapp should be rejected. |
| Keywords: | Neo-Chartalism, Georg Friedrich Knapp, Modern Monetary Theory (MMT), Real Bills Doctrine, Fiscal Theory of the Price Level |
| JEL: | B31 E42 B50 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:340197 |
| By: | Cristina Conflitti; Daniel Enderle (Vienna University of Economics and Business); Ludmila Fadejeva (Latvijas Banka, Monetary Policy Department); Erwan Gautier; Alex Grimaud (Oesterreichische Nationalbank); Eduardo Gutiérrez (Banco de España); Valentin Jouvanceau; Jan-Oliver Menz; Alari Paulus (Eesti Pank); 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 fourpercentage- 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: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:273 |
| By: | Mario González-Frugone; Ignacio Rojas |
| Abstract: | In recent decades, central banks have increasingly relied on communication as a policy tool. We use linguistic methods to extract the latent information from monetary policy documents in Spanish of the Central Bank of Chile and use this information to reassess the impact of monetary policy surprises on financial markets. As a by-product of this analysis, we present a methodology for analyzing central bank documents in Spanish, construct a sentiment index that captures the policy tilt of each document, and examine whether these documents provide information that can help anticipate changes in the monetary policy rate. The sentiment index is categorized into key economic topics—Inflation, Activity, External Conditions, Financial Conditions, Expectations, and Risk—enabling a detailed understanding of the dynamics behind policy bias. Our findings reveal that monetary policy rate (MPR) surprises have a strong and immediate effect on the yield curve. However, this impact is short-lived and diminishes along the yield curve. In contrast, sentiment surprises in press releases exhibit a weaker, but more persistent effect across instruments. Regarding the minutes, our results suggest that the information they contain is generally already priced in, as sentiment surprises from these documents do not significantly affect the yield curve. Conversely, surprises in the Monetary Policy Report (IPoM) have a positive effect on two-year interest rates, indicating that these reports provide new information that shapes medium-term monetary policy expectations. In terms of anticipation, we find that Central Bank policy documents provide enough information to anticipate policy rate movements. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1053 |
| By: | Valentina Cortés Ayala; Karlla Muñoz Cáceres; Daniel Pérez Klein |
| Abstract: | This article presents the results of the “Central Bank Expectations Survey, ” conducted by the Central Bank of Chile and targeted at over 30 central banks worldwide, with responses from 28 of them. The objective of the survey was to gather information on the existence of inflation expectations surveys aimed at firms or households, identifying who conducts the data collection, the methodologies used, the purposes for which they are employed, and whether the results are used as an input to monitor the anchoring of agents' expectations relative to each institution's inflation target. The study's findings reveal methodological and data treatment heterogeneity, as well as diversity in the interpretation of expectations anchoring. Additionally, a lag was identified in the use of consumer surveys compared to firm surveys. The study demonstrates the growing importance of these instruments in economic analysis and monetary policy formulation but also highlights the need for joint efforts among institutions to improve the quality and comparability of the results obtained. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1054 |
| By: | Carlos Madeira |
| Abstract: | Using hand-collected data with biographical information on central bank governors and board members across 212 countries, I obtain experience-based forecasts for GDP growth and inflation based on an adaptive learning model estimated from their lifetime macroeconomic data. I show that life experience influences the monetary policy rates, with heterogeneity by central bank independence and central bankers' treasury experience. PhD education, studies abroad and professional experience in foreign countries do not seem to influence policy rates. Furthermore, life experience influences the tone of speeches for monetary policy, financial stability and climate concerns. Weather disasters experience reduces climate concerns and NGFS membership. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1073 |
| By: | Ngunza Maniata, Kevin; Pinshi, Christian P. |
| Abstract: | This article provides a structured review of the rapidly growing literature on the implications of artificial intelligence (AI) for central banking and proposes an organizing taxonomy of the main macro-financial and institutional channels discussed in recent contributions. As a general-purpose technology, AI has the potential to influence productivity growth, price-setting behavior, inflation dynamics, and the transmission of monetary policy, while its diffusion in the financial system may introduce new sources of systemic risk through algorithmic coordination, model opacity, and cyber vulnerabilities. The article synthesizes recent contributions from international financial institutions and academic research to organize these channels within a coherent macro-financial framework. It also reviews documented applications of AI within central banks, including macroeconomic forecasting and nowcasting, supervisory technology, payments oversight, and internal information processing. Attention is given to the emerging literature on African central banks and other emerging market economies, where AI offers opportunities to alleviate data constraints but also raises challenges related to skills, infrastructure, and governance. By organizing and critically assessing existing evidence, the article clarifies why AI constitutes a structural issue for central banking and identifies key areas for future research on monetary and financial stability. |
| Keywords: | Artificial intelligence; Central banks; Monetary policy; Financial stability; Emerging markets. |
| JEL: | E31 E52 E58 G01 G28 O33 O55 |
| Date: | 2026–03–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128352 |
| By: | Felipe Martínez |
| Abstract: | This paper examines the heterogeneous effects of monetary policy and oil price shocks on inflation across the income distribution in Chile. We find that a contractionary monetary policy shock significantly reduces inflation for all income deciles, with a larger decline for high-income households. This differential response is mainly driven by price changes in the Transport category, which accounts for a larger share of expenditures among these households. By contrast, an oil price shock significantly increases cumulative inflation. Although the initial impact is stronger for high-income households, the effect becomes larger for low- and middle-income households as the shock propagates to other sectors, driven by a comparatively stronger price response in the Food category. Moreover, we document substantial dispersion in household-level inflation rates and show that low-income households experienced higher cumulative inflation than their high-income counterparts between 2009 and 2023. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1076 |
| By: | Carlos A. Medel |
| Abstract: | This article examines the determinants of the anchoring of inflation expectations in Chile, both within and beyond the two-year policy horizon. Despite the heightened sensitivity of expectations to actual inflation developments following the recent inflation surge, evidence from linear and non-linear time-series models, as well as binaryoutcome analyses, suggests that confidence in the Central Bank's official inflation forecasts can persist, even in the presence of exogenous influences such as global and domestic economic policy uncertainty and geopolitical tensions. The findings indicate that, notwithstanding observed deviations from the inflation target, full confidence in the monetary policy stance can be maintained. Robustness checks confirm the baseline results when incorporating the full set of responses from the widely used inflation expectations survey. Nonetheless, financial market participants tend to anchor their expectations more firmly to the target, in contrast to experts and academics, who respond more strongly to new data. Members of the corporate sector appear to lie between these two groups in their expectations behaviour. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1056 |
| By: | Fernando Pérez (Banco Central de Reserva del Perú) |
| Abstract: | This paper examines the impact of exchange rate variations on the consumer price inflation in Peru, i.e. the exchange rate pass-through effect to prices (ERPT), emphasizing the inherent nonlinearities of this process, such as the differences between depreciations and appreciations, and also exploring the differences associated with the magnitude of the shocks. The ERPT is not necessarily constant over time, so it is necessary to identify the source of the temporal variation. This leads to the consideration of different models: i) A Linear Bayesian Structural VAR, ii) A non-linear censored SVAR, iii) A time varying coefficients SVAR with Stochastic Volatility, and iv) A Threshold Bayesian SVAR with volatility feedback. In all the models mentioned, an exchange rate shock is identified, and the dynamic effect that this has on measures of total inflation is examined. We find strong evidence of asymmetries and non-linearities in the ERPT, with a time varying effect that fluctuates between 0.1 and 0.3 over 12 months, but can be potentially higher in more uncertain and volatile episodes. |
| Keywords: | Exchange Rate Pass-Through, Inflation, Asymmetric effects, Non-linearities |
| JEL: | C32 E31 F31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:dt-2026-007 |
| By: | Bowden, Roger |
| Abstract: | Recently concerns have been raised about the effectiveness of monetary policy in controlling inflation while avoiding damage to the economy from high exchange rates. This paper examines the basis for concern and identifies the problem as a failure in the primary instrument, namely the Reserve Bank's operating cash rate, to adequately impact further along the term structure curve, which has become the more sensitive area for aggregate demand. This means that direct control over expenditure is weak, and too much leeway is left to the housing and other asset markets to sustain demand in the economy. Globalisation of credit availability and financial technology have helped to blunt the policy instrument in this respect, shifting the adjustment burden on to the exchange rate. Deft management of interest and currency expectations can help, but the problem may require closer coordination and cooperation between monetary and fiscal policy, restoring a stabilisation role for the latter. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:vuw:vuwecf:33499 |
| By: | D.W. Kimolo (University of South Africa); N.M. Odhiambo (University of South Africa); S. Nyasha (University of South Africa) |
| Abstract: | This study examines the inflation dynamics in Rwanda from the 1970s to 2021, focusing on policies, trends, challenges, and opportunities in managing inflation. Secondary data sources were used for analysis. The findings show that Rwanda has adopted a multi-faceted approach to inflation control, including macroeconomic policies, economic diversification, and infrastructure investment. The study identifies three distinct episodes of high inflation in the 1970s, early 1990s, and 1994. Since the early 2000s, inflation trends have been erratic, with notable episodes in 2004, 2008-2009, 2012, and 2020. Challenges in managing inflation include import reliance, weak monetary policy transmission, and vulnerability of the agriculture sector. Opportunities for Rwanda lie in economic diversification, improved coordination between fiscal and monetary policy, and sound macroeconomic policies. The study emphasizes the need for a comprehensive approach to inflation management, considering Rwanda's unique circumstances, to achieve stability and inclusive growth through sound policies, diversification, and infrastructure investment. |
| Keywords: | Price Level; Inflation; Deflation; Rwanda |
| Date: | 2024–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:afa:wpaper:wp072024 |
| By: | Guangling Liu; Marrium Mustapher |
| Date: | 2025–02–07 |
| URL: | https://d.repec.org/n?u=RePEc:rza:ersawp:899 |
| By: | Klaus Adam (University of Mannheim & CEPR); Andrey Alexandrov (DEF, University of Rome "Tor Vergata"); Henning Weber (Deutsche Bundesbank) |
| Abstract: | The misallocation costs associated with different aggregate inflation rates can be estimated from micro price data via a set of sufficient statistics. We show that this works for a broad class of price-setting models and in the presence of unobserved product-level heterogeneity in pricing frictions and flexible prices. Applying the sufficient statistics approach to the micro price data underlying the U.K. consumer price index, we find large misallocation costs: aggregate productivity falls by about 1% if aggregate inflation is 8 percentage points above or below its optimal rate of 1.8%. Our findings provide important lessons for the calibration of sticky-price models: standard calibration targets can be uninformative about the sufficient statistics characterizing misallocation costs. To correctly capture these costs, models should be directly calibrated to the sufficient statistics that we uncover. |
| JEL: | E31 E58 |
| Date: | 2026–04–27 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:620 |
| By: | Nitin Nair |
| Abstract: | This paper causally shows that non-financial corporate liquidity dampens monetary policy transmission. While standard analyses of financial heterogeneity rely on exposure-based esti- mates, I additionally employ Granular Instrumental Variables (GIV) to overcome endogeneity concerns. GIVs exploit idiosyncratic shocks to the largest corporate cash holding firms to identify exogenous variation in the aggregate cash ratio. I then develop a stock-flow consistent growth model to identify the structural conditions under which corporate cash accumulation weakens transmission. These results have direct implications for the effectiveness of monetary policy and motivate the inclusion of corporate liquidity into mechanisms like the financial accelerator and investment functions. |
| Keywords: | Monetary Policy Transmission; Local Projections; Granular Instrument Variables; Corporate Finance; Stock–flow consistent model |
| JEL: | C36 E12 E22 E52 G32 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2610 |
| By: | Alexander Meléndez (Banco Central de Reserva del Perú) |
| Abstract: | This paper examines the influence of monetary policy and the zero lower bound (ZLB) on government consumption and investment multipliers in Peru from 1996Q1 to 2023Q3. Using a hybrid Time-Varying Parameter Vector Autoregression with Stochastic Volatility (TVP-VAR-SV), the study estimates impulse response functions, fiscal multipliers, forecast error variance decompositions, and historical decompositions for each quarter of the sample. The results indicate that a tighter monetary policy stance is associated with lower estimated government consumption and investment multipliers, consistent with standard monetary-fiscal interaction mechanisms documented in the literature. Moreover, following the adoption of an explicit policy rate framework, estimated fiscal multipliers exhibit greater sensitivity to interest rate conditions. In this context, the COVID-19 period provides a natural episode of historically low policy rates, approximating a ZLB-type environment from an analytical perspective, under which estimated government investment multipliers increase significantly, in line with the international literature. These findings contribute to the literature on monetary–fiscal policy interactions in emerging market economies operating under inflation targeting and a managed floating exchange rate regime. |
| Keywords: | fiscal multipliers, monetary policy, zero lower bound, emerging country |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:dt-2026-016 |
| By: | Helmut Elsinger (Oesterreichische Nationalbank, Economic Studies Division); Helmut Stix (Oesterreichische Nationalbank, Economic Studies Division); Martin Summer (Oesterreichische Nationalbank, Economic Studies Division) |
| Abstract: | This paper examines consumers intended adoption of a digital euro in Austria using a discrete choice experiment. We estimate a mixed logit model to quantify the role of key attributes such as privacy, offline functionality, security against financial loss, monetary incentives and payment form factors. Our findings indicate that security and financial incentives are the strongest drivers of adoption, while privacy plays a secondary role. We identify significant heterogeneity in adoption likelihood across socio-demographic groups. Simulations suggest that under realistic design assumptions, approximately 45% of individuals are found to have an intention to adopt a digital euro. |
| Keywords: | Central Bank Digital Currency (CBDC), Consumer Adoption, Discrete Choice Experiment, Payment Preferences |
| JEL: | E42 D12 G21 C35 |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:268 |
| By: | Michael Pfarrhofer (Vienna University of Economics and Business); Anna Stelzer (Oesterreichische Nationalbank) |
| Abstract: | We assess asymmetries, nonlinearities and state dependencies in dynamic responses of the euro area to monetary policy shocks. The dataset includes macroeconomic, financial, and survey-based variables measuring credit conditions and bank lending transmission channels. These data are observed at different frequencies. We propose a multivariate nonparametric mixed-frequency model, and discuss how to compute dynamic causal effects in a nonlinear context. The results suggest limited effects of expansionary policy shocks whereas contractionary shocks yield responses in line with theory. There is little variation over the business cycle and in distinct periods such as at the effective lower bound. |
| Keywords: | nonlinear structural inference, mixed frequency data, Bayesian nonparametrics, credit channel |
| JEL: | C32 E32 E52 |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:276 |
| By: | César Carrera (Banco Central de Reserva del Perú); Marko Razzo (Banco Central de Reserva del Perú) |
| Abstract: | This paper examines how labor-market informality alters the estimation and policy interpretation of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) in an emerging-market context. Using quarterly Peruvian data from 2007 to 2024, we estimate a time-varying parameter unobserved-components model with stochastic volatility following Chan, Koop, and Potter (2016). Bayesian MCMC techniques jointly recover trend inflation, the NAIRU, and the Phillips-curve slope under two alternative measures of slack: the standard unemployment rate and an extended measure incorporating informal workers. The conventional specification implies a rising NAIRU and persistent inflationary pressure. In contrast, the informality-adjusted NAIRU declines, and the Phillips-curve slope flattens, indicating that informal employment absorbs slack and dampens inflationary dynamics. These results suggest that ignoring informality overstates inflation risks and the power of monetary policy, with significant implications for inflation-targeting frameworks in economies with large informal sectors. |
| Keywords: | NAIRU, Informal employment, Phillips curve, Monetary policy, Inflation dynamics, Emerging markets, State-space model, Bayesian estimation |
| JEL: | C11 C32 E24 E31 E32 E52 O17 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:dt-2026-001 |
| By: | Ander Pérez-Orive; Yannick Timmer; Alejandro Van der Ghote |
| Abstract: | We revisit the credit channel of monetary policy when firms face multiple financing constraints. Our theory shows that the multiplicity of constraints dampens the transmission of expansionary policy to firm borrowing and investment notably but amplifies the transmission of policy tightening. This asymmetry arises because, when policy tightens (eases), the most (least) responsive constraint binds. Using U.S. firm-level data and exploiting a quasi-natural experiment, we find strong support for these predictions. Embedding the mechanism into a New Keynesian framework, we find that the drop in investment after contractionary shocks is twice as large as its increase following equally-sized expansionary shocks. |
| Keywords: | Monetary policy transmission; Dynamic stochastic general equilibrium (DSGE) models; Business investment |
| JEL: | D22 D25 E22 E44 E52 |
| Date: | 2026–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103075 |
| By: | Peter Lihn Jørgensen; Kevin J. Lansing |
| Abstract: | We develop an endogenous measure of anchoring for short-run expected inflation in a New Keynesian model with full-information rational expectations. Specifically, we allow the fraction of non-reoptimizing firms that index prices to the inflation target, rather than lagged inflation, to depend on observed inflation persistence. The model with endogenous indexation generates a scatter plot of persistence and volatility measures for inflation that approximates the convex pattern observed in quarterly U.S. data. With endogenous indexation, the equilibrium anchoring measure exhibits history dependence. To illustrate this idea, we perform a series of disinflation simulations where the model inflation target declines to 2% at different speeds, starting from around 8% in 1980.Q1. The Volcker disinflation simulation exactly replicates the U.S. data using the model-implied anchoring measure and model-implied shock sequences. We show that a slower disinflation mitigates output losses but results in a weaker anchoring measure over subsequent decades. The Volcker disinflation produces a more severe recession in 1982 but leads to a stronger anchoring measure that renders inflation more resilient to subsequent shocks, such as those that arrive during the Great Recession and the pandemic era. |
| Keywords: | anchored inflation expectations; Philips curve; Endogenous indexation; Great Recession; Pandemic era; History dependence. |
| JEL: | E31 E32 E37 |
| Date: | 2026–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:103061 |
| By: | Ekaterina Pirozhkova; Giovanni Ricco; Nicola Viegi |
| URL: | https://d.repec.org/n?u=RePEc:rza:ersawp:891 |
| By: | Evelyn Muñoz-Salas (Department of Economic Research, Central Bank of Costa Rica); César Ulate Sancho (Department of Economic Research, Central Bank of Costa Rica) |
| Abstract: | This essay is part of a research agenda developed within the framework of the Consultative Group on Monetary Policy (CGMP) of the Bank for International Settlements (BIS, https://www.bis.org/publ/bppdf/bispap163.htm), which documents lessons learned by central banks in the Americas and other emerging market economies following recent episodes of heightened uncertainty. The agenda draws on survey evidence, analytical frameworks and institutional experiences to examine monetary policy decision-making and communication in highly uncertain environments. The essay describes the approach of the Central Bank of Costa Rica to incorporating uncertainty into macroeconomic analysis, risk assessment and monetary policy communication, and provides evidence on how analytical frameworks, decision-making processes and communication strategies have been adapted in an environment of elevated volatility and increased macroeconomic complexity. ***RESUMEN: Este ensayo forma parte de una agenda de investigación desarrollada en el marco del Grupo Consultivo de Política Monetaria (CGMP) del Banco de Pagos Internacionales (BIS), que documenta las lecciones aprendidas por bancos centrales de América y otras economías emergentes, tras episodios recientes de elevada incertidumbre. recopila encuestas, marcos analíticos y experiencias institucionales, con el objetivo de examinar cómo se toman decisiones de política monetaria y se en contextos de elevada incertidumbre. Se presenta el enfoque del Banco Central de Costa Rica para integrar la incertidumbre en el análisis macroeconómico, en la evaluación de riesgos y en la comunicación de la política monetaria, aportando evidencia concreta sobre la adaptación de los marcos analíticos, los procesos de decisión y las estrategias de comunicación en entornos de elevada volatilidad y complejidad macroeconómica. |
| Keywords: | Monetary Policy; Uncertainty; Monetary Policy Communication; Reaction Function; Forward Guidance; Scenario Analysis, Política monetaria, Incertidumbre, Comunicación de la política monetaria, Función de reacción, Orientación prospectiva, Análisis de escenarios |
| JEL: | E50 E58 E44 F42 G01 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:apk:epolec:2601 |
| By: | Martin Trombetta (Universidad de Buenos Aires. Facultad de Ciencias Económicas. Instituto Interdisciplinario de Economía Política (IIEP UBA–CONICET). Buenos Aires, Argentina.); Joaquín Waldman (Universidad de Buenos Aires. Facultad de Ciencias Económicas. Instituto Interdisciplinario de Economía Política (IIEP UBA–CONICET). Buenos Aires, Argentina.); Lautaro Souto (Universidad de Buenos Aires. Facultad de Ciencias Económicas. Instituto Interdisciplinario de Economía Política (IIEP UBA–CONICET). Buenos Aires, Argentina.) |
| Abstract: | We study the effect of inflation on poverty in a large panel dataset of 160 countries observed from 1970 to 2024. We estimate two-way fixed effects models that control for per capita GDP and calculate the sensitivity of internationally harmonized poverty measures (using different poverty lines) to the inflation rate. Our results point to a statistically significant positive impact of inflation on poverty, but only when relatively high poverty lines are used. Heterogeneity analysis reveals that the size of this effect is positively associated to country income level. Furthermore, unconditional quantile regressions suggest that the effect is larger in the second quartile of the international poverty rate distribution, implying the link is particularly strong for upper-middle income countries (notably, Latin American economies). Our findings replicate in a subsample of disinflation episodes. These results contribute to the relevant ongoing debate on the consequences of inflation and disinflation, suggesting a rationale for the political popularity boost usually associated to successful disinflations. |
| Keywords: | Inflation; Poverty; Distribution; Cross-country; Two-way fixed effects; Unconditional quantile regressions |
| JEL: | E31 I32 O11 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ake:iiepdt:2026-116 |
| By: | Marcel Barmeier (Oesterreichische Nationalbank) |
| Abstract: | As TLTRO programs provide a direct incentive to increase lending, investigating the level of prudence applied by banks in making lending decisions is of high relevance. Relying on loan-level data, I evaluate the riskiness of lending by applying estimations in a difference-in-differences setting around the cut-off of the TLTRO lending period. Investigating various risk-taking strategies, I show that participation in TLTRO operations is not associated with an increase in PDs, defaults or loans overdue. Even banks that only narrowly fulfilled the lending requirements to benefit from the lowest interest rate applied to TLTRO funding did not engage in higher risk-taking. |
| Keywords: | Monetary policy transmission, funding-for-lending, risk-taking channel, financial stability, TLTRO |
| JEL: | E44 E51 E52 E58 G21 |
| Date: | 2025–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:264 |
| By: | Joshua Hausman; John V. Leahy; John Mondragon; Johannes F. Wieland |
| Abstract: | Nominal interest rates have real effects. Residential mortgages and other real world debt contracts require a sequence of constant nominal payments. Combined with payment-to-income constraints, these nominal payments force borrowers to take on less debt when nominal interest rates rise, regardless of the behavior of the real interest rate. Survey data shows that conditional on the real rate, higher nominal mortgage interest rates reduce home buying sentiment. And increases in nominal mortgage rates reduce mortgage origination more in cities where payment to-income constraints are more likely to bind. We explore the macroeconomic implications of payment-to-income constraints in a new Keynesian model modified to include a credit good. The payment-to-income constraint amplifies the effect of current short-term nominal interest rates on output and inflation, making the model less forward-looking than the standard new Keynesian model. |
| Date: | 2026–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:103060 |
| By: | Denys Casiano (Banco Central de Reserva del Perú) |
| Abstract: | This paper estimates the causal effect of the Central Reserve Bank of Peru's (BCRP) Retail Payments Interoperability Strategy on payment instrument choice and household financial fragility in Peru. Interoperability connected previously segmented digital-wallet networks and payment rails, reducing compatibility and coordination frictions that limit the effective use of digital payments. I combine quarterly microdata from the National Household Survey (ENAHO, 2022–2024) with administrative information to build a predetermined district-level exposure measure based on the relative pre-rollout (December 2022) presence of institutions that become interoperable in each implementation phase. I exploit the staggered rollout and this territorial heterogeneity in a staggered-adoption difference-in-differences design following Callaway and Sant'Anna (2021), complemented with robustness checks and placebo tests. The results suggest a reallocation away from traditional instruments toward more digitized payment channels enabled by interoperability. In particular, I find a decline in cash use for everyday and recurring expenditures and a reduction in card use, alongside an increase in digital channel use (internet banking: +3.3 pp). In parallel, financial fragility falls by 2.3–2.4 pp, consistent with lower liquidity frictions and a greater ability to smooth shocks through timely transfers. The evidence is consistent with a technology channel, as more exposed districts experience a 7.5–7.9 pp increase in the probability of having prepaid mobile internet, in line with households acquiring the minimum connectivity needed to operate mobile payments. Effects concentrate in districts with higher pre-treatment connectivity, human capital, and formality, indicating that interoperability can accelerate the transition away from cash, although its reach remains constrained by persistent structural barriers. |
| Keywords: | Payment systems; interoperability; digital wallets; demand for cash; retail payments; household finance; mobile internet; network externalities. |
| JEL: | D14 D83 E41 E42 G21 L86 O33 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:dt-2026-010 |
| By: | Christian Beer (Oesterreichische Nationalbank, Economic Analysis Division); Robert Ferstl (Off-Site Banking Analysis and Strategy Division); Bernhard Graf |
| Abstract: | This study examines the effectiveness of using webscraped data to predict price developments in the Austrian food retail sector. We calculate monthly nowcasts of price changes based on daily price data collected by the OeNB since mid-2020, using Eurostat methodology for price index calculation, along with further details provided by the national statistics office. We assess the quality of our nowcasts by comparing them with various baseline models and more advanced time series methods also covering machine learning approaches. Our findings indicate that webscraped data are a useful way to obtain more accurate nowcasts with a time advantage, amounting to several weeks, over traditional data sources. In addition, we are the first, to our knowledge, to explore the possibility of using the improved accuracy of the nowcasts as a basis for disaggregated short-term forecasts that extend up to one quarter. While direct forecasts at higher levels of aggregation produce slightly more accurate overall metrics, indirect forecasts derived from disaggregated data provide superior insights into the underlying dynamics of specific sub-components. Our results show that more advanced time series models have trade-offs in terms of computational efficiency while performing very similarly to more traditional methods. These findings have implications for policymakers who aim to develop an effective system for real-time monitoring of inflation dynamics at a very granular level. |
| Keywords: | Webscraping, Inflation forecasting, Time series models |
| JEL: | C22 C81 E31 E37 |
| Date: | 2025–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:262 |
| By: | Martin Summer (Oesterreichische Nationalbank, Economic Studies Division) |
| Abstract: | As central banks explore issuing digital currencies for public use, a critical design challenge is how to protect the privacy of the granular data trails digital payments leave behind. While privacy is widely recognised as a goal, policy debates often frame it as a trade-off with crime prevention—limiting ambition and reinforcing legacy design choices that assume privacy and enforcement are fundamentally in compatible. This risks replicating the data practices of commercial platforms in public infrastructure. This paper charts an alternative approach. Recent advances in privacy-enhancing technologies (PETs) now enable both strong privacy protec tions and verifiable compliance through programmable, rule-based auditability. By embedding such capabilities directly into system architecture, central banks can make privacy a built-in feature of digital money—strengthening institutional trust. Building on recent advances in cryptography and strategic analysis, we offer a con ceptual framework that treats privacy and auditability as distinct design dimen sions, and distil three design principles for privacy-protective CBDCs that remain compatible with enforcement needs. We also introduce a “PET dashboard” that maps specific technologies to CBDC system layers, highlighting where collaboration across central banks, academia, and industry is most needed. |
| Keywords: | CBDC, privacy-enhancing technologies (PETs), economics of privacy |
| JEL: | E42 G28 D82 O33 |
| Date: | 2026–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:278 |
| By: | Ghaderi, Mohammad; Seo, Sang Byung; Shaliastovich, Ivan |
| Abstract: | We identify desirable/undesirable inflation outcomes under subjective beliefs by comparing surveybased and risk-adjusted distributions of inflation. Intuitively, investors dislike inflation at both extremes, preferring a range in the middle. This "good inflation" region, which investors associate with lower-than-average marginal utility, varies substantially over time in position and width, revealing time-varying preferences across inflation ranges. Different ranges contribute to the inflation risk premium with mixed signs, offsetting each other and often masking important insights into the pricing of inflation risk. We rationalize these empirical patterns using a model where investors learn and update beliefs about hidden deflationary and inflationary recession states. |
| Keywords: | Inflation Options, Learning, Subjective Beliefs, Density Forecasts, Good/Bad Inflation Ranges |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:340186 |
| By: | Kugler, Peter |
| Abstract: | Our econometric (cointegration) analysis of the Swiss franc US dollar exchange rates over the period 1974 – 2025 provides strong evidence for a negative bias of the forward rate as predictor of the spot rate for the years up to 2007, which disappears with data from 2008 onwards. This implies that hedging increased the expected Swiss franc value of dollar investments before 2008. This advantage of hedging disappeared in the last 15 to 20 years and hedged and unhedged dollar investment have the same franc expected value in the long run. |
| JEL: | E43 E44 G15 |
| Date: | 2026–04–21 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2026/02 |
| By: | Zsofia Döme (Financial Market Authority Liechtenstein); Michael Sigmund (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division) |
| Abstract: | Since 2014, several countries have implemented the Basel III countercyclical capital buffer (CCyB) to enhance the banking sector’s resilience against risks arising from excessive credit growth. We analyze the CCyB decision-making process of macroprudential authorities across Europe. Our findings indicate that macroprudential authorities neither follow the Basel Committee on Banking Supervision (BCBS) guide, based on the credit-to-GDP gap, nor do they rely on the variables recommended by the European Systemic Risk Board when setting the CCyB rate. However, we demonstrate that had the BCBS CCyB guide been applied prior to the global financial crisis of 2007–2008, capital reserves within the European banking sector would have been sufficient to cover the 240 billion euros in government support used to stabilize financial institutions. Our results show that CCyB decision rates are predominantly influenced by a positive cycle-neutral CCyB approach and the funding structure of banking supervision. |
| Keywords: | Countercyclical capital buffer; Macroprudential policies; Financial cycles |
| JEL: | E32 E58 E61 G21 G28 |
| Date: | 2025–10–23 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:269 |
| By: | Fernando E. Alvarez; David Argente; Diana Van Patten |
| Abstract: | We study the resilience of payment systems to large disruptions in digital infrastructure caused by natural disasters and outages. While advanced economies have rapidly shifted toward electronic payments, these systems depend critically on electricity and information technology, raising concerns about their reliability during crises. We combine high-frequency county-level electricity outage data with detailed weather records, transaction-level expenditure data, household scanner data, and new representative surveys from the United States, Spain, and Sweden. Event-study evidence shows that natural disasters---especially hurricanes---generate persistent outages that sharply reduce expenditures. Natural disasters by themselves do not alter households' choice of payment method; instead, shifts toward cash arise through three channels: electronic payment methods become unavailable, households increase cash holdings for precautionary reasons, and cash is subsequently spent once available ("cash burn"). Consistent with these mechanisms, payment composition shifts markedly: spending rises before disasters due to stockpiling, largely financed with credit, while after disasters digital payments decline and cash usage rises, particularly in areas experiencing outages. Survey evidence confirms that nearly half of consumers are unable to use their preferred electronic payment during outages and that cash serves as a key fallback. Exploiting variation in cash holdings across households and locations, we find that greater access to cash increases the likelihood of completing transactions during outages and mitigates expenditure declines. Complementary survey evidence and the immediate response to our information treatment show that outages and official guidance increase desired cash holdings. Finally, we embed an RCT in the NielsenIQ panel: roughly half of panel households receive authoritative preparedness guidance, and we follow their realized purchases through the subsequent hurricane season. This design provides a clean framework for causal identification of whether greater cash preparedness smooths consumption during weather shocks. Together, the observational, survey, and experimental components of the paper show that cash plays a critical role in sustaining economic activity during payment-system disruptions and point to the value of offline-capable payment instruments, including CBDCs, in increasingly digital economies. |
| JEL: | Q54 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35115 |
| By: | Nico Petz (Oesterreichische Nationalbank); Thomas Zörner (Oesterreichische Nationalbank (OeNB)) |
| Abstract: | This paper analyzes business cycle synchronization and the Phillips curve (PC) relationship in Central, Eastern, and Southeastern European (CESEE) economies relative to the euro area. We find an overall increase in business cycle synchronicity, particularly among Euro adoption candidates, with notable heterogeneities during the early 2000s, the global financial crisis, and the euro crisis. Using a Kalman filter to extract business cycles and various measures of synchronicity, we show that CESEE EU countries align more closely with the euro area than non-EU countries. The unemployment-inflation relationship, analyzed with time-varying parameter (TVP) models, reveals a steepening of the Phillips curve post-COVID-19, with negative slope coefficients across all countries. We observe a growing convergence of the PC slope toward the euro area, especially in candidate countries. These results highlight the role of EU membership in fostering economic synchronization and emphasize the importance of considering time-varying dynamics in assessing economic convergence amid major shocks. |
| Keywords: | Business cycle alignment, synchronization, EMU, euro area, CESEE, time-varying parameter model |
| JEL: | C22 E32 F15 F45 O47 |
| Date: | 2025–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:267 |