|
on Monetary Economics |
| By: | Cwik, Tobias; Winter, Christoph |
| Abstract: | In the aftermath of the Great Financial Crisis, central banks from several advanced, small, open economies have used FX interventions (FXI) in order to stimulate inflation, given that their policy rates were very low. We present a quantitative DSGE model that allows us to study the effectiveness of this unconventional monetary policy tool. We apply the model to Switzerland, a country that has seen frequent and sizable central bank interventions. The model implies that FXI are effective and long-lasting: FXI of approximately CHF 27 billion (5% of annual GDP) are necessary to prevent the Swiss franc from appreciating by 1.1%. The effect is stronger the longer the central bank can commit to keep its policy rate constant in response to the inflationary effect of the interventions. We also find that FXI create significant additional leeway for monetary policy in small, open economies. This effect can be shown by the "shadow rate", the policy rate required to keep CPI inflation on its realised path without FXI. This "shadow rate" was up to 1 pp below the realised policy rate and close to -1.5% from 2015 to mid-2022 in Switzerland. Our framework also allows us to study the sensitivity of the shadow rate in an environment in which the policy rate is at (or close to) its lower bound. If the persistence of the policy rate increases at the lower bound, the shadow rate rises in absolute terms. |
| Keywords: | Monetary policy, FX intervention, shadow rate, DSGE model |
| JEL: | C54 E52 F41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:335029 |
| By: | De Santis, Roberto A.; Cardamone, Dario |
| Abstract: | We examine the state dependence of monetary policy transmission and the parameters of the Phillips curve, dynamic IS equation, and Taylor rule across four regimes defined by joint deviations of inflation from the Federal Reserve’s target and output from potential. The analysis uncovers important regime-specific asymmetries. The Taylor principle holds across all four regimes. The systematic policy response to the output gap weakens when inflation is below target but output remains above potential, whereas the response to inflation is broadly similar across regimes. The size of monetary policy shocks is significantly larger when inflation exceeds its target. The Phillips curve steepens when inflation exceeds target and output is above potential, while output sensitivity to interest rate changes declines under high inflation and economic slack. This explains why monetary policy shocks are significantly larger in inflationary booms, but transmission becomes less effective when elevated inflation coincides with economic slack. JEL Classification: C32, E52 |
| Keywords: | DIS curve, monetary transmission, Phillips curve, state dependence, Taylor rule, threshold VAR |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263175 |
| By: | Ferrari Minesso, Massimo; Siena, Daniele |
| Abstract: | This paper studies the international macro-financial implications of U.S. dollar-backed payment stablecoins. These digital assets create a new global safe asset channel that links private money creation and global payment needs directly to U.S. public debt. By reshaping the demand for safe assets and the geography of dollar intermediation, stablecoins transform the dynamics of global financial markets, generating new trade-offs, also for the U.S.: even if they widen the dollar’s global footprint and compress U.S. risk-free yields, they entail non-trivial macro-financial costs. Stablecoins dampen the domestic real effects of U.S. monetary policy and increase both U.S. and foreign exposure to cross-country shocks, making a more digital, dollar-centric reserve system less stable. These effects are limited at low adoption levels but rise non-linearly with stablecoin capitalization, reshaping the functioning of the international financial system. JEL Classification: G15, E42, E44, E52, F3 |
| Keywords: | financial stability, global safe asset, monetary policy, spillovers, stablecoins |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263174 |
| By: | Alexa Kaminski (University of Zurich); Alistair Macaulay (University of Surrey); Wenting Song (UC Davis) |
| Abstract: | This paper studies how the transmission of monetary policy varies with monetary policy narratives. Using an AI-based data classification algorithm guided by macroeconomic theory, we construct directed graphs of the causal mechanisms described in FOMC transcripts, which capture the narratives used to justify interest rate decisions. Even after purging these narratives of predictable components from contemporaneous macroeconomic conditions, we find substantial variation in narratives over time. Clustering the residual graphs yields three recurring types: an inflation narrative, a finance narrative, and a textbook narrative. Narrative-conditioned local projections reveal that the transmission of monetary policy is strongly narrative dependent, no narrative cluster exhibits the canonical joint decline in inflation and output, and the price puzzle is narrative specific. These results suggest that standard shock measures average over heterogeneous policy episodes and that narrative measurement provides a practical way to operationalize this heterogeneity. |
| JEL: | C45 C55 E52 E58 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:sur:surrec:0126 |
| By: | Thomas Ankenbrand; Denis Bieri; Stefano Ferrazzini; Johannes Hoehener |
| Abstract: | Tokenised money encompasses a broad range of digital monetary instruments issued on distributed ledger technology, including Central Bank Digital Currencys (CBDCs), deposit tokens, stablecoins, and decentralised protocol-based designs. Despite their shared monetary function, these instruments differ markedly in issuer structure, collateralisation, stability mechanisms, governance, and technological embedding, creating conceptual ambiguity. This paper proposes a concise taxonomy spanning twelve key design dimensions, offering a systematic framework for comparing heterogeneous forms of tokenised money. The taxonomy clarifies how different design choices shape monetary properties, risks, and policy implications, supporting clearer analysis and dialogue across academia, industry, and regulation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.11010 |
| By: | Lukas Hack; Klodiana Istrefi; Matthias Meier |
| Abstract: | Conventional strategies to identify monetary policy shocks rest on the implicit assumption that systematic monetary policy is time-invariant. In an environment with time-varying systematic monetary policy, we formally show that these strategies yield shocks that are contaminated, leading to bias in estimated impulse responses. In line with our theoretical results, we empirically show that conventional monetary policy shocks are predictable by measured fluctuations in systematic monetary policy. We propose new shocks that are purged of this predictability. Our preferred new shocks show that U.S. monetary policy affects inflation and output more strongly and faster compared to the corresponding conventional shocks. |
| Keywords: | Monetary Policy Shocks, Systematic Monetary Policy, Identification |
| JEL: | E32 E43 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1021 |
| By: | Philipp Poyntner; Sofie R. Waltl |
| Abstract: | We study how the general public perceives the link between monetary policy and housing markets. Using a large-scale, cross-country survey experiment in Austria, Germany, Italy, Sweden, and the United Kingdom, we examine households' understanding of monetary policy, their beliefs about its impact on house prices, and how these beliefs respond to expert information. We find that while most respondents grasp the basic mechanisms of conventional monetary policy and recognize the connection between interest rates and house prices, literacy regarding unconventional monetary policy is very low. Beliefs about the monetary policy-housing nexus are malleable and respond to information, particularly when it is provided by academic economists rather than central bankers. Monetary policy literacy is strongly related to education, gender, age, and experience in housing and mortgage markets. Our results highlight the central role of housing in how households interpret monetary policy and point to the importance of credible and inclusive communication strategies for effective policy transmission. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.08957 |
| By: | Matthieu Bussiere; Tommaso Gasparini; Guillaume Horny; Benoit Nguyen |
| Abstract: | How does heterogeneity in deposit funding among banks influence the transmission of monetary policy to loan supply? To address this question, we exploit a bank-level panel dataset of more than 450 banks from 19 euro-area countries from 2007 to 2023. Our empirical findings reveal that banks with a higher reliance on deposit funding exhibit a more muted increase in lending rates following monetary policy tightening. These results are consistent with a mechanism in which deposit funding shapes bank loan supply. |
| Keywords: | Banks, Deposit Pricing, Loan Supply |
| JEL: | G14 G23 G29 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1029 |
| By: | Silvia Miranda-Agrippino; Tsvetelina Nenova; Hélène Rey |
| Abstract: | Using a novel indicator for the People's Bank of China monetary policy stance, we estimate a policy rule that accounts for the dual nature of its price stability mandate—encompassing domestic inflation and the exchange rate—and for the evolution of its operational framework. The “Ins”: The domestic transmission follows textbook patterns, with exceptions due to the active management of the renminbi and the financial account. The "Outs": International spillovers are powerful and affect commodity markets, global production and trade. The pass-through to foreign (US) prices is substantial. Financial spillovers are second-order, and mostly derivative from trade spillovers. |
| JEL: | E50 F3 F4 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34626 |
| By: | Neil Wilson; Richard Tye; Andrew Berkeley |
| Abstract: | This paper challenges the widespread public and institutional misconception that legal tender laws in English law compel creditors to accept payment in a specific form. We argue that legal tender is a narrow, procedural artefact with diminishing practical relevance. Through an analysis of statutory provisions, common law, and the Civil Procedure Rules, we demonstrate that legal tender serves not as a substantive right to discharge debts but as a limited procedural defense concerning liability for costs in litigation. By examining the institutional mechanisms for settling private contractual debts and public statutory obligations, such as taxes, we show that settlement occurs almost exclusively through electronic, bank-mediated systems. The paper concludes that the operational currency of the modern state is not physical legal tender but central bank reserves and commercial bank money, rendering legal tender a concept of largely historical and symbolic significance. |
| Keywords: | Legal tender; Monetary law; Tax obligations; Payment systems |
| JEL: | B50 E42 K12 K34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1103 |
| By: | Friedheim Diego; De Marco Filippo |
| Abstract: | This paper investigates how lenders’ inflation expectations shape credit allocation. Banks expecting higher inflation reallocate credit towards ex-ante leveraged firms, which benefit from a reduction in real debt burdens. To test this hypothesis, we combine individual bank macroeconomic forecasts for developed economies with syndicated loan data from 1991 to 2021. We show that banks expecting a 1 percentage point higher inflation over the next year extend loans that are 15% larger and 17 basis points cheaper to firms with high long-term leverage, relative to banks with lower inflation expectations. Importantly, the effects are not present for firms with high short-term leverage, whose real value is harder to reduce. Consistent with this pattern, firms receiving loans from banks with higher inflation expectations increase their capital expenditure relative to otherwise similar firms borrowing from banks with lower expectations. |
| JEL: | E31 E52 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4803 |
| By: | Eric Vansteenberghe |
| Abstract: | This paper investigates how dispersion in banks' subjective inflation forecasts is a channel of the transmission of monetary policy to credit supply. We extend the Monti-Klein model of monopolistic banking by incorporating risk aversion, subjective beliefs, and ambiguity aversion. The model predicts that greater inflation uncertainty or asymmetry in beliefs raises equilibrium loan rates and amplifies credit rationing. Using AnaCredit loan-level data for France, we estimate finite-mixture density regressions that allow for latent heterogeneity in loan pricing. Empirically, we find that higher subjective uncertainty and asymmetry both increase average lending rates and skew their distribution, disproportionately affecting financially constrained firms in the right tail. Quantitatively, moving from the 25th to the 75th percentile of our indicators raises average borrowing costs by more than 10 basis points, which translates into roughly 0.5 billion euros of additional annual interest expenses for non-financial corporations. By contrast, forecast disagreement has a weaker and less systematic effect. Taken together, these results show that uncertainty and asymmetry in inflation expectations are independent and powerful drivers of credit conditions, underscoring their importance for understanding monetary policy transmission through the banking sector. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.12255 |
| By: | Rubio Mateo Luis |
| Abstract: | Using monthly data for 2016-2025, I identified unexpected policy innovations as residuals from a Taylor rule and estimated Local-Projection impulse responses for headline CPI, tradables/non-tradables, and nine disaggregated components, treating those innovations as monetary policy shocks. Tightening is no quick fix: a +10 pp policy-rate shock leaves monthly inflation above baseline for roughly two years and cumulates sizable price-level gains (approx. 7-8 pp at one year, remaining positive at two to four years). Movements are faster and larger in tradables; services adjust more slowly, with wide heterogeneity across categories. Inference relies on heteroskedasticity- and autocorrelation-consistent (HAC) standard errors with wild-bootstrap checks. These patterns indicate long and variable lags in this setting; effective disinflation requires persistence and coordination with complementary instruments. Evidence suggests the monetary policy rate was either ineffective or not the right instrument to achieve price stability, perhaps favoring the choice of monetary-aggregate targeting for Argentina. I find early 90% significance for most series and zero-hit times clustering near two years. |
| JEL: | E5 E3 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4836 |
| By: | Maria Manuel Campos; José Miguel Cardoso da Costa; Sandra Gomes; Pascal Jacquinot |
| Abstract: | This paper studies the effect of alternative monetary policy responses and the implementation of different fiscal policy measures to an inflationary shock in a monetary union, through the lens of a global DSGE model calibrated to the euro area. We find that a more aggressive monetary policy response mitigates the inflation surge, but has a detrimental impact on economic activity that imposes a stronger increase of public debt, reducing the fiscal policy space. We also find that some fiscal policy measures may alleviate the negative impact of the shock on households and firms, but do not significantly alter the inflation dynamics: a reduction of consumption taxes reduces inflation only temporarily, while an increase of transfers or of public investment slightly increase inflation initially, even if the latter may have a protracted negative impact. Overall, an appropriate mix of monetary and fiscal policies may be needed to ensure a swift return of inflation to target, while mitigating the impact on consumption. Targeting transfers to support constrained households has a mild impact on inflation, but may be a way to mitigate the impact on the most vulnerable with a less detrimental effect on public debt. |
| JEL: | E52 E62 E63 F45 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w202515 |
| 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 best proxy for unitary wages). Our findings reveal that expan-sionary 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: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp270 |
| By: | H. Ozlem Dursun-de Neef; Tarik Alperen Er; Ibrahim Yarba |
| Abstract: | Combining bank-firm level credit registry data on the universe of loans and firms’ financial statements, we analyze the transmission of policy rate movements to banks’ lending behavior through their ex-ante exposure to interest rate risk. Controlling for demand side factors and other bank characteristics that are known to affect monetary policy transmission, our bank-firm level analyses show that banks with higher ex-ante exposure to interest rate risk reduce their lending and shorten their loan maturities once interest rates begin to rise, compare to banks with lower exposure. However, the effect is valid only for private banks, not state-owned banks. This effect is particularly pronounced for banks with low capital ratios, highlighting the importance of bank capital in contractionary periods. The effect persists at the firm level where firms are unable to avoid reductions in their loans by switching to less-exposed banks. Yet, this is the case only for SMEs, not for large firms. This reveals the asymmetric deterioration in SMEs’ lending conditions relative to large firms. We also document the real effects of the monetary policy transmission on firms’ sales and employment. Our findings reveal that SMEs, but not large firms, with higher exposure to interest rate risk through their banks experience declines in sales and employment. |
| Keywords: | Interest rate risk, Bank lending, Monetary policy transmission, SMEs |
| JEL: | G21 E51 E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2601 |
| By: | Sébastien Blanco; Miriam Koomen; Pinar Yesin |
| Abstract: | We present novel evidence on the global transmission of monetary policy (MP) surprises via bond funds. Using daily MP surprise measures and a multi-country panel of weekly fund flows, we document that bond fund flows respond systematically to MP surprises. The direction, intensity, and persistence of these responses, however, vary across destination countries, fund investment strategies, and fund domiciles. Furthermore, bond fund flows react not only to domestic MP surprises, but also to foreign MP surprises, indicating cross-border spillovers. We explore two mechanisms driving these responses: the relative importance of MP shocks versus information shocks, and the impact of exchange rate movements on portfolio rebalancing. Our findings highlight the role of nonbank financial intermediaries in global MP transmission. |
| Keywords: | NBFIs, Bond funds, Monetary policy surprises, Cross-border spillovers |
| JEL: | G23 E52 E44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2026-01 |
| By: | Verona, Fabio |
| Abstract: | Inflation dynamics reflect forces operating at different cycles, from short-lived shocks to longterm structural trends. We introduce the sum-of-the-cycles (SOC) method, which exploits this multifrequency structure of inflation for forecasting. SOC decomposes inflation into cyclical components, applies forecasting models suited to their persistence, and recombines them into an aggregate forecast. Across U.S. inflation measures and horizons, SOC consistently outperforms leading time-series benchmarks, reducing forecast errors by about 25 percent at short horizons and nearly 50 percent at long horizons. During the 2020-21 inflation surge, when many models - including advanced machine-learning methods - struggled, SOC retained strong performance by incorporating shortage indicators. Beyond accuracy, SOC enhances interpretability: financial variables dominate high- and business-cycle frequencies, Phillips Curve models are most informative at medium frequencies, and factor-based methods, forecast combinations, and shortage indices prevail at low frequencies. This combination of accuracy and transparency makes SOC a practical complement to existing tools for inflation forecasting and policy analysis. |
| Keywords: | inflation forecasting, frequency decomposition, cycles, forecast combination, shortage indicators, Phillips curve, macro-finance |
| JEL: | C22 C53 E31 E32 E37 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofrdp:335013 |
| By: | Joana Passinhas; Isabel Proença |
| Abstract: | In 2022, the euro area started to experience very high levels of inflation relative to its history, prompting the European Central Bank to raise reference rates by 450 basis points from July 2022 to September 2023. The market anticipated this, with the Euro Interbank Offered Rate, that frequently serves as the reference rate in housing loans, rising as early as March 2022. In this context, we study the benefits of a debt service-to-income (DSTI) limit, namely the Portuguese one set in 2018, in changing the loan service-to-income (LSTI) ratio distribution of new loans for house purchase in the low interest rate (before March 2022) and in the new increasing interest rate environment. Using instrumental variable quantile regressions, we obtain the benefits of the limit by comparing the LSTI distribution of loans under the DSTI limit versus the one of loans included in the exceptions (i.e. with DSTI ratios above the limit). Findings show that DSTI limits effectively keep risky loans from entering the market and reduce individuals effort rate in both the low and rising interest rate environment. The benefits of the DSTI limit became more pronounced after interest rates began rising, highlighting their role in maintaining stringent lending standards in a higher-interest environment. |
| JEL: | C21 C26 E58 G21 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w02524 |
| By: | Diana Bonfim; Sujiao Zhao; Olivier De Jonghe |
| Abstract: | We study heterogeneity in households’ credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-2024 using granular credit register data. We first document substantial between- and within-country variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the pass-through of the ECB’s recent tightening cycle to household borrowing costs, and assess its heterogeneous impact across households. Passthrough is nearly complete for mortgages (around 0.9) but considerably weaker for consumer credit (around 0.4). While mortgage pass-through is relatively homogeneous across countries, consumer credit shows pronounced cross-country differences that cannot be explained by borrower or loan characteristics. Younger households face stronger mortgage pass-through but weaker consumer credit pass-through relative to older borrowers, and longer maturities are associated with stronger pass-through in both credit markets. |
| JEL: | E52 G21 D14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w202514 |
| By: | Di Iorio Juan Pablo |
| Abstract: | This study examines the effects of incorporating fiscal dominance, based on the Fiscal Theory of the Price Level, into a New Keynesian Small Open Economy (NK-SOE) model. This framework enables a comparison between the responses of an economy characterized by fiscal dominance and those of canonical NK-SOE models when faced with monetary or external shocks. Notable differences emerge in nominal variables, such as inflation rates and nominal devaluation, as well as in household consumption and the real exchange rate. I show that introducing fiscal dominance into an otherwise standard NK-SOE model can help explain two important puzzles in the literature: the “price puzzle” and the “exchange rate response puzzle.” Furthermore, the model is expanded to account for government debt issued in foreign currency, introducing a fiscal channel related to the currency composition of the government’s debt. Additionally, the structure of taxes and government expenditures—particularly fiscal revenues tied to the non-tradable sector—plays a significant role in shaping the economic response when the government issues debt in foreign currency. |
| JEL: | F4 E6 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4794 |
| By: | Vanessa B. Schmidt |
| Abstract: | I study the role of home production in determining the labor income channel through which monetary policy affects consumption inequality. To this end, I develop a Two-Agent New Keynesian model with home production. In the context of my model, hand-to-mouth households experience a sharper decline in labor income compared to richer households in response to a contractionary monetary policy shock. However, they increase home production to a greater extent than richer households do. The resulting labor income channel is therefore one third the size when accounting for home production. In line with my theoretical results, I show empirically that individuals living hand-to-mouth respond to contractionary monetary policy shocks by increasing home production by more than richer people do. |
| Keywords: | constrained households, consumption inequality, home production, monetary policy, TANK models |
| JEL: | E21 E52 J22 |
| Date: | 2025–11–13 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0082 |
| By: | Jean Barthélemy; Eric Mengus; Guillaume Plantin |
| Abstract: | This paper introduces a general and parsimonious framework to study whether a state can control the value of its currency by declaring it to be the legal tender for claims between itself and the private sector, and by trading it for desirable commodities according to a mechanism of its choice. In an economy in which all agents are price-setters, we identify when such policies elicit a single equilibrium price level. For policies that fail to do so, for example because different official and unofficial prices may coexist in equilibrium, we still offer tight restrictions on the set of predictable price levels. We discuss how our framework sheds light on common mechanisms driving various historical and recent forms of monetary or/and fiscal instability. |
| Keywords: | Price Level Determination; Legal Tender; Monetary Policy; Fiscal Policy |
| JEL: | E42 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1023 |
| By: | Alessandro Franconi; Giacomo Rella |
| Abstract: | Using the Distributional Financial Accounts of the United States, we study the effects of monetary policy on the wealth distribution. The direction and persistence of these effects depend on the policy instrument. Interest rate cuts initially reduce wealth inequality but increase it in the medium run. Asset purchases, instead, increase wealth inequality but only temporarily. Housing is the main channel through which monetary policy affects wealth at the bottom while corporate equities explain wealth growth at the top. Using household-level data from the Panel Study of Income Dynamics, we document a wealth reversal at the bottom of the distribution: lower interest rates raise housing wealth in the short run but lead to higher mortgage debt and lower net wealth over time, contributing to the medium-term rise in inequality. |
| Keywords: | Monetary Policy, Distributional Financial Accounts, Wealth Inequality. |
| JEL: | E52 D31 E44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:rsi:creeic:2504 |
| By: | Nikoleta Anesti; Edward Hill; Andreas Joseph |
| Abstract: | This paper investigates the ability of Large Language Models (LLMs), specifically GPT-3.5-turbo (GPT), to form inflation perceptions and expectations based on macroeconomic price signals. We compare the LLM's output to household survey data and official statistics, mimicking the information set and demographic characteristics of the Bank of England's Inflation Attitudes Survey (IAS). Our quasi-experimental design exploits the timing of GPT's training cut-off in September 2021 which means it has no knowledge of the subsequent UK inflation surge. We find that GPT tracks aggregate survey projections and official statistics at short horizons. At a disaggregated level, GPT replicates key empirical regularities of households' inflation perceptions, particularly for income, housing tenure, and social class. A novel Shapley value decomposition of LLM outputs suited for the synthetic survey setting provides well-defined insights into the drivers of model outputs linked to prompt content. We find that GPT demonstrates a heightened sensitivity to food inflation information similar to that of human respondents. However, we also find that it lacks a consistent model of consumer price inflation. More generally, our approach could be used to evaluate the behaviour of LLMs for use in the social sciences, to compare different models, or to assist in survey design. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.14306 |
| By: | George-Marios Angeletos; Chen Lian; Christian K. Wolf |
| Abstract: | How does the fiscal framework affect the central bank's ability to stabilize output and inflation? The textbook answer, which assumes Ricardian households, recommends that fiscal adjustment should be fast enough to allow for monetary dominance. We instead argue that, with non-Ricardian households, the central bank may indeed welcome slow, or even no, fiscal adjustment. On the demand side, slow fiscal adjustment helps stabilize aggregate spending; on the supply side, it eases tax distortions, improving the output-inflation trade off. And while the first channel favors slow fiscal adjustment only when the business cycle is dominated by demand shocks, the second channel extends this preference to supply shocks. A quantitative exercise affirms our lessons in the U.S. context, with the central bank preferring virtually no fiscal adjustment over the business cycle. |
| JEL: | E52 E62 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34654 |
| By: | Stefano Herzel (DEF, University of Rome "Tor Vergata"); Marco Nicolosi (Università La Sapienza) |
| Abstract: | We analyze the sensitivity of the euro-area yield curve to revisions in market expectations of the ECB policy rate. Using changes in the maintenance-period forward OIS as a market-based measure of policy-rate surprises, we document that yield responses vary systematically across maturities. To interpret these patterns, we adopt a short-rate model with stochastic jumps occurring only at scheduled ECB meeting dates and derive closed-form expressions for the condi- tional sensitivity of yields to changes in the expected jump size. We compare the model-implied term-structure responses with realized yield changes on days of large revisions in expectations. The model reproduces the cross-sectional shape and magnitude of observed sensitivities, especially the pronounced peak at intermediate maturities, underscoring the importance of incorporating scheduled jump times when modeling interest-rate dynamics. |
| Keywords: | OIS, €STR, ECB, monetary policy surprises, scheduled jumps, term-structure sensitivity |
| JEL: | E43 E52 G12 |
| Date: | 2026–01–12 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:619 |
| By: | Federico Di Pace; Giacomo Mangiante; Riccardo Masolo (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore) |
| Abstract: | We employ Synthetic Control Method techniques to estimate the causal effect of Brexit on the consumer price index (CPI) in the United Kingdom. We construct a counterfactual CPI index from a weighted pool of comparable economies and find that the price level of the United Kingdom rose approximately 7 percentage points more than its synthetic counterpart, between 2016Q2 and 2024Q4. This accounts for over a quarter of total inflation during the period. We attribute about 2 percentage points of this increase to the depreciation of the British pound after the Referendum and the remaining 5 percentage points to the change in trading relationships that ensued the 2021 Trade and Cooperation Agreement. |
| Keywords: | Brexit, Exchange Rate, Trade Barriers and Consumer Prices. |
| JEL: | C32 E31 F13 G10 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ctc:serie1:def147 |
| By: | Benjamin Jungmann; Eckhard Hein; Juan Manuel Campana |
| Abstract: | Post-Keynesian conflict inflation models have received renewed attention in the course of the recent inflationary processes related to the recovery from the Covid-19 crisis in 2020 and the hike of energy prices in the context of the start of the Russian war on Ukraine in 2022. Although the basic principles of conflict inflation can be presented in a closed economy framework (e.g. Hein 2023, chap. 5), examining current sources and triggers of inflation requires open economy models. Post-Keynesian economics has presented several of these models (e.g. Blecker 2011, Vera 2014, Bastian and Setterfield 2020), which differ in the role assigned to the nominal and the real exchange rate (RER), on the one hand, and the stability of the wage and price Phillips curves, on the other hand. This paper first provides a systematic overview of post-Keynesian open economy conflict inflation models using the treatment of the RER and the stability of the Phillips curve as the main clustering criteria. Second, it provides a model including an unstable Phillips curve and a policy rule targeting a certain RER in response towards trade imbalances. The model distinguishes three equilibrium rates of employment: the goods market equilibrium rate of employment, the distribution claims equilibrium and hence stable inflation rate of employment, and finally the external balance equilibrium rate of employment. The interaction of these three rates drives the system. Finally, the model examines the conditions for an overall equilibrium and its stability. |
| Keywords: | conflict inflation, open economy, exchange rate policy, post-Keynesian model |
| JEL: | E12 E31 E61 F41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:imk:fmmpap:120-2025 |
| By: | Alex Huang |
| Abstract: | The Journal Impact Factor (IF), as a core indicator of academic evaluation, has not been systematically studied in relation to its historical evolution and global macroeconomic environment. This paper employs a period-based regression analysis using long-term time series data from 1975-2026 to examine the statistical relationship between IF and Federal Reserve monetary policy (using real interest rate as a proxy variable). The study estimates three nested models using Ordinary Least Squares (OLS): (1) a baseline linear model, (2) a linear model controlling for time trends, and (3) a log-transformed model. Empirical results show that: (i) in the early period (1975-2000), there is no significant statistical relationship between IF and real interest rate ($p>0.1$); (ii) during the quantitative easing period (2001-2020), they exhibit a significant negative correlation ($\beta=-0.069$, $p |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.09618 |
| By: | Seula Kim; Michael Navarrete |
| Abstract: | We study how inflation varies across regions with different income levels and the role of retailer market structure. Using NielsenIQ Retail Scanner and Business Dynamics Statistics data, we document new stylized facts of spatial heterogeneity in food inflation and retailer market structure. From 2006 to 2020, poorer metropolitan statistical areas experienced annualized food inflation that was 0.46 percentage points higher than that of richer ones—amounting to a cumulative difference of 8.8 percentage points over the period. Poorer areas also had fewer goods, fewer retailers, and higher market concentration. Using a triple-difference estimator during the 2014–15 bird flu outbreak, we identify a causal link between market concentration and inflation. |
| Keywords: | inflation; retailer market structure; market concentration; spatial inequality |
| JEL: | E31 I31 L11 L81 R12 |
| Date: | 2025–11–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:102337 |
| By: | Tran, Lan; Su, Ye; Tran, Doc Lap |
| Keywords: | Agribusiness |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360624 |
| By: | Georges Prat |
| Abstract: | An accounting measure of the demand for money is deduced from the Allais’ “Fundamental Equation of Monetary Dynamics”. Data from German hyperinflation in the early 1920s illustrate the method we propose. The spread between money supply and money demand is found to be rather moderate but is not white noise. Our approach can be applied to any country and over any period, provided that the aggregate expenditure can be approximated using available data. This new way can help improve the estimation of the money demand function while avoiding arbitrary assumptions about the dynamics of the spread between money supply and money demand. |
| Keywords: | demand for money, measure |
| JEL: | C51 E41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2026-2 |
| By: | Philip Bunn; Nicholas Bloom; Craig Menzies; Paul Mizen; Gregory Thwaites; Ivan Yotzov |
| Abstract: | We present new evidence on how firms set prices using direct questions from a large, economy-wide survey of UK firms. Since 2023, 54% of firms report setting prices in a state-dependent manner, as opposed to changing prices at fixed intervals. In contrast, 44% of firms used state-dependent pricing in 2019. Smaller firms, those with a higher share of non-labour costs, and those reporting higher subjective uncertainty around sales and prices are more likely to be state-dependent. We then analyse the implications of price-setting behaviour for inflation dynamics. State-dependent firms experienced a sharper increase in price growth over 2022-2023, and also a faster subsequent decline. Using evidence from a randomised survey experiment, firm-level forecast errors, and local projections, we show that prices of state-dependent firms respond faster to cost shocks. The difference between state-dependent and time-dependent firms is furthermore larger for bigger shocks, consistent with theoretical predictions. |
| JEL: | C83 D22 D84 E31 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34666 |
| By: | Nam, Hosung; Jo, Jungkeon |
| Abstract: | Understanding the drivers of consumer welfare changes in food consumption has important policy implications. This study measures changes in consumer surplus (CS) for food consumed at home and food services in the United States using aggregated Personal Consumption Expenditure (PCE) data. We apply a recently developed approach to disentangle food price movements into demand- and supply-side components, identifying which side of the market historically drives changes in CS. We find that CS generally declines during economic recessions. However, at the onset of the COVID-19 pandemic, CS for food consumed at home rose sharply—largely driven by positive demand shocks—while CS for food services fell substantially due to negative shocks from both supply and demand. During the recent period of food price inflation, CS for both food-at-home and food services increased, primarily driven by demand-side contributions. |
| Keywords: | Marketing |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360842 |
| By: | Yan, Hongqiang; Mishra, Ashok K.; Manfredo, Mark |
| Keywords: | Agricultural Finance, Farm Management |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360685 |
| By: | Danial Lashkari |
| Abstract: | It is common for price measures to consider changes in quality. That is, a price index might fall even though listed prices are unchanged because the quality of the item has improved. An adjustment for quality captures the fact that consumers are effectively getting more for the same dollar when product quality rises. In practice, however, it is notoriously difficult to measure quality changes since it requires access to detailed data on all product characteristics that matter to consumers. We offer a novel method to infer quality changes and apply it to U.S. import price indices. When we account for quality improvements in this way, we find that the import price inflation based on official measures has been overstated, revealing that consumers have been getting more from their purchases of imported goods than what standard quality adjustments suggest. |
| Keywords: | imports; inflation; quality upgrading |
| JEL: | C43 D11 D12 E01 E1 L11 L15 |
| Date: | 2026–01–14 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102332 |
| By: | Domínguez Juan Ignacio |
| Abstract: | Exchange controls are a common policy tool in emerging economies. This study develops a tractable model with capital accumulation to formalize their macroeconomic consequences in an environment where the government finances its deficit through domestic credit expansion while maintaining a fixed exchange rate. The analysis shows that exchange controls generate a wedge between official and parallel exchange rates, reduce output and permanent consumption, and, under certain conditions, tighter import restrictions can increase money demand and delay the collapse of the fixed rate regime. Moreover, the share of legal exports declines as the exchange rate gap widens. When import restrictions are endogenously adjusted in response to the amount of legal exports, domestic prices rise persistently over time. The main contributions are: (i) formalizing and summarizing the effects of exchange controls in a tractable model with capital accumulation and monetized deficits under a fixed exchange rate, and (ii) identifying a money-demand channel through which import restrictions can influence the timing of a first generation balance-of-payments crisis. |
| JEL: | F31 F41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4795 |
| By: | Yihan Hong; Hengxiang Feng; Yinghan Wang; Boxuan Li |
| Abstract: | The approval of the Bitcoin Spot ETF in January 2024 marked a transformative event in cryptocurrency markets, signaling increased institutional adoption and integration into traditional finance. This study examines Bitcoin's changing relationships with traditional assets, including equities, gold, and fiat currencies, following this milestone. Using rolling correlation analysis, Chow tests, and DCC-GARCH models, we found that Bitcoin's correlation with the S\&P 500 increased significantly post-ETF approval, indicating stronger alignment with equities. Its relationship with gold stabilized near zero, while its correlation with the U.S. Dollar Index remained consistently negative, reflecting its continued independence from fiat currencies. These findings offer insights into Bitcoin's evolving role in portfolios, implications for market stability, and future research opportunities on cryptocurrency integration into traditional financial systems. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.12815 |
| By: | Fabien Clive Ntonga Efoua (FSEG, CEREG - Université de Yaoudé II-Soa, CEDIMES - CEDIMES - Centre d'Etudes sur le Développement International et les Mouvements Economiques et Sociaux); Françoise Okah Efogo; Bernard Cléry Nomo Beyala; Bruno Emmanuel Ongo Nkoa |
| Abstract: | The goal of this paper is to discuss the strengths, weaknesses, opportunities and threats of the decentralized digital currencies in Africa, a region that serves as an incubator for innovations in the decentralized finance sector, but remains somewhat excluded from the field of academic research on these same issues. In addition to providing a comprehensive overview of the current state of the cryptocurrency market (particularly with regard to the categories and underlying technologies), this article relies on a SWOT analysis that draws some lessons and long-term perspectives while respecting the diversity of local and international concerns. It emerges that the popularity of the BASI-coins is built on a triple illusion: that of disintermediation, that of security and that of independence: miners remain essential, and oligopolies are being reconstituted in the cryptosphere which, from this point of view, does not differ from the traditional finance. In addition, even if the macro-financial framework of African countries seems de facto to lend itself to their adoption, it should be noted that their implementation requires addressing several challenges: both in terms of infrastructure (electricity/Internet access) and technology as well as institutional. Moreover, BASI-coins could compete with (future) sovereign digital currencies (Govcoins), and their widespread adoption could destabilize the financial systems due to pressure on foreign exchange reserves. |
| Abstract: | L'objectif de cet article est d'analyser les forces, les faiblesses, les opportunités et les menaces des monnaies numériques décentralisées en Afrique, une région qui sert d'incubateur pour les innovations dans le secteur de la finance décentralisée, mais qui sur ces mêmes questions, demeure relativement en marge du champ de la recherche académique. En plus de dresser un panorama assez complet de l'état actuel du marché des cryptomonnaies (notamment en ce qui concerne les catégories et les technologies sous-jacentes), cet article s'appuie sur une analyse SWOT qui permet de dégager des enseignements et des perspectives de long terme, tout en respectant la diversité des préoccupations locales et internationales. Il en ressort que la popularité des BASI-coins s'est bâtie sur une triple illusion : celle de la désintermédiation, celle de la sécurité et celle de l'indépendance : les mineurs sont incontournables et les oligopoles se reconstituent dans la cryptosphère qui, de ce point de vue, ne diffère pas de la finance traditionnelle. En outre, même si le cadre macro-financier des pays africains semble de facto se prêter à l'adoption des cryptomonnaies et que cette dernière offre des opportunités en termes d'inclusion et d'innovation dans la sphère financière, un usage efficient des monnaies numériques nécessite de relever plusieurs défis ; tant sur les plans infrastructurel (accès à l'électricité/Internet) et technologique qu'institutionnel. Par ailleurs, les BASI-coins pourraient faire concurrence aux (futurs) monnaies numériques souveraines (Govcoins) et leur adoption généralisée pourrait déstabiliser les systèmes financiers en raison d'une pression sur les réserves de change. |
| Keywords: | Afrique, SWOT, Cryptomonnaies, BASI-coins |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05402623 |
| By: | Marinelli Gaston |
| Abstract: | This paper shows how global dollar appreciations transmit to emerging market and developing economies (EMDEs) through commodity prices and country risk. Using quarterly data for 22 EMDEs from 1999–2019, I combine the Obstfeld & Zhou (2023) dataset with country-specific commodity price indices and classify countries as commodity exporters or importers via a trade-balance rule. Global dollar appreciation shocks explain up to 16% of the forecast-error variance of commodity terms of trade (CToT) and up to 9% of EMBI spreads. A global dollar appreciation depreciates EMDE currencies, raises EMBI, depresses investment, and lowers GDP, with muted CPI effects. Stratifying by commodity status reveals sharp heterogeneity: exporters suffer larger and more persistent adverse responses, while importers seem stable. To uncover mechanisms, I implement an approach `a la Cloyne–Jord`a–Taylor (2023) to estimate indirect effects. A more favorable CToT response mitigates output and demand contractions, whereas higher commodity import prices and larger EMBI responses amplify adverse outcomes. |
| JEL: | F4 C3 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4818 |
| By: | McLaughlin, Patrick W.; Okrent, Abigail M. |
| Abstract: | Have consumers become more price sensitive in light of elevated food inflation in the post-pandemic era? This study uses beverages, a large category of food expenditure in the United States, as a case study to examine whether consumers shifted consumption from national brands to cheaper PLs or had higher price elasticities of demand for these products. We draw on near “real-time” brand-level beverage sales data from Circana’s Liquid Data Unify platform for retail scanner data. We find little evidence that consumers' price sensitivity increased in the post-pandemic era. |
| Keywords: | Marketing |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360837 |