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on Monetary Economics |
| By: | Kosuke Aoki (BANCO DE ESPAÑA); Enric Martorell (BANCO DE ESPAÑA); Kalin Nikolov (BANCO DE ESPAÑA) |
| Abstract: | We examine the interplay between monetary policy, bank risk-taking, and financial stability in a quantitative macroeconomic model with endogenous risk-taking by banks and systemic crises. Banks’ access to leverage depends on their charter value, which is itself affected by movements in the real interest rate. We find that permanent shifts in the long-term real interest rate have a significant impact on banks’ leverage and on their investments in systemically risky assets, while transitory movements have a more limited impact. We show that in the presence of systemic risk-taking, the systemic component of monetary policy faces a trade-off between price stability and financial stability. A moderate reaction to inflation deviations from the target is optimal, as it sustains banks’ equity value after financial crises. Seeking price stability reduces inflation volatility but leads to increased systemic risk-taking and more severe financial recessions. The optimal central bank policy combination involves an increase in regulatory bank capital requirements coupled with a moderate reaction of monetary policy to inflation. |
| Keywords: | financial intermediation, monetary policy, systemic risk, macroprudential policy |
| JEL: | E44 E52 E58 G21 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2517 |
| By: | Okan Akarsu; Emrehan Aktug; Altan Aldan; Unal Seven |
| Abstract: | This paper leverages a rare quasi-experiment—the unexpected September 2021 interest rate cut by the Central Bank of the Republic of Türkiye—to examine how inflation expectations shape firm behavior in a high-inflation environment. Drawing on a rich dataset that combines monthly survey responses with administrative records, we exploit the heterogeneous revisions in firms’ inflation expectations triggered by the policy shock. Firms that significantly increased their inflation forecasts (treated) subsequently became more pessimistic about economic conditions, reduced employment, and curbed domestic sales. At the same time, they strategically raised procurement, acquired more foreign currency assets, and boosted borrowing in local currency—even at higher costs—in anticipation of debt erosion. These patterns suggest that firms’ heightened inflation expectations drive both defensive and opportunistic behaviors, ranging from hedging against currency depreciation to locking in lower financing costs. Overall, the findings highlight the critical role of inflation expectations in guiding firm-level decisions and document the importance of policy credibility in volatile macroeconomic settings. |
| Keywords: | Inflation expectations, Firm behaviors, High inflation, Experimental macroeconomics |
| JEL: | E12 E24 E31 E52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2516 |
| By: | Yi-Li Chien; Zhengyang Jiang; Matteo Leombroni; Hanno Lustig |
| Abstract: | We compute the cross-country transfers that result from unconventional monetary policy in the Eurozone. The ECB funds the expansion of its aggregate balance sheet mostly by issuing bank reserves and cash in core countries. The national central banks (NCBs) in periphery countries then borrow from the core NCBs at below-market rates to fund the asset purchases and bank lending. In addition, NCBs in the periphery lend more to their own banks at below-market rates. To compute the cross-country transfers, we compare the resulting cross-country distribution of NCB income to a counterfactual scenario without the ECB and without non-marketable intra-Eurozone debt. We document significant and persistent transfers from the core to the periphery. |
| JEL: | E42 E52 F33 G15 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34311 |
| By: | Konrad Kuhmann (Latvijas Banka) |
| Abstract: | Bank lending is a key factor in the transmission of monetary policy to the real economy. Using granular loan data on the euro area, I analyze how bank specialization interacts with the effects of monetary policy on credit. I first document that bank lending in the euro area is characterized by a substantial degree of specialization. That is, banks tend to be over-exposed to borrowers in certain industries and of certain size. I also find that higher specialization is generally associated with more favorable lending conditions. Most importantly, banks partly insulate their preferred borrowers from the consequences of monetary policy. In particular, they adjust interest rates and lending relatively less strongly for borrowers from groups in which they specialize. My findings suggest that bank specialization is relevant for the aggregate and distributional consequences of monetary policy. |
| Keywords: | Bank specialization, Bank lending, Monetary policy, AnaCredit |
| JEL: | E51 E52 G21 |
| Date: | 2025–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ltv:wpaper:202506 |
| By: | Carlo Alcaraz; Stijn Claessens; Gabriel Cuadra; David Marques-Ibanez; Horacio Sapriza |
| Abstract: | How does the credible announcement of an unconventional monetary policy intervention affect bank lending standards during crises? We use a major central bank announcement, the "whatever it takes" speech of the European Central Bank President that boosted the capital of banks, as a natural experiment. We compare changes in lending standards of subsidiaries of euro area versus other banks in a third country, Mexico. The speech reversed a prior trend of euro area banks augmenting their risk-taking via loan growth, lending rates, and credit risk. Our findings show that policies that amount to capitalization can reduce risk-taking in times of stress, adding a new dimension to the bank capital channel. |
| Keywords: | monetary policy; financial institutions and regulation |
| JEL: | E51 G21 F34 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedrwp:101854 |
| By: | Beschin, Anna; Paredes, Joan; Polichetti, Gaetano; Renault, Théodore |
| Abstract: | This paper contributes to the literature on the price Phillips curve by exploiting subnational regional data from 11 euro area countries. Beyond controlling for aggregate fluctuations common across euro area regions, our approach accounts for country-specific dynamics, including national inflation expectations, thereby addressing key limitations in previous studies. Our results suggest that the Phillips curve in the euro area is relatively flat, but statistically significant. Furthermore, we provide novel evidence on potential nonlinearities in the price Phillips curve and highlight the critical role of properly accounting for country-specific factors such as inflation expectations. These findings provide new insights for the conduct of monetary policy and underscore the value of regional data in euro area macroeconomic analysis. JEL Classification: E24, E30, E31 |
| Keywords: | heterogeneity, non-linearity, price Phillips curve, regional data |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253133 |
| By: | Kenichi Ueda (University of Tokyo); Chanthol Hay (National University of Battambang) |
| Abstract: | Cambodia is one of the two first countries that adopted a retail CBDC in October 2020. The design of the CBDC, called the Bakong, is a bit unique. We find a few design flaws that could potentially damage the central bank and then the Cambodian economy as a whole. We show some key statistics from our own survey in 2022 to clarify our arguments. The Bakong is offered in two currencies, the Khmer Riel (KHR) and the US dollar (USD), as Cambodia has been highly dollarized. We discuss theoretical predictions for the CBDC based on three kinds of substitutes: paper money, bank deposits, and foreign currencies. The third one is specific to the Bakong. Unlike a typical local currency CBDC, the USD Bakong may substitute for the KHR more. Moreover, it has been announced that the retail Bakong is legally not a liability of the central bank, but from the viewpoint of the underlying technology and economics, it is a central bank liability. |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:cfi:fseres:cf579 |
| By: | Anna Cole; Michael W. McCracken |
| Abstract: | What anchors inflation expectations? An analysis breaks down how anticipated drift from the Fed’s 2% target and divergence among forecasts each contribute. |
| Keywords: | inflation; inflation expectations; inflation forecasts; inflation expectations anchoring; Survey of Professional Forecasters (SPF); Michigan Survey of Consumers |
| Date: | 2025–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:101823 |
| By: | Otaviano Canuto |
| Abstract: | The international monetary system has been dominated by the U.S. dollar since the Second World War. The hegemony of the greenback cut across the end of the dollar exchange standard established by the Bretton Woods Agreement, and came out from the global financial crisis—and the euro crisis—even stronger than before. The euro area and China are taking steps to strengthen the international role of their currencies, but surmounting the inner strength of the dollar-based monetary system cannot be taken for granted. This is visible in two aspects of the rising profiles of competitors to the dollar-based system: the growing use of local currencies in cross-border payments between China and other countries—particularly the BRICS— and the role played by the euro and the renminbi in cross-country financial safety nets. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pr07_25 |
| By: | Okan Akarsu; Huzeyfe Torun |
| Abstract: | [EN] This study investigates how firms' inflation expectations evolve during both inflationary and disinflationary periods, using data from the Business Tendency Survey (BTS), and analyzes the relationship between firms' cost- and price-related expectations and their inflation forecasts. By matching firms based on their fundamental characteristics, and then employing probit models alongside propensity score matching, we estimate the average treatment effect on the treated (ATT) to assess changes in expectations as quasi-randomized treatments. Our results indicate a significant dispersion in inflation expectations during periods of rising inflation. However, as inflation stabilizes, firms' expectations begin to converge, signaling reduced uncertainty and closer alignment with central bank targets. This study adds to the literature by providing empirical evidence from an emerging market economy, offering valuable insights into how firm-level inflation expectations shift across different inflation phases and highlighting the role of monetary policy in anchoring these expectations. [TR] Bu calisma, Iktisadi Egilim Anketi (IYA) verilerini kullanarak firmalarin enflasyon beklentilerinin hem enflasyonist hem de dezenflasyonist donemlerde nasil degistigini Iktisadi Egilim Anketi (IYA) verilerini kullanarak incelenmekte ve firmalarin maliyet ve fiyatla ilgili beklentileri ile enflasyon tahminleri arasindaki iliskiyi analiz etmektedir. Firmalari temel ozelliklerine gore eslestirip, ardindan egilim puani eslestirme) yontemi ve probit modeller kullanilarak, beklentilerdeki degisiklikleri yari-rastgele tedaviler olarak degerlendirmek icin tedavi grubu uzerindeki ortalama etki tahmin edilmektedir. Bulgularimiz, enflasyonun yukseldigi donemlerde firmalarin enflasyon beklentilerinde onemli bir dagilim oldugunu gostermektedir. Ancak, enflasyon istikrar kazandikca, firmalarin beklentileri yakinsamaya baslamakta; bu da belirsizligin azaldigini ve beklentilerin merkez bankasi hedeflerine daha yakin hale geldigine isaret etmektedir. Bu calisma, gelismekte olan bir ulkeden elde edilen ampirik bulgularla mevcut literature katki saglamakta; firmalarin enflasyon beklentilerinin enflasyonun farkli evrelerinde nasil degistigine dair degerli bilgiler sunmakta ve bu beklentilerin cipalanmasinda para politikasinin rolunu vurgulamaktadir. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:econot:2519 |
| By: | Luca Benati, Juan-Pablo Nicolini |
| Abstract: | Modern analysis of the welfare effects of monetary policy is based on moneyless models and therefore ignores the effect of inflation on the efficiency of transactions. A justification for this strategy is that these welfare effects are quantitatively very small, as argued by Ireland (2009). We revisit Ireland’s result using recent data for the United States and several other developed countries. Our computations are influenced by the experience of very low short-term rates observed since Ireland’s work in the countries we study. We estimate the welfare cost of a steady state nominal interest rate of 5% to be at least one order of magnitude higher than in Ireland (2009), which questions the validity of performing monetary policy evaluation in cashless models. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2508 |
| By: | Hung Q. Tran |
| Abstract: | Amidst intense geopolitical competition, efforts to develop tokenized monetary units—tradable on programmable platforms such as blockchains—have added a new dimension to the debate about the role of a global payment and reserve currency. Tokenized monetary units are expected to greatly improve the efficiency of payment transactions in terms of their speed and cost, especially cross-border transactions. They could also meet emerging demand for technologically enabled features such as smart contracts, which can be embedded in monetary tokens. The country that can promote and develop tokenization based on its fiat money—the United States, for example—would enjoy first-mover advantages, being able to attract users to its tokenized platforms, and helping to strengthen the role of its currency in global payments and finance in the digital age. Alternatively, if several major countries could compete by developing tokenized money, the shift to a multi-currency reserve system would be accelerated. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:pbecon:p44_25 |
| By: | Stephan Luck |
| Abstract: | Digital currencies have grown rapidly in recent years. In July 2025, Congress passed the “Guiding and Establishing National Innovation for U.S. Stablecoins Act” (GENIUS) Act, establishing the first comprehensive federal framework governing the issuance of stablecoins. In this post, we place stablecoins in a historical perspective by comparing them to national bank notes, a form of privately issued money that circulated in the United States from 1863 through 1935. |
| Keywords: | digital currencies; stablecoins; national bank notes; economic history |
| JEL: | N21 N22 |
| Date: | 2025–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:101880 |
| By: | Bowen Fu; Chenghan Hou; Jan Pr\"user |
| Abstract: | This paper proposes a structural multivariate unobserved components model with external instrument (SMUC-IV) to investigate the effects of monetary policy shocks on key U.S. macroeconomic "stars"-namely, the level of potential output, the growth rate of potential output, trend inflation, and the neutral interest rate. A key feature of our approach is the use of an external instrument to identify monetary policy shocks within the multivariate unob- served components modeling framework. We develop an MCMC estimation method to facilitate posterior inference within our proposed SMUC-IV frame- work. In addition, we propose an marginal likelihood estimator to enable model comparison across alternative specifications. Our empirical analysis shows that contractionary monetary policy shocks have significant negative effects on the macroeconomic stars, highlighting the nonzero long-run effects of transitory monetary policy shocks. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.05802 |
| By: | Carola Binder; Cody Couture; Abhiprerna Smit |
| Abstract: | This paper examines partisanship in public perceptions of the Federal Reserve. In all years from 2001 through 2023, trust in the Federal Reserve was highest for respondents of the same party as the President. The partisan effects were larger than other demographic differences in trust, but do not explain the large partisan gap in inflation expectations in those years. We conducted a new survey-based information experiment before and after the Presidential inauguration in 2025, and found a changed pattern: Republicans continued to have lower trust in the Fed than did Democrats, even after a Republican President was elected and took office. Yet, Republicans had much lower inflation expectations than Democrats. Responses to open-ended survey questions point to tariffs and President Trump himself as most salient to consumers when considering how inflation will evolve. |
| Keywords: | Federal Reserve; trust; partisanship; inflation expectations |
| JEL: | E02 E03 E30 E5 E51 E58 |
| Date: | 2025–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:cwm:wpaper:172 |
| By: | Giuseppe Pagano Giorgianni |
| Abstract: | This paper examines how natural gas price shocks affect Italian firms' pricing decisions and inflation expectations using quarterly survey data from the Bank of Italy's Survey on Inflation and Growth Expectations (SIGE) spanning 1999Q4-2025Q2. We identify natural gas price shocks through a Bayesian VAR with sign and zero restrictions. Our findings reveal that these shocks are a primary driver of firms' inflation expectations, particularly during the post-COVID period (2021-2023) when supply disruptions following Russia's invasion of Ukraine generated unprecedented price pressures. We then estimate a larger BVAR incorporating firm-level price setting variables and macro aggregates, documenting that gas price shocks generate persistent increases in both firms' current and expected prices, alongside elevated inflation uncertainty. We uncover substantial non-linearities using state-dependent local projections: under high uncertainty, firms successfully pass through cost increases to consumers, maintaining elevated prices; under low uncertainty, recessionary effects dominate, causing firms to reduce prices below baseline. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.03792 |
| By: | Martin Farias (OECD); Javier Suarez (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | We examine the interaction between banks and money market funds (MMFs) in a setup where the latter can experience large redemptions following an aggregate liquidity shock (as in March 2020). In the model MMFs and bank deposits are alternatives for firms’management of their cash holdings. MMFs experiencing correlated redemptions get forced to sell assets to banks in narrow markets, producing asset price declines. Ex post the price declines damage firms’ capacity to cover their needs with the redeemed shares. Ex ante the prospect of such an effect reduces the attractiveness of MMFs relative to bank deposits. Yet the equilibrium allocation of firms’ savings exhibits an excessive reliance on MMFs since firms fail to internalize their effect on the size of the pecuniary externalities caused by future redemptions. This provides a rationale, distinct from first mover advantages, for the macroprudential regulation of the investment in MMFs. |
| Keywords: | Liquidity management; liquidity risk; pecuniary externalities; money markets. |
| JEL: | G01 G21 G23 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cmf:wpaper:wp2025_2508 |
| By: | Ricardo J. Caballero; Alp Simsek |
| Abstract: | We develop a model of central bank communication where market participants' uncertainty about desired financial conditions creates misunderstandings ("tantrums") and amplifies the impact of financial noise on asset prices and economic activity. We show that directly communicating the expected financial conditions path (FCI-plot) eliminates tantrums and recruits arbitrageurs to insulate conditions from noise, while communicating expected interest rates alone fails to achieve these benefits. We demonstrate that scenario-based FCI-plot communication enhances recruitment when participants disagree with the central bank regarding scenario probabilities. This enables an "agree-to-disagree" equilibrium where markets help implement central bank objectives despite differing views. |
| JEL: | E12 E32 E44 E52 E58 G10 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34325 |
| By: | Jaeho Choi; Jaewon Kim; Seyoung Chung; Chae-shick Chung; Yoonsoo Lee |
| Abstract: | This study examines the relationship between Federal Open Market Committee (FOMC) announcements and financial market network structure through spectral graph theory. Using hypergraph networks constructed from S\&P 100 stocks around FOMC announcement dates (2011--2024), we employ the Fiedler value -- the second eigenvalue of the hypergraph Laplacian -- to measure changes in market connectivity and systemic stability. Our event study methodology reveals that FOMC announcements significantly alter network structure across multiple time horizons. Analysis of policy tone, classified using natural language processing, reveals heterogeneous effects: hawkish announcements induce network fragmentation at short horizons ($k=6$) followed by reconsolidation at medium horizons ($k=14$), while neutral statements show limited immediate impact but exhibit delayed fragmentation. These findings suggest that monetary policy communication affects market architecture through a network structural transmission, with effects varying by announcement timing and policy stance. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.02705 |
| By: | Cara Dabrowski; Eckhard Hein |
| Abstract: | Based on the notion of endogenous money, which precludes inflation from being a monetary phenomenon, this contribution develops an introductory macroeconomic model of conflict inflation aimed at undergraduate teaching. Our demand-driven model includes Kaleckian mark-up pricing determining firms’ target profit shares, while workers’ target wage shares are determined by institutional features of the labour market and the social benefit system and the employment rate. Conflict inflation emerges if these targets are inconsistent with each other. This basic version of our teachable Kaleckian macroeconomic model incorporates the main components of aggregate demand and their determinants for a closed (private) economy, as well as conflicting income claims between workers and capitalists. The model is then applied in a stylised way to the recent inflationary shocks taking off in 2021. It aims to provide a basic heterodox approach, which is both straightforward and effective in facilitating students’ understanding of inflationary dynamics. |
| Keywords: | conflict inflation, post-Keynesian/Kaleckian model, teaching economics |
| JEL: | A22 E12 E25 E31 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2522 |
| By: | Okan Akarsu; Altan Aldan; Unal Seven |
| Abstract: | [EN] This study examines how firms’ perceptions of their business environment and expectations of their own future sales shape their inflation expectations, with particular attention to differences across inflation regimes. Using firm-level data from Türkiye’s Business Tendency Survey (BTS), we find that firms with a weaker assessment of their industry’s current state tend to forecast higher inflation, particularly during periods of heightened uncertainty. In high-inflation environments, firms’ inflation expectations are more strongly associated with their perceptions of current industry conditions, whereas expectations about their own future sales play a comparatively smaller role. Conversely, firms' expectations for their own sales become a more decisive factor in their inflation forecasts during low-inflation or disinflationary periods. These results highlight the state-dependent nature of firms’ inflation expectation formation. By shedding light on the mechanisms through which firms form expectations, this note underscores how reducing macroeconomic uncertainty and strengthening policy communication can enhance the effectiveness of monetary policy. [TR] Bu calisma, firmalarin sektorel duruma iliskin algilarinin ve satis beklentilerinin enflasyon beklentilerini nasil sekillendirdigini, farkli enflasyon rejimleri altinda incelemektedir. Iktisadi Yonelim Anketi (IYA) verilerini kullanan analizimiz, sektorlerinin mevcut durumuna iliskin gorece daha olumsuz beklentiler icinde olan firmalarin, ozellikle belirsizligin arttigi donemlerde, diger firmalara gore daha yuksek enflasyon tahmininde bulunma egiliminde olduklarini gostermektedir. Yuksek enflasyon ortaminda, firmalarin enflasyon beklentileri, sektorlerinin mevcut kosullarina iliskin algilariyla daha guclu bir sekilde iliskilidir; buna karsilik, gelecekteki satislarina iliskin beklentilerinin enflasyon bekleyisleri uzerine etkisi daha sinirli kalmaktadir. Buna karsin, dusuk enflasyon veya dezenflasyon donemlerinde, firmalarin satis beklentileri enflasyon tahminlerinde daha belirleyici bir faktor haline gelmektedir. Bu bulgular, firmalarin enflasyon beklenti olusumunun duruma bagli bir yapiya sahip oldugunu ortaya koymaktadir. Firmalarin beklenti olusturma mekanizmalarina isik tutan bu calisma, makroekonomik belirsizligin azaltilmasi ve politika iletisiminin guclendirilmesinin para politikasinin etkinligini artirmada onemli bir rol oynayabilecegini vurgulamaktadir. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:econot:2521 |
| By: | Julián A. Cárdenas-Cárdenas; Deicy J. Cristiano-Botia; Eliana González-Molano; Carlos Huertas-Campos |
| Abstract: | The credibility of a central bank is reflected in the agent’s expectations of the monetary policy interest rate (MPR) and affects the behavior of interest rates in the economy. This document includes these expectations in various models that estimate the pass-through of monetary policy to CD and credit interest rates for the Colombian case. Compared with previous works that only include the observed MPR, the models that incorporate MPR expectations show stronger correlations with CD and credit rates, and faster transmission. It was also found that when analyzing periods of increases and decreases of the MPR, the transmission is asymmetric. However, it was found that the asymmetry in transmission between periods of MPR increases and decreases varies over time. In the short term, transmission tends to be more rapid during phases of MPR decline. Conversely, over longer horizons, transmission appears to be more pronounced during periods of MPR increase. *****RESUMEN: La credibilidad de un banco central se refleja en las expectativas de la tasa de interés de política monetaria (TPM) de los agentes y afecta el comportamiento de las tasas de interés de la economía. En este documento se incluyeron estas expectativas en varios modelos que estiman el traspaso de la política monetaria a las tasas de interés de CDTs y de crédito para el caso colombiano. Frente a trabajos anteriores que sólo incluían la TPM observada, los modelos que incluyen las expectativas de la TPM registran correlaciones más altas con las tasas de CDs y de crédito y menores tiempos de traspaso. También se encontró que, cuando la muestra se divide entre periodos de aumentos y descensos de la TPM, el traspaso es asimétrico. Sin embargo, se encontró que la asimetría en la transmisión entre períodos de aumento y disminución de la TPM varía con el tiempo. En el corto plazo, la transmisión tiende a ser más rápida durante las fases de disminución de la TPM. Por el contrario, a horizontes más largos la transmisión puede ser más acentuada durante periodos de incrementos de la TPM. |
| Keywords: | Monetary policy, Interest rate pass-through, Expectations, Política monetaria, transmisión de tasas de interés, expectativas |
| JEL: | E4 E5 D8 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1327 |
| By: | Jabir Sandhu; Sofia Tchamova; Rishi Vala |
| Abstract: | We examine the Canadian money market fund (MMF) sector and find that it has grown rapidly, holding a large share of treasury bills and commercial paper. Unlike in some other jurisdictions where investor outflows likely amplified stresses, Canadian MMFs experienced inflows during the March 2020 market turmoil. |
| Keywords: | Coronavirus disease (COVID-19); Financial institutions; Financial markets; Financial stability; Market structure and pricing; Monetary policy transmission |
| JEL: | E4 E40 G0 G00 G01 G1 G2 G23 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsan:25-25 |
| By: | Yosuke Fukunishi (Graduate School of Economics, The University of Tokyo); Haorong Qiu (Graduate School of Economics, The University of Tokyo); Akihiko Takahashi (Graduate School of Economics, The University of Tokyo); Fan Ye (Graduate School of Economics, The University of Tokyo) |
| Abstract: | This study introduces a novel generative modeling framework for simulating the term structure of interest rates. In recent years, generative models have achieved significant progress in image generation and are increasingly being applied to finance. To the best of our knowledge, this is the first study to apply a generative model—specifically, a diffusion model—to the term structure of interest rates. Furthermore, we extend the framework to incorporate conditional generation mechanisms and v-parameterization. The training dataset consists of spot yield curves constructed from daily overnight index swap (OIS) rates using cubic Hermite splines. As base conditioning variables, we use short-term interest rates and changes in consumer price indexes (CPIs). Empirical analysis covering the period from 2015 to 2025 demonstrates that our model successfully reproduces the level and shape of yield curves corresponding to historical macroeconomic conditions and short-term interest rate environments. Additionally, when incorporating further conditioning variables related to quantitative easing policies, monetary base, current account balances, and nominal gross domestic product (GDP), we find that the inclusion of quantitative easing indicator notably enhances the model’s output relative to the base conditioning case. This suggests improved robustness and representational capacity under expanded conditioning. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cfi:fseres:cf605 |
| By: | Falk Bräuning; Joanna Stavins |
| Abstract: | Monetary policy impacts consumer spending via the effect of interest rate changes on credit card borrowing. Using supervisory account-level spending and balance data, we estimate that a 1 percentage point increase in the interest rate reduces credit card spending by nearly 9 percent and revolving balances by close to 4 percent. Aggregate results are primarily driven by revolving accounts, while we estimate small and statistically insignificant interest-rate elasticity for transaction accounts. Consistent with financial constraints, low-credit-score accounts tend to adjust spending, while high-credit-score accounts adjust balances. |
| Keywords: | credit cards; interest rates; consumer spending |
| JEL: | D12 D14 E43 G21 |
| Date: | 2025–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:101889 |
| By: | Wagner Piazza Gaglianone; Jaqueline Terra Moura Marins; José Valentim Machado Vicente |
| Abstract: | This paper examines the relationship between interest rate differentials and exchange rate returns across different monetary regimes, with a particular focus on distinguishing between high- and low-interest-rate setups. Relying on a rich panel dataset comprising 46 countries and over two decades of monthly observations, we estimate panel models that allow for country-specific heterogeneity and regime-dependent dynamics. Thresholds separating regimes are constructed in a fully data-driven manner, including conditional and time-varying specifications. Our findings show that exchange rate elasticity with respect to interest rate differentials indeed depends on the regime and it is usually higher under low interest rates, a result consistent across several model specifications and robustness checks. A clustering analysis is also conducted to uncover groups of countries with similar FX dynamics, further highlighting the heterogeneous nature of currency responses across the international landscape. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:630 |
| By: | Wagner Piazza Gaglianone; Gustavo Silva Araujo; José Valentim Machado Vicente |
| Abstract: | This paper investigates how the Brazilian yield curve has responded to macroeconomic fundamentals over the past two decades. Using a set of OLS regressions applied to short- and long-term interest rates, as well as the yield curve slope, we examine the roles of domestic inflation, fiscal stance, economic activity, and external interest rates. Our findings show that domestic inflation and economic activity, together with U.S. yields, exhibit consistent significance across maturities. Fiscal indicators based on primary surplus, rather than public debt, exert a clear effect on short-term rates and the slope, underscoring the relevance of fiscal flows over fiscal levels. Robustness exercises incorporating financial conditions, credit indicators, and the monetary policy stance confirm that short-term rates are especially responsive to financial signals and regime changes, whereas long-term rates are more strongly influenced by external conditions, credit dynamics, and a persistent monetary stance. The analysis is further extended to real interest rates, confirming the robustness of the main results and highlighting the enduring influence of fiscal flows and credit dynamics on the slope and long-term rates. These findings show the importance of credible fiscal and monetary frameworks and provide new evidence on how emerging market yield curves reflect domestic and external fundamentals. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:629 |
| By: | Tarek Alexander Hassan; Thomas M. Mertens; Jingye Wang; Tony Zhang |
| Abstract: | We develop a general-equilibrium model in which the safety of a country's currency and the choice of its exchange-rate regime arise endogenously. Calibrated to pre-2025 data, the model replicates the U.S. dollar’s safety premium, low Treasury yields, and its status as the world's anchor currency. Introducing a trade war that isolates U.S. goods markets from the world erodes the U.S. dollar's safety premium, raises U.S. interest rates, and lowers the world market value of U.S. firms. For sufficiently high tariffs, small economies optimally re-peg to the euro, precipitating a phase shift to a euro-centric international monetary system and a global welfare loss. The analysis implies that persistent trade wars may threaten the financial privileges the United States derives from the dollar’s international role. |
| JEL: | E22 E4 F1 F3 G12 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34332 |
| By: | Paul, Revocatus Washington; Sharma, Dhiraj |
| Abstract: | This paper examines the welfare effects of Tanzania’s 2021 levy on mobile money transfers, a policy that sharply increased transaction costs in a country where mobile money is the primary channel for financial access and remittances. Using two waves of the Tanzania National Panel Survey (2014/15 and 2020/22) combined with high-frequency phone survey data, a triple-difference identification strategy was implemented to isolate the impact of the levy on rural and urban households before and after its introduction. The findings show that rural households—who rely more heavily on mobile money and have fewer financial alternatives—experienced a 10–18 percent decline in per capita food consumption and a significant rise in food insecurity following the levy. Robustness checks using variation in bank penetration, shock incidence, and remittance dependence support these results. |
| Date: | 2025–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11228 |
| By: | Población García, Francisco Javier; Suárez, Nuria |
| Abstract: | The purpose of this paper is to empirically examine the effects of capital and liquidity on bank stability as well as the existence of a potential complementary or substitute relationship between both dimensions to explain bank stability. We use a sample of 16, 061 banks from 27 countries during the period 2013-2023. Our results show that both capital and liquidity increase bank stability. However, the joint interactive effect presents a negative coefficient indicating the existence of a potential substitution effect between both variables. We also provide evidence on market power acting as a potential mechanism explaining the baseline relationships. Furthermore, the results seem to be modulated by specific bank- and country-level factors. JEL Classification: G20, G21, G28, K00 |
| Keywords: | bank-level characteristics, bank stability, capital, country-level characteristics, liquidity |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253134 |
| By: | Natalia Fischl-Lanzoni; Martin Hiti; Asani Sarkar |
| Abstract: | In a companion post, we showed that during the bank run of spring 2023 investors were seemingly not concerned about bank risk broadly but rather became sensitized to the risk of only about a third of all publicly traded banks. In this post, we investigate how the Federal Reserve’s liquidity support affected investor risk perceptions during the run. We find that the announcement of the Fed’s novel Bank Term Funding Program (BTFP), and subsequent borrowings from the program, substantially reduced investor risk perceptions. However, borrowings from the Fed’s traditional discount window (DW) had no such effect. |
| Keywords: | bank runs; bank balance sheets; investor attention; bank liquidity; emergency lending; Bank Term Funding Program (BTFP); discount window |
| JEL: | E50 G11 G21 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:101879 |
| By: | Natalia Fischl-Lanzoni; Martin Hiti; Asani Sarkar |
| Abstract: | The bank run that started in March 2023 in the U.S. occurred at an unusually rapid pace, suggesting that depositors were surprised by these events. Given that public data revealed bank vulnerabilities as early as 2022:Q1, were other market participants also surprised? In this post, based on a recent paper, we develop a new, high-frequency measure of bank balance sheet risk to examine how stock market investors’ risk sensitivity evolved around the run. We find that stock market investors only became attentive to bank risk after the run and only to the risk of a limited number (less than one-third) of publicly traded banks. Surprisingly, investors seem to have mostly focused on media exposure and not fundamentals when evaluating bank risk. In a companion post, we examine how the Federal Reserve’s liquidity support affected investor risk perceptions. |
| Keywords: | bank runs; bank balance sheets; investor attention; bank liquidity; emergency lending |
| JEL: | E50 G11 G21 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:101878 |
| By: | Kremens, Lukas; Martin, Ian; Varela, Liliana |
| Abstract: | We study exchange rate expectations in surveys of financial professionals and find that they successfully forecast currency appreciation at the two-year horizon, both in and out of sample. Exchange rate expectations are also interpretable, in the sense that three macrofinance variables—the risk-neutral covariance between the exchange rate and equity market, the real exchange rate, and the current account relative to GDP—explain most of their variation. But there is no “secret sauce” in expectations: after controlling for the three macro-finance variables, the residual information in survey expectations does not forecast currency appreciation in our sample. |
| JEL: | F3 G3 |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127790 |
| By: | Santoni, Alessandro; Rapalino, Valentina; Nesti, Roberta |
| Abstract: | The IMF working paper, “Good Supervision: lessons from the field, ” examines the effectiveness of On-site Inspections (OSIs) as a supervisory tool in advanced economies (AEs), drawing insights from 60 Basel Core Principles (BCPs) assessments conducted between 2012 and June 2023. Despite their critical role in ensuring financial stability, OSIs are identified as the second-largest weakness among supervisory techniques in AEs. The study highlights challenges such as limited supervisory resources, infrequent inspections of smaller banks, and an over-reliance on off-site monitoring, which cannot fully substitute the insights gained from in-person supervision. Key deficiencies include gaps in OSI scope, frequency, staffing, and enforcement mechanisms, as well as communication and structural issues. The paper underscores the need for supervisory authorities to balance on-site and off-site methods, enhance staffing and inspection practices, and strengthen enforcement capabilities. These improvements are deemed essential to align supervisory practices with BCP standards and foster a more resilient financial system. JEL Classification: G2, E58 |
| Keywords: | Basel Core Principle (BCP), International Monetary Fund (IMF), On-site Inspections (OSIs), supervisory techniques |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025375 |
| By: | Romain Bouis; Sumaiyah R Mirza; Erlend Nier |
| Abstract: | This paper examines empirically how the effect of interest rates on the three components of bank profits – loan loss provisions, net interest margin, and non-interest income – varies depending on bank characteristics and the macroprudential policy environment. A new finding is that higher interest rates lead to larger loan loss provisions for banks offering flexible-rate loans, but that this effect is attenuated when macroprudential borrower-based measures have been tight in preceding years. Tighter macroprudential settings also reduce the effect of higher unemployment on loan loss provisions recorded by banks, and thereby the negative impact of unemployment on profitability. Moreover, we find significant heterogeneity across banks: banks with strong risk appetite that extend loans at flexible rates are adversely affected by higher interest rates, as the effect on loan losses dominates the effect on the interest margin, while the profitability of other banks benefits on average from higher interest rates. |
| Keywords: | Interest rate; bank profitability; net interest margin; loan loss provisions; macroprudential policy |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/196 |
| By: | Luca Fornaro; Federica Romei |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1891 |
| By: | Davit Gondauri |
| Abstract: | Inflation forecasting is a core socio-economic challenge in modern macroeconomic modeling, especially when cyclical, structural, and shock factors act simultaneously. Traditional systems such as FPAS and ARIMA often struggle with cyclical asymmetry and unexpected fluctuations. This study proposes a hybrid framework (FPAS + $\zeta$) that integrates a structural macro model (FPAS) with cyclical components derived from the Riemann zeta function $\zeta(1/2 + i t)$. Using Georgia's macro data (2005-2024), a nonlinear argument $t$ is constructed from core variables (e.g., GDP, M3, policy rate), and the hybrid forecast is calibrated by minimizing RMSE via a modulation coefficient $\alpha$. Fourier-based spectral analysis and a Hidden Markov Model (HMM) are employed for cycle/phase identification, and a multi-criteria AHP-TOPSIS scheme compares FPAS, FPAS + $\zeta$, and ARIMA. Results show lower RMSE and superior cyclical responsiveness for FPAS + $\zeta$, along with early-warning capability for shocks and regime shifts, indicating practical value for policy institutions. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.02966 |