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on Monetary Economics |
| By: | Juan Pablo Di Iorio (UDESA); Javier García-Cicco (UDESA) |
| Abstract: | A salient feature of many emerging and developing economies is that a substantial fraction of government debt is denominated in foreign currency. We study the implications of the Fiscal Theory of the Price Level (FTPL) in a standard New Keynesian small and open economy model, with an explicit role for the currency denomination of public debt. We show that, while the classical FTPL characterization of equilibrium existence and uniqueness extends largely independently of debt composition, the propagation of shocks does not. The currency denomination of public liabilities alters the effects of monetary and fiscal policy, including the possibility that a monetary tightening leads to a depreciation under active fiscal regimes. More broadly, the interaction between the fiscal-monetary policy mix and the share of foreign-currency debt also plays a central role in shaping the response to external shocks. |
| Keywords: | Fiscal theory of the price level; inflation; exchange rate; fiscal and monetary policy interactions; currency composition of government debt. |
| JEL: | E31 E52 E63 F41 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:390 |
| By: | Elmir Mukhtarov (Central Bank of the Republic of Azerbaijan); Ali Hajili (Central Bank of the Republic of Azerbaijan); Aygun Garayeva (Central Bank of the Republic of Azerbaijan); Vugar Ahmadov (Central Bank of the Republic of Azerbaijan) |
| Abstract: | Effective monetary policy requires maintaining the short-term interbank rate close to the policy rate while limiting its volatility, ensuring smooth transmission, and reducing banks' liquidity and interest rate risks. This paper seeks to identify and explain the drivers of volatility in short-term interbank rates, while examining the impact of the reserve averaging framework on banking sector liquidity. Drawing on evidence from an emerging market, this study demonstrates that deviations of cumulative reserves from their trend exert a significant influence on interbank rate volatility. Specifically, the results identify distinct states in the money market: a high-responsiveness state and a low-responsiveness state, depending on prevailing liquidity conditions. The findings imply that central banks should closely monitor cumulative reserve positions and proactively guide liquidity toward its trend path. |
| Keywords: | overnight interbank rate; required reserve; markov-switching model; liquidity state |
| JEL: | C22 E53 E58 G21 |
| Date: | 2026–03–12 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp07-2026 |
| By: | Amir Ahmadi, Pooyan; Matthes, Christian; Wang, Mu-Chun |
| Abstract: | The effects of monetary policy shocks are regularly estimated using high-frequency sur- prises in asset prices around central bank meetings as an instrument. These studies, insofar as they explicitly model the relationship between instrument and structural shock, assume a constant relationship between the instrument and the monetary policy shock. By allowing for time variation in this relationship, we show that only a few distinct periods are infor- mative about monetary policy shocks. Therefore, we build a narrative for instrument-based identification. For the instrument in Gertler & Karadi (2015), the effect on the (log) price level is almost 50 percent larger than the standard specification would suggest. |
| Keywords: | High-Frequency Identification, Instruments, Monetary Policy |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:338091 |
| By: | Moon, Haejun |
| Abstract: | Monetary expansion is a sovereign prerogative whose costs and benefits are structurally asymmetric. When a central bank expands the money supply, all holders of nominal claims bear the inflation cost, while asset holders capture a seigniorage premium—a windfall appreciation attributable to monetary policy rather than productive activity. This paper argues that this asymmetry constitutes a distributive injustice under the proportionality principle, and derives this conclusion independently from three ethical traditions: Aristotelian distributive justice, contractarian rationality, and left-libertarian common ownership. The argument proceeds in six steps. First, I establish the institutional mechanics of seigniorage—how central banks create base money at near-zero cost to acquire interest-bearing assets—and introduce a dual-parameter framework that separates the asset appreciation rate (πₐ) from the cash depreciation rate (πc), capturing the empirically documented divergence under quantitative easing. Second, I develop the proportionality principle through three independent ethical derivations, each yielding the conclusion that costs and benefits of sovereign monetary action must be allocated proportionally. Third, I defend the choice of proportionality against competing distributive principles—maximin, sufficientarianism, and luck egalitarianism—and establish its priority over Pareto efficiency as a criterion of distributive justice. Fourth, I address the strongest objections: the transfer problem, the Pareto defense, the general equilibrium objection, the voluntariness objection, the agency problem (whether structural injustice is possible without individual wrongdoing), and the scope problem (why monetary policy warrants correction when other policies with distributive consequences do not). Fifth, I propose the seigniorage dividend as a Pigouvian correction with a rule-based institutional design compatible with central bank independence, and demonstrate that it functions as an automatic demand stabilizer—transferring purchasing power from low-MPC asset holders to high-MPC cash-dependent households—providing an independent consequentialist justification that does not depend on the proportionality principle. Sixth, I articulate the structural conditions that distinguish monetary policy from other sovereign actions with distributive consequences, providing a principled stopping rule for the proportionality claim. |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:ge4qx_v1 |
| By: | Illing, Gerhard |
| Abstract: | During the last decades, central bank independence proved to be the bedrock of credible and effective monetary policy. Both past and recent history provides plenty of evidence of disastrous outcomes with high inflation and economic stagnation, when central banks - lacking independence - were put under strong political influence. Game theoretic modeling provides valuable insights into the crucial role of independence. In a fiat money economy (with costs for producing additional pieces of paper money being close to zero) a commitment for price stability is key. In the absence of binding rules, it would not be dynamically consistent to stick to the promise to implement price stability. The model by Barro Gordon Model (1982) is the work horse model for game theoretic analysis. It builds on the seminal work of Kydland Prescott (1977) on dynamic inconsistency. The starting point of Barro Gordon is a short run Phillips curve, causing a trade-off between stabilizing inflation and stabilizing output. If there are structural distortions in the economy, the promise to stick to some target rate not credible: There is an incentive to stimulate economy by raising above target rate of inflation to raise output. Private agents anticipate this incentive; they raise expected inflation ex ante. So the optimal policy is not dynamic consistent (in game theoretic terms: not subgame perfect). This leads to an inflation bias: Inflation being too high, without any gain in output and employment. So ex post, discretionary policy ends up in an inferior outcome. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:338105 |
| By: | Carlos Cañizares Martínez; Adriana Lojschová; Alicia Aguilar |
| Abstract: | This paper estimates the effects of standard monetary policy shocks on housing and other macro variables in Slovakia, a CESEE country. For that purpose, we use a non linear local projection model which uncovers asymmetries in these effects around three different dimensions: high versus low economic growth, interest rates and infla tion. The main findings in this study are as follows. First, we often find no evidence of standard monetary policy eliciting a contractionary response in house prices or housing investment. Second, evidence is weakest during recessions and periods of low interest rates or low inflation. Third, these findings may be linked to the inability of monetary policy to trigger significant contractionary effects on household lending, which in turn may be linked to the effective lower bound on interest rates, the pre dominance of fixed-rate mortgages in Slovakia, or interaction between monetary and macroprudential policy. We also provide a discussion on the possible country charac teristics that might drive these results and policy implications. |
| Keywords: | Monetary policy, nonlinearities, local projections, euro area. |
| JEL: | C32 C36 E42 E52 E58 R21 R31 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp202 |
| By: | Adam Copeland; Owen Engbretson |
| Abstract: | Securities dealers play a central role intermediating funds in the U.S. short-term money markets. This intermediation involves risk, which can be mitigated by holding buffers of liquid securities. The cost of holding these buffers—the liquidity risk premium—is driven by the opportunity cost of holding money and so is influenced by monetary policy. We use detailed data on the pricing of repurchase agreements (repo), the main contract used to provide secured funding in the money markets, to measure by how much changes in monetary policy affect the liquidity risk premium embedded in repo pricing. The results imply that both changes in administrative rates and in aggregate reserves have effects on this risk premium and that this relationship is nonlinear. Using the average values of rates and reserves in 2024, the estimated coefficients predict that a 100-basis-point increase in the interest rate on reserve balances results in a 0.9 basis point increase in the liquidity risk premium—a 10 percent increase in the spread charged by securities dealers to their clients. The same effect on this risk premium can be achieved by a $429 billion decrease in the aggregate reserves. |
| Keywords: | repo; liquidity risk premium; rate pass-through; short-term funding |
| JEL: | G23 E58 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102916 |
| By: | Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Florian Gerth (Asian Institute of Management, Philippines); Paul Lukuliko Philemon (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan) |
| Abstract: | We construct a new measure of monetary policy discretion by treating the predictable component of interest-rate changes as rule based and unexpected changes as discretionary. Using newly released high-frequency monetary policy shocks for 20 countries from 2000 to 2024, we document systematic cross-country variation in discretion. Two-way fixed-effects estimates show that greater central-bank independence is associated with higher discretion in developed economies. Event studies around irregular governor turnovers yield little evidence of politically driven discretionary shocks once transitional dynamics are accounted for. |
| Keywords: | Taylor rule; Monetary policy shocks; High frequency identification; discretion; Central bank independence |
| JEL: | E40 E43 E44 E58 E61 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:fds:dpaper:202602 |
| By: | Apel, Mikael (Monetary Policy Department, Central Bank of Sweden); Blix Grimaldi, Marianna (Financial Stability Department, Central Bank of Sweden); Ahrenberg, Lars (Linköping University); Jönsson, Arne (Linköping University) |
| Abstract: | Most empirical research on the effects of transparency on monetary policy committees is based on a natural experiment in 1993 at the Federal Reserve, when it was decided that transcripts of meetings would be released with a five-year lag. Evidence is found of both a conformity effect (reluctance to offer dissenting opinions) and a discipline effect (more thorough preparation). We investigate the effects of increased transparency on a monetary policy committee using another and arguably more timely natural experiment. In May 2007, the Swedish central bank started to include the names of Executive Board members in the minutes of monetary policy meetings. We find that members began to put more effort into explaining their views (a form of discipline effect), that interaction between members decreased, and that references to members’ own previous views became more common. A key insight is that the effects of increased transparency depend on the nature of the change and the type of committee. |
| Keywords: | Central bank communication; central bank transparency; committee decision making; text analysis |
| JEL: | D71 E52 E58 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0463 |
| By: | Ruopu Hu (Graduate School of Economics, Kobe University); Junior Maith (Norges Bank); Shin-Ichi Nishiyama (Graduate School of Economics, Kobe University) |
| Abstract: | We revisit U.S. trend inflation dynamics since the 1960s by estimating a nonlinear, nonstationary Markov-switching New Keynesian model in which trend inflation evolves as a latent Markov process. Our estimation (i) confirms the Volcker disinflation as a regime shift from high to mid-level trend inflation between 1980 and 1987; (ii) shows that trend inflation remained stable around 2.8% during the Great Moderation and beyond, despite major disruptions such as the Global Financial Crisis and the COVID-19 pandemic; and (iii) identifies a persistent hawkish monetary policy regime after 1982, with temporary weakening during periods of policy rate reductions at the zero lower bound—while inflation expectations remained well anchored. |
| Keywords: | Trend Inflation, Markov-Switching DSGE, Volcker Disinflation, Great Moderation. |
| JEL: | E31 E52 C54 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2604 |
| By: | Matthieu Chavaz; David Elliott; Win Monroe |
| Abstract: | We exploit the surprise announcement and subsequent amendment of a central bank funding scheme to test how public liquidity provision affects credit market outcomes. Contrary to the notion that public liquidity is primarily a substitute for private liquidity, banks that are more exposed to stress in private wholesale funding markets use less central bank funding. We rationalise this pattern by establishing an "equilibrium channel" of public liquidity. The mere availability of central bank funding reduces the cost of private wholesale funding. This stimulates lending by banks exposed to wholesale funding, regardless of whether they actually use the central bank funding. Using a surprise amendment to the design of the scheme, we show that the "strings attached" to central bank funding help to explain why it is an imperfect substitute for private funding. |
| Keywords: | central bank funding, mortgage lending, bank funding risk |
| JEL: | E52 E58 G21 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1336 |
| By: | Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Paul Lukuliko Philemon (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan) |
| Abstract: | We examine how a more hawkish policy stance – defined as an above- median long-run inflation semi-elasticity of the policy rate – affects economic growth in 37 inflation-targeting countries. To this end, we estimate time-varying, bias-corrected forward-looking Taylor rules for all inflation- targeting countries for which the data permit such estimation. Our results point to sizable growth effects, exceeding 0.5 percent annually, for countries with a more hawkish policy stance. This suggests that the growth benefits reported in the previous literature on inflation targeting are primarily driven by a small subset of countries that react more forcefully to inflation. |
| Keywords: | Economic growth, inflation targeting, monetary policy reaction function, hawkishness |
| JEL: | E52 E58 O40 O47 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:fds:dpaper:202601 |
| By: | Gregory Phelan (Williams College); Jean-Paul L'Huillier (Brandeis University); William Zame (UCLA); |
| Abstract: | "Under exogenous price stickiness, the divine coincidence suggests that the Central Bank can focus on inflation stabilization to maximize welfare. We show that endogenous price stickiness upsets this result. The pursuit of price stability may, in fact, increase price stickiness, flatten the Phillips curve, increase the distortions due to sticky prices, and lead to a welfare loss. Welfare can be improved if the Central Bank stabilizes the output gap directly (dual mandate). Our argument does not rely on markup shocks or nominal wage rigidities. Instead, the key to these insights is the consideration of a strategic microfoundation for price stickiness." |
| Keywords: | Central bank design, policy-dependent price stickiness, Lucas critique |
| JEL: | E52 |
| Date: | 2025–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:wil:wileco:2025_105 |
| By: | Thomas J Carter; Mr. Güneş Kamber; Ms. Julia Otten |
| Abstract: | A cornerstone of all successful inflation-targeting regimes is a strong commitment to price stability as the primary objective of monetary policy, operationalized through a clearly defined inflation target. When setting targets in the context of emerging market and developing economies, policymakers face a range of specific challenges relative to their counterparts in advanced economies, often including a more volatile economic environment and weaker institutional backdrop. This How-To Note provides conceptual and practical guidance on how these and other key factors shape the appropriate design of inflation targets in emerging market and developing economies, covering not only the target level, but also the specific inflation measure to be targeted, the relevant time horizon for meeting the target, and the width and interpretation of any associated bands. The note also covers: (1) key considerations involved in reviewing and potentially adjusting the specification of the target, stressing careful management of the heightened risks to credibility that these processes tend to entail for emerging market and developing economies; and (2) special issues associated with disinflation programs. |
| Keywords: | inflation; inflation targeting; price stabilization; emerging market and developing economies; monetary policy frameworks; central banks |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfhtn:2026/004 |
| By: | Goncharenko, Roman (Central Bank of Ireland); Lukmanova, Elizaveta (Central Bank of Ireland) |
| Abstract: | We examine how monetary policy transmits through non-bank lenders (NBLs) using comprehensive loan-level data covering the universe of all loans in an economy. A one-percentage-point (pp) increase in the policy rate leads NBLs to raise lending rates by 0.17 pp more than banks and to contract credit sharply on the extensive margin. We show that this amplification is driven by a liability wedge: banks’ price-insensitive deposit franchise stabilizes their funding costs, whereas NBLs rely on short-term wholesale debt that reprices immediately. This funding fragility exposes NBLs to rapid balance-sheet deterioration, resulting in higher pass-through and a stronger contraction in lending. This credit contraction spills over to the real economy, causing firms with high non-bank exposure to reduce assets, liabilities, employment, and profitability significantly more than bank-dependent firms. Consequently, we show that NBLs can act as stronger amplifiers of monetary policy than banks. |
| Keywords: | Non-bank lending, NBLs, Monetary Policy Transmission, Bank Lending Channel, Credit Channel, Pass-through. |
| JEL: | E51 E52 G21 G23 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:02/rt/26 |
| By: | Swapan-Kumar Pradhan; Eswar S. Prasad; Előd Takáts; Judit Temesvary |
| Abstract: | We investigate how the U.S. dollar’s prominence in the denomination of international debt securities has evolved in recent decades, using a comprehensive global dataset with far more extensive coverage than datasets used in prior literature. We find no monotonic dollarization or de-dollarization trend; instead, the dollar’s share exhibits a wavelike pattern. We document three dollarization waves since the 1960s. The last wave, following the global financial crisis, lifted the dollar’s share nearly back to its level at the euro’s launch in 2000. We show that closer alignment of a country’s domestic currency to a reserve currency (e.g., the U.S. dollar) correlates with higher shares of issuance in that currency. Our findings are robust to composition and currency valuation effects as well as alternative data definitions. |
| JEL: | F3 F41 G15 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34942 |
| By: | Paweł Macias (Narodowy Bank Polski); Damian Stelmasiak (Narodowy Bank Polski); Karol Szafranek (Narodowy Bank Polski); Krzysztof Makarski (Narodowy Bank Polski) |
| Abstract: | Nominal rigidities play a central role in monetary policy transmission, shaping how inflation and real activity respond to various shocks. Using a large longitudinal dataset of granular price data for Poland covering 2000–2024, we contribute to the literature on price stickiness across several dimensions. First, we document the price-setting behaviour in Poland. Second, we show how the process was affected by the turbulent post-COVID-19 period and Russia’s full-scale invasion of Ukraine, evaluating the importance of the intensive and extensive margins of price adjustments. Third, we distinguish between sticky and flexible sectors, revealing heterogeneity in prices response to economic variables and shocks. We also compare the price-setting process in Poland with those in the euro area and the US. Finally, we complement these analyses with simulations performed on a two-sector DSGE model. Overall, we provide new, comprehensive evidence on price rigidity and discuss its implications for monetary policy transmission. |
| Keywords: | price rigidity; stickiness; consumer prices; micro data; inflation |
| JEL: | D40 E31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nbp:nbpmis:383 |
| By: | Hegemann, Hendrik |
| Abstract: | The Euro Area experienced historically high inflation in 2022, with energy prices playing a central role. This paper examines the joint impact of various energy price shocks on inflation in the Euro Area, with a focus on the period encompassing the COVID-19 pandemic and the Russia-Ukraine war. Using a structural VAR model, the analysis identifies shocks to gasoline, diesel, jet fuel, natural gas, and electricity prices and evaluates their effects on headline and core inflation. Historically, before the pandemic, gasoline price shocks had the most substantial impact on the Euro Area HICP, while the effects of other energy price shocks were relatively minor. Spillover effects to non-energy goods were very limited, implying negligible effects on core inflation. Extending the sample to May 2023 reveals a notable change in these relationships. In particular, natural gas price shocks become substantially more important and exhibit significantly more persistent effects on inflation. In contrast to previous findings for the United States, the results suggest that energy prices, especially natural gas price shocks, played a major role in the surge in the HICP and core HICP during 2021 and 2022 within the Euro Area. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:338106 |
| By: | Bindseil, Ulrich |
| Abstract: | In essence, the currently large stablecoins are electronic money issued by narrow balance sheet vehicles into a distributed ledger (or a "programmable platform"). Many believe that they will have significant success as a new form of money. Members of the current US administration expect that US stablecoins would circulate globally and support demand for treasuries and the international role of the USD. Related to the latter, recent industry initiatives plan to rely on US stablecoins as a settlement asset for cross-border payments ("stablecoin sandwich"). We discuss the comparative advantages of banks vs. non-banks as stablecoin issuers, as well as between MiCAR compliant and Genius Act compliant coins. We then review the implications of large global stablecoins on the financial system and discuss financial stability risks and remedies. We compare regulatory approaches across some jurisdictions and note that different directions have been taken, although most authorities seem to agree that stablecoins must not be remunerated. We discuss additional ideas how to address the risks associated with successful stablecoins, propose some basic regulatory principles and argue that prohibiting the remuneration of stablecoins does not necessarily foster financial stability. We suggest three options fulfilling the proposed regulatory principles. |
| Keywords: | money, stablecoin, blockchain, narrow banks, financial stability, run, disintermediation |
| JEL: | E40 E50 F33 G10 G20 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:338085 |
| By: | Mahbuba Aktar (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Florian Gerth (Asian Institute of Management, Philippines) |
| Abstract: | Financial frictions are a key determinant of monetary policy transmission. Using provincial Chinese data for 2011–2019, we examine this question through the lens of regional variation in traditional and digital financial inclusion. We combine high-frequency monetary policy shocks with state-dependent local projections, in- terpreting traditional inclusion as a proxy for liquidity constraints and digital inclusion as a proxy for search frictions. Regions with stronger liquidity constraints exhibit weaker output and price responses, in line with the predictions of New Keynesian models with heterogeneous agents. Lower search frictions instead tend to amplify transmission over medium horizons, though short-run effects are mixed. |
| Keywords: | monetary policy transmission; regional differences; financial frictions; financial inclusion; high-frequency identification |
| JEL: | E5 E4 C2 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:fds:dpaper:202604 |
| By: | Rudy Marhastari (Bank Indonesia); Cicilia Anggadewi Harun (Bank Indonesia); Retno Muhardini (Bank Indonesia); Agatha Silalahi (Bank Indonesia); Annes Nisrina Khoirunnisa (Bank Indonesia); Rheznandya Arkaputra Azis (Bank Indonesia); Sintia Aurida (Bank Indonesia); Rahardian Luthfan Ihtifazhuddin (Bank Indonesia); Citra Ayu Rossi Wulandari (Bank Indonesia); Alvin Andhika Zulen (Bank Indonesia); Amin Endah Sulistiawati (Bank Indonesia) |
| Abstract: | This study evaluates the effectiveness of Bank Indonesia’s communication strategy by integrating computational linguistics, media sentiment analytics, and macroeconomic diagnostics within a unified empirical framework. Using advanced Natural Language Processing (NLP) techniques, BI’s press releases from 2019–2024 are transformed into quantitative indicators capturing clarity, sentiment, comprehensiveness, consistency, and economic appropriateness. In parallel, news articles on inflation and exchange rate developments are analyzed to assess how policy messages are transmitted or amplified through media channels. These linguistic features are further enriched using Named Entity Recognition to identify stakeholder-specific resonance and potential pathways of narrative distortion within the public communication ecosystem. To assess macroeconomic implications, a VARX model links communication characteristics to intermediary channels, market expectations, and macroeconomic outcomes under both normal and anomalous conditions. Complementing this analysis, an Early Warning System (EWS) employing a 12-month rolling window and IsolationForest anomaly detection identifies periods of inflation and exchange-rate stress, providing a diagnostic foundation for anticipating heightened communication demands. The findings show that central bank communication functions not only as an information conduit but also as an active policy instrument that shapes expectations and influences market behavior. Building on these insights, the study proposes a three-pillar framework: Features, Timing, and Channels; to strengthen clarity, responsiveness, and coherence in central bank communication. This research advances the literature by integrating AI/ML-based diagnostics with policy communication analysis, offering an empirically grounded approach to enhancing communication effectiveness, transparency, and expectation management. |
| Keywords: | Central Bank Communication, Communication Feature, Sentiment Analysis, Communication Impact Analysis, Early Warning System |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:idn:wpaper:wp192025 |
| By: | Ibrahim Ag Elmoctar (UL - Université de Labé); Moussa Diakite (UL - Université de Labé) |
| Abstract: | Déclaration de divulgation :Les auteurs n'ont pas connaissance de quelconque financement qui pourrait affecter l'objectivité de cette étude. Ils assument l'entière responsabilité de tout éventuel plagiat, de l'usage de l'intelligence artificielle dans la rédaction, ainsi que des résultats présentés dans cet article. Conflit d'intérêts :Les auteurs ne signalent aucun conflit d'intérêts. |
| Keywords: | Economic growth, Instabilité monétaire Inflation Taux de change Croissance économique Guinée JEL Classification : E31, E52, F31, O55 Type du papier : Recherche empirique Monetary instability Inflation Exchange rate Economic growth Guinea JEL Classification : E31, Guinea JEL Classification : E31, O55 Paper type : Empirical Research, Exchange rate, O55 Type du papier : Recherche empirique Monetary instability, Guinée JEL Classification : E31, Croissance économique, Taux de change, Inflation, Instabilité monétaire |
| Date: | 2026–01–15 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05463917 |
| By: | Marcos Cerón (Banco Central de Reserva del Perú); Marcelo Paliza (Banco Central de Reserva del Perú); Elmer Sánchez (Banco Central de Reserva del Perú) |
| Abstract: | This paper examines the determinants of Central Bank Digital Currency (CBDC) wallet usage and evaluates the impact of a retail CBDC pilot implemented by the Central Reserve Bank of Peru (BCRP) in regions with low levels of financial inclusion. As of August 2025, the pilot reached approximately 117 thousand active users and 60 thousand participating merchants, while the outstanding balance of CBDC in circulation amounted to about PEN 7.5 million. Focusing on districts with low levels of financial inclusion, the first part of the paper investigates the individual-level determinants of CBDC wallet usage. Survey-based evidence indicates that awareness of the central bank's involvement, satisfaction with the wallet, and the use of other digital wallets are strongly associated with active usage. In contrast, selfemployment is negatively correlated with wallet activity, likely reflecting the closed-loop design of the pilot. In the second part of the paper, we exploit a quasi-experimental setting created by differentiated advertising campaigns across treated and control districts to estimate the effects of the intervention. The results show that the campaign significantly increased merchant adoption. Instrumental-variable estimates further identify merchant participation as a key mechanism driving wallet usage. Overall, the findings highlight the features and policy levers that are critical for the adoption of a retail CBDC, including merchant network expansion, well-targeted advertising campaigns, clear communication about the central bank's involvement and financial incentives. |
| Keywords: | retail CBDC; digital payments; quasi-experimental design |
| JEL: | E42 E58 C26 |
| Date: | 2026–03–19 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp09-2026 |
| By: | Burak Uras (Williams College); Tulio Bouzas (Tilburg University); ; |
| Abstract: | "Why do firms continue to rely on cash in economies where digital payments are widespread and electronic transaction costs are low? This paper shows that the an- swer lies in the interaction between payment technologies and tax enforcement. Us- ing randomized experimental evidence from Kenyan small and medium-sized firms, we establish that the adoption of electronic payments causally increases tax com- pliance by raising transaction traceability. Moreover, SME survey evidence shows that tax evasion is associated with cash discounts. Motivated by these findings, we develop a microfounded general equilibrium model in which heterogeneous firms choose prices, payment acceptance, and tax evasion jointly. Cash facilitates eva- sion but exposes buyers to transaction risk, while electronic payments are safer yet traceable by third parties. These trade-offs generate endogenous cash discounts, selective rejection of digital payments, and coexistence of payment instruments in equilibrium. The calibrated model shows that when electronic payments are non–interest-bearing, inflation increases cash usage and tax evasion, overturning the standard prediction that inflation reduces cash use. We characterize the op- timal policy mix and show that financial development, enforcement intensity, and inflation are tightly intertwined in maximizing government revenues and welfare." |
| Keywords: | E-Money, Pricing Heterogeneity, Tax Compliance, Macro Policy |
| JEL: | E44 G23 H26 |
| Date: | 2026–02–13 |
| URL: | https://d.repec.org/n?u=RePEc:wil:wileco:2026_102 |
| By: | Monti, Francesca (Université catholique de Louvain, LIDAM/CORE, Belgium); Van Keirsbilck, Leïla (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | This paper explores the dynamics of U.S. sectoral producer prices in a large BVAR model where the Input-Output (IO) matrix is used to structure their longrun relationships, allowing to capture flexibly the propagation of micro shocks to aggregate variables. This model’s forecasts of headline inflation have accuracy comparable to the Survey of Professional Forecasters’ and greater than those generated by a standard BVAR with Minnesota priors, confirming that the IO matrix long-run prior conveys relevant information about the data. We identify three key shocks - an oil price shock, a cereal price shock, and a monetary policy shock - using instrumental variables and find that sectoral linkages play a significant role in their transmission. Sectoral asymmetries are crucial for evaluating the macroeconomic consequences of energy price shocks, as industries with slower price adjustments amplify inflation persistence, even after the shock dissipates. And the impact of a sector-specific shock like the cereals price shock is non-negligible once the production network accounted for. |
| Keywords: | BVAR ; production networks ; sectoral shocks |
| JEL: | C11 C55 E30 |
| Date: | 2025–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:cor:louvco:2025014 |
| By: | Gregory Phelan (Williams College); Thomas Kohler (Independent Scholar); Jean-Paul L'Huillier (Brandeis University); Maximilian Weiss (University of Tubingen) |
| Abstract: | "According to anecdotal accounts, firms tend to justify price increases as a need to cover cost increases. Standard pricing models imply that firms do not only adjust to cost increases, but also to changes in spending (such as pent-up demand). We present a model where this is not necessarily the case. Our framework relies on an asymmetry between firms and consumers, where firms have more precise information about aggregate shocks. This leads to a novel microfoundation for price stickiness. There is differential adjustment depending on the type of shock, with supply shocks triggering more adjustment than demand shocks. We discipline the model using a survey of firms during the post-pandemic reopening of the German economy in March 2021. Consistent with the model, firms report increasing prices as a reaction to higher costs resulting from strenuous hygiene and social distancing regulations. On the other hand, in an effort to avoid upsetting customers, firms report not reacting to pent-up demand (despite equilibrium rationing). In a calibrated version of the model supply shocks are responsible for most of the upward adjustment of prices." |
| Keywords: | Optimal strategies, price gauging, fairness, monetary policy tradeoffs |
| Date: | 2025–01–20 |
| URL: | https://d.repec.org/n?u=RePEc:wil:wileco:2025_104 |
| By: | Berg, Tobias; Lindner, Vincent; Rößler, Denise |
| Abstract: | After years of investigation, the digital euro project has entered the legislative stage. Geoeconomic developments, especially the full-scale invasion of Ukraine in 2022 and the following regime of sanctions against Russia, as well as the economist-nationalist policies of the second Trump administration, have reinforced arguments for EU monetary and infrastructure sovereignty. At the same time, however, the digital euro project is under pressure from private solutions, stablecoins and the European Wero initiative that claim to provide similar benefits as the digital euro. While these may develop into useful tools for payments, they fail to provide the same features, such as universal acceptance and legal certainty, competitive neutrality, and - crucially - EU sovereign control over settlement infrastructure. This Policy Letter calls upon EU policymakers to reject the false dichotomy between private solutions and a public infrastructure and to make swift progress on the legislation and implementation of the digital euro. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safepl:338129 |
| By: | Damian Stelmasiak (Narodowy Bank Polski); Karol Szafranek (Narodowy Bank Polski); Paweł Macias (Narodowy Bank Polski); Krzysztof Makarski (Narodowy Bank Polski) |
| Abstract: | This paper explores potential asymmetry and heterogeneity in price responses to two identical VAT shocks of opposite sign. To this end, we study how Polish food retailers reacted to a temporary VAT cut from 5% to 0% in February 2022 and its reversal in April 2024. Combining monthly CPI micro data together with high-frequency (daily) web-scraped prices allows us to identify price adjustments with greater precision and to distinguish immediate reactions from medium-term dynamics. We find that the VAT cut was passed through almost fully and immediately across all retailers via a sharp increase in the frequency of price decreases. By contrast, the VAT increase generated only partial and heterogeneous pass through: among small retailers it was immediate and complete, whereas large retailers raised their prices only modestly on impact and continued to do so with a delay. To rationalize this key asymmetry in prices response, we outline a simple framework in which price hikes trigger psychological menu costs—stemming from consumer loss aversion and customer anger— while price cuts do not, leading to weaker and delayed pass-through of VAT increases. |
| Keywords: | price rigidity; VAT rate change; pass-through; individual prices; web-scraped prices |
| JEL: | D40 E31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nbp:nbpmis:384 |