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on Monetary Economics |
| By: | Michael Ehrmann |
| Abstract: | Trust in the central bank is an essential ingredient for a successful conduct of monetary policy. However, for many central banks trust has recently declined, for instance in the wake of the post-pandemic inflation surge, due to large errors in central banks’ inflation forecasts, or given problems when exiting from forward guidance. The rapid, substantial and persistent erosion of trust makes it clear that trust needs to be earned continuously. This paper reviews why trust is important, what determines it and how central banks can enhance it. It also argues that it is important for central banks to improve the measurement and monitoring of trust. It ends by highlighting some future challenges for maintaining trust. |
| Keywords: | trust; credibility; reputation; central banks; monetary policy; inflation expectations |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2024-04 |
| By: | Aurélien Goutsmedt (ISPOLE - UCL - Université Catholique de Louvain = Catholic University of Louvain, F.R.S.-FNRS, ICHEC - Brussels Management School [Bruxelles]); Francesco Sergi (LIPHA - Laboratoire Interdisciplinaire d'étude du Politique Hannah Arendt Paris-Est - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel) |
| Abstract: | This article introduces a new conceptual framework for examining the transformation of central banks' activities at the intersection of science and politics. The article relies on the results of four historical case studies gathered by the special issue "The Scientization of Central Banks. National Patterns and Global Trends"—to which this article provides also an introduction. We start with an analysis of Martin Marcussen's concept of "scientization", originally formulated to describe the changes within central banks since the 2000s. After highlighting how Marcussen's concept has raised different interpretations, we broaden our scope to examine how "scientization" is applied in the wider social sciences, extending beyond the study of central banks. This brings to the fore two ideas: scientization as "boundary work" (redrawing the line between "science" and "non-science") happening both in the public-facing ("frontstage") and internal ("backstage") activities of organizations. Finally, we suggest how these two ideas can be used to reinterpret "scientization" of central banks as the emergence of central banks as "boundary organizations". This reframing allows us to untangle and clarify the phenomena previously conflated under the original concept of scientization, offering a more coherent framework for ongoing research on central banks. |
| Keywords: | Central bank, Scientization, Expertise, Boundary organization |
| Date: | 2025–04–22 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04518367 |
| By: | Petrella Ivan (Department of Economics, Social Studies, Applied Mathematics and Statistics, and Collegio Carlo Alberto, University of Turin; University of Warwick and CEPR); Santoro Emiliano (Catholic University of Milan); Winkelmann Yannik (University of Tubingen) |
| Abstract: | Using UK consumer price microdata, we report that aggregate price flexibility varies substantially over time and induces significant non-linearity in inflation. In a regime of high flexibility, the half-life of inflation drops by 50% and its volatility rises considerably. Such asymmetry arises naturally from state-dependent pricing, for which we find ample evidence in the data, particularly following the Great Recession. Neglecting this property may lead to a systematic underprediction of inflation, as seen in the post-Pandemic inflation surge. Tracking real-time movements in price flexibility is crucial for assessing inflation dynamics and to inform monetary policy decisions. |
| Keywords: | Inflation, Price flexibility, Monetary policy, Ss models |
| JEL: | E30 E31 E37 C22 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:tur:wpapnw:099 |
| By: | Ferrando, Annalisa; Mulier, Klaas; Ongena, Steven; Delis, Manthos |
| Abstract: | Monetary policy can have contrasting effects on economic inequality via distinct channels. We examine the effect working via the credit channel, whereby monetary policy induces heterogeneous access to credit for business owners based on their wealth. Using unique data on business loan applications from small firms, we find that monetary expansions increase the bank’s likelihood to approve loan applications, particularly so for low-wealth entrepreneurs, translating to higher future income and wealth. Survey data from 19 euro area countries on loan applications by SMEs confirms these findings, and shows that the effect transmits especially via weakly capitalized and less liquid banks. JEL Classification: E51, E52, D63 |
| Keywords: | bank credit, business loans, entrepreneurs’ private wealth, monetary policy |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253058 |
| By: | Kristin Forbes; Jongrim Ha; M. Ayhan Kose |
| Abstract: | Central banks often face tradeoffs in how their monetary policy decisions impact economic activity (including employment), inflation and the price level. This paper assesses how these tradeoffs have evolved over time and varied across countries, with a focus on understanding the post-pandemic adjustment. To make these comparisons, we compile a cross-country, historical database of “rate cycles” (i.e., easing and tightening phases for monetary policy) for 24 advanced economies from 1970 through 2024. This allows us to quantify the characteristics of interest rate adjustments and corresponding macroeconomic outcomes and tradeoffs. We also calculate Sacrifice Ratios (output losses per inflation reduction) and document a historically low “sacrifice” during the post-pandemic tightening. This popular measure, however, ignores adjustments in the price level—which increased by more after the pandemic than over the past four decades. A series of regressions and simulations suggest monetary policy (and particularly the timing and aggressiveness of rate hikes) play a meaningful role in explaining these tradeoffs and how adjustments occur during tightening phases. Central bank credibility is the one measure we assess that corresponds to only positive outcomes and no difficult tradeoffs. |
| JEL: | E31 E32 E43 E52 E58 F33 F44 N10 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33825 |
| By: | Escribano Sáez, Álvaro; Rodríguez Solano, Juan Andres; Arranz Cuesta, Miguel Angel |
| Abstract: | Since the influential works of Friedman and Schwartz (1963, 1982) and Hendry and Ericsson (1991), on the monetary history of the United States of America and the United Kingdom from 1876 to 1975, there has been a great concern in the literature about the instability of money demand functions. This concern together with the results of the New Keynesian models, produced the abandonment of money as an instrument of monetary policy. Recently, using M1 as the measure of money, Benati, Lucas, Nicolini and Weber (2021) have shown, for a shorter and recent period of time, that there is a stable long-run money demand for a long list of countries. However, to date there are no studies showing that alternative stable longrun and short-run money demand equations exist since the XIX century. By means of nonlinear cointegration and nonlinear equilibrium corrections (NEC), we present empirical evidence of stable nonlinear UK money demands models of real broad money balances from 1877 to 2023. The properties of these NEC models are assessed via Monte Carlo simulations. Rational polynomials error-correction models are used to generate a simple nonlinear Granger´s representation theorem together with a two-step estimation procedure, which satisfies well-stablished asymptotic conditions. As a byproduct, with four different but stable money demand specifications, we empirically identify key abrupt historical periods, corresponding to World Wars I and II, regulatory changes and the COVID period, generating a common 6.5% excess inflation effect, over the historical 2.2% constant average inflation rate since 1877. |
| Keywords: | Money demand stability; Nonlinear cointegration; Nonlinear equilibrium correction; Nonlinear error correction; Rational polynomials; Opportunity cost of holding money |
| JEL: | E41 E43 E47 E51 |
| Date: | 2025–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:47122 |
| By: | Francesco Ferlaino |
| Abstract: | This study examines how different types of financial frictions influence household wealth and consumption inequality in response to a contractionary monetary policy shock. The analysis considers two key frictions: those affecting production firms and those related to household borrowing, both incorporated into a HANK model. The results suggest that frictions in the productive sector have a stronger impact on wealth inequality, whereas frictions in household borrowing lead to greater consumption dispersion relative to the counterfactual scenario. This divergence primarily arises from dynamics around the zero-wealth threshold, particularly the behavior of the household borrowing spread. |
| Keywords: | Heterogeneous agents; financial frictions; monetary policy; New Keynesian models; inequalities |
| JEL: | E12 E21 E44 E52 G51 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp263 |
| By: | Hie Joo Ahn; Jeremy B. Rudd |
| Abstract: | We propose an empirical framework in which shocks to worker reallocation, aggregate activity, and labor supply drive the joint dynamics of the labor market and inflation, and where reallocation shocks take two forms depending on whether they result from quits or from job losses. We find that these structural shocks, which affect the Beveridge curve, have different effects on inflation. Our model fully decomposes shifts of or along the empirical Beveridge curve in terms of the contribution of each shock and also allows us to estimate the Phillips correlation associated with each shock; observed Beveridge and Phillips correlations change over time depending on what types of structural shocks predominate in a given period. We find that reallocation shocks that accompany job losses were a key source of labor market dynamics and the steepening of the reduced-form Phillips curve during the Covid-19 pandemic, and were an important driver of the post-pandemic "soft landing." |
| Keywords: | Beveridge curve; Phillips curve; Monetary policy |
| JEL: | C11 C32 E24 E31 E52 |
| Date: | 2025–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:100029 |
| By: | Tiff Macklem; Jill Vardy |
| Abstract: | Central bank communications have undergone profound changes over the past two decades as central banks greatly enhanced their transparency and openness in order to support their monetary policy objectives. It has become widely accepted that clear communication by central banks is important in order to enhance credibility, improve monetary policy effectiveness and reinforce accountability. Some key lessons have emerged, notably the following seven: (i) public support of inflation targeting objectives and means is essential; (ii) central bank mandates must be focused and achievable; (iii) credibility is enhanced when central banks acknowledge uncertainty; (iv) crises require a different style of communicating; (v) public demand for information has increased; (vi) central banks must deploy new ways of reaching audiences; and (vii) central banks need to listen to a wide range of stakeholders. Central bank performance is judged by results and economic outcomes, but success is more likely if central banks clearly communicate to help citizens navigate the broader economic forces at work and understand how policies affect them. These efforts improve policy decisions, reinforce legitimacy and cement public trust. |
| Keywords: | central banks; monetary policy frameworks; communications; uncertainty; transparency; credibility; trust |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2024-02 |
| By: | Elliot Beck; Michael Wolf |
| Abstract: | Accurately forecasting inflation is critical for economic policy, financial markets, and broader societal stability. In recent years, machine learning methods have shown great potential for improving the accuracy of inflation forecasts; specifically, the random forest stands out as a particularly effective approach that consistently outperforms traditional benchmark models in empirical studies. Building on this foundation, this paper adapts the hedged random forest (HRF) framework of Beck et al. (2024) for the task of forecasting inflation. Unlike the standard random forest, the HRF employs non-equal (and even negative) weights of the individual trees, which are designed to improve forecasting accuracy. We develop estimators of the HRF's two inputs, the mean and the covariance matrix of the errors corresponding to the individual trees, that are customized for the task at hand. An extensive empirical analysis demonstrates that the proposed approach consistently outperforms the standard random forest. |
| Keywords: | Exponentially weighted moving average, Linear shrinkage, Machine learning |
| JEL: | C21 C53 C31 E47 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2025-07 |
| By: | Frost, Jon; Rochet, Jean-Charles; Shin, Huyn Song; Verdier, Marianne |
| Abstract: | We compare three competing digital payment instruments: bank deposits, private stablecoins and central bank digital currencies (CBDCs). A simple theoretical model integrates the theory of two-sided markets and payment economics to assess the benefits of interoperability through a retail fast payment system organised by the central bank. We show an equivalence result between such a fast payment system and a retail CBDC. We find that both can improve financial integration and increase trade volume, but also tend to reduce the market shares of incumbent intermediaries. |
| Keywords: | payments; CBDC; big tech; banks; stablecoins |
| JEL: | E42 E58 G21 L51 O31 |
| Date: | 2025–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130555 |
| By: | Dibiasi, Andreas (ETH Zürich); Mikosch, Heiner (ETH Zürich - KOF Swiss Economic Institute); Sarferaz, Samad (ETH Zurich); Steinbach, Armin (HEC Paris; Max Planck Institute for Research on Collective Goods) |
| Abstract: | In a novel survey, we study how German senior government officials systematically adjust fiscal policy in response to economic shocks, focusing on their fiscal responses to a contractionary monetary policy shock. Using randomized vignette treatments, we examine how officials update GDP and inflation expectations under fiscal and monetary policy shock scenarios and assess their preferred fiscal adjustments. Our findings show that officials predominantly respond by increasing debt and reducing spending, with tax increases playing a minor role, often combining multiple fiscal instruments. Counterfactual analysis reveals that officials’ reasoning aligns with key insights from the Heterogeneous Agent New Keynesian literature. |
| Keywords: | Fiscal policy; monetary policy; fiscal-monetary interaction; expectation formation; survey experiment |
| JEL: | E62 |
| Date: | 2025–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1546 |
| By: | Stefano Fasani; Valeria Patella; Giuseppe Pagano Giorgianni; Lorenza Rossi |
| Abstract: | This paper investigates the macroeconomic effects of a belief distortion shock—an unexpected increase in the wedge between household and professional forecaster inflation expectations. Using survey and macro data alongside machine-learning techniques, we identify this shock and examine its effects within and outside the ZLB, while conditioning on the degree of inflation disagreement. The shock increases unemployment during normal times, whereas it reduces it in the ZLB, when the monetary stance is accommodative. Inflation disagreement instead dampens the expansionary effects of the shock. A New Keynesian model with belief distortion shocks replicates these dynamics and reproduces the inflation disagreement empirical patterns. |
| Keywords: | Inflation, Belief Distortion Shock, Inflation Disagreement, Households Expectation, Machine Learning, Local Projections, New Keynesian model, Monetary Policy, ZLB |
| JEL: | E31 C22 D84 C32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:lan:wpaper:423478673 |
| By: | Huberto M. Ennis; Elizabeth C. Klee |
| Abstract: | We study transaction-level data of bank borrowings at the Federal Reserve's discount window from 2010 to 2019. We merge these data with quarterly information on bank balance sheets and income statements. To aid in the interpretation of our empirical analysis, we also develop a detailed model of the decision of banks to borrow from various sources, including the discount window. The objective is to contribute to a better understanding of the reasons why banks use the discount window during ``normal'' times---periods of relative calm in financial markets. Consistent with our model, we find that borrowing from the discount window is tightly linked to the composition of banks' balance sheets. Most importantly, banks holding less reserves tend to borrow more often (and more) from the Fed's discount window. Similarly, banks with more expensive and fragile liabilities, and less marketable collateral, are also more likely to borrow from the Fed. |
| Keywords: | Banking; Federal Reserve; Central bank; Liquidity |
| JEL: | E52 E58 G28 |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:100037 |
| By: | Diego Bonelli (BANCO DE ESPAÑA); Berardino Palazzo (FEDERAL RESERVE BOARD OF GOVERNORS); Ram Yamarthy (FEDERAL RESERVE BOARD OF GOVERNORS) |
| Abstract: | Using inflation swap prices, we study how changes in expected inflation affect firm-level credit spreads and equity returns, and uncover evidence of a time-varying inflation sensitivity. In times of “good inflation, ” when inflation news is perceived by investors to be more positively correlated with real economic growth, movements in expected inflation substantially reduce corporate credit spreads and raise equity valuations. Meanwhile in times of “bad inflation, ” these effects are attenuated and the opposite may even occur. These dynamics naturally arise in an equilibrium asset pricing model with a time-varying inflation-growth covariance and persistent macroeconomic expectations. |
| Keywords: | inflation sensitivity, time variation, asset prices, stock-bond correlation |
| JEL: | E31 E44 G12 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2525 |
| By: | Alejandro Ferrer (BANCO DE ESPAÑA); Ana Molina (BANCO DE ESPAÑA) |
| Abstract: | In a liquidity stress scenario, banks may need to urgently monetise assets to meet deposit outflows. This can be done by either selling the assets or using them as collateral in financing operations. In a context of crisis, executing these financing transactions with private counterparties may be constrained, making the transactions with the central bank particularly relevant. The sale of assets classified at amortised cost will result in the materialisation of any accumulated unrealised losses, adversely affecting the banks’ profitability. Alternatively, central bank financing prevents the materialisation of unrealised losses, which, however, limit the amount of financing that can be obtained through this mechanism, as it is based on the market value of the collateral provided. In this case, the increase in interest expenses associated with the funds obtained from the central bank will also impact the bank’s profitability. All these negative effects on profitability ultimately affect solvency and can exacerbate the initial liquidity crisis. Thus, there is a link between liquidity stress and solvency deterioration in which unrealised losses play a significant role. Drawing on Spanish banking system data, we examine this connection in various simulation exercises, looking at its nature and strength under each mechanism (asset sale and pledge). The data show a growing weight of government debt classified at amortised cost on the balance sheets of Spanish banks in recent years, as well as an increase in the associated unrealised losses during the period of rising interest rates, especially in 2022, and in 2023. |
| Keywords: | government debt, debt held at amortised cost, unrealised losses, LCR, liquidity stress, central bank liquidity facilities |
| JEL: | E43 G17 G21 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2509e |
| By: | Jonathan J Adams (Department of Economics, University of Florida); Philip Barrett (International Monetary Fund) |
| Abstract: | Empirical monetary policy shocks (EMPS) contain information about monetary policy both today and in the future. We define the term structure of monetary policy news as the marginal impact of an EMPS on the policy residual at each horizon. Policy news at different horizons has different effects, so knowing the term structure is necessary in order to use an EMPS to evaluate theory. We develop an IV method to estimate this term structure. We find that most EMPS in the literature convey more information about policy in future than in the present, but there is substantial heterogeneity. We use the estimated term structures to construct synthetic forward guidance and surprise shocks, and estimate their macroeconomic effects. Surprise interest rate hikes exhibit an "output puzzle", but forward guidance about future rate increases is deeply contractionary. |
| JEL: | E32 E43 E52 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ufl:wpaper:001017 |
| By: | Jaanika Meriküll; Matthias Rottner |
| Abstract: | This paper studies the distributional effects of monetary policy and its dependence on inflation. We document a novel dependency in the earnings heterogeneity channel of monetary policy using high-frequency, administrative tax data from eurozone member Estonia. Monetary policy shocks substantially influence earnings inequality during high-inflation periods, with weaker effects during low-inflation periods. Extending our dataset with granular MPC estimates, we show that earnings heterogeneity amplifies the aggregate MPC and consumption response. In high-inflation periods, consumption and inequality respond more, even though the aggregate MPC may be lower. We rationalise our findings with a nonlinear tractable HANK model featuring inflation dependencies. |
| Keywords: | monetary policy, labour income inequality, inflation, state dependency, earnings heterogeneity channel, aggregate MPC |
| JEL: | E52 D31 J31 J63 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1271 |
| By: | Shovon Sengupta (SUAD_SAFIR - SUAD - Sorbonne University Abu Dhabi, BITS Pilani - Birla Institute of Technology and Science, Fidelity Investments); Tanujit Chakraborty (SUAD_SAFIR - SUAD - Sorbonne University Abu Dhabi); Sunny Kumar Singh (BITS Pilani - Birla Institute of Technology and Science) |
| Abstract: | Forecasting consumer price index (CPI) inflation is of paramount importance for both academics and policymakers at central banks. This study introduces the filtered ensemble wavelet neural network (FEWNet) to forecast CPI inflation, tested in BRIC countries. FEWNet decomposes inflation data into high- and low-frequency components using wavelet transforms and incorporates additional economic factors, such as economic policy uncertainty and geopolitical risk, to enhance forecast accuracy. These wavelet-transformed series and filtered exogenous variables are input into downstream autoregressive neural networks, producing the final ensemble forecast. Theoretically, we demonstrate that FEWNet reduces empirical risk compared to fully connected autoregressive neural networks. Empirically, FEWNet outperforms other forecasting methods and effectively estimates prediction uncertainty due to its ability to capture non-linearities and long-range dependencies through its adaptable architecture. Consequently, FEWNet emerges as a valuable tool for central banks to manage inflation and enhance monetary policy decisions. |
| Keywords: | Inflation forecasting Wavelets Neural networks Empirical risk minimization Conformal prediction intervals |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05056934 |
| By: | Vyacheslav Fos; Nancy R. Xu |
| Abstract: | Using 472 FOMC meetings (1969–2019) and the exogenous rotation of voting rights among Reserve Bank presidents, we identify meetings where local economic conditions in voting districts significantly affect the Federal funds target rate (FFR), while those in non-voting districts show no effect. This voting-group effect persists after controlling for national conditions and Greenbook forecasts, implying that actual FFR decisions plausibly deviated from what average information and expectations would have suggested. Distortions are sizable, persistent, and priced into futures and Treasury markets prior to FOMC meetings. We demonstrate these findings using both components of the Fed’s dual mandate: inflation and unemployment rates. |
| JEL: | D7 E5 E58 G10 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33762 |
| By: | Biais, Bruno; Rochet, Jean-Charles; Villeneuve, Stéphane |
| Abstract: | In our dynamic general equilibrium model, agents can invest in money and in a production technology exposed to shocks. If the government is non-benevolent and has a monopoly over money issuance it issues too much money, to finance excessive public expenditures. We study the effects of a cryptocurrency in limited supply but with crash risk. If the crash risk is not too large, competition from the cryptocurrency constrains the government’s monetary policy. If the government is non-benevolent, this constraint improves citizens welfare, but if the government is rather benevolent competition from the cryptocurrency can lower citizens’ welfare. |
| Date: | 2025–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130554 |
| By: | Lawrence J. Christiano; Martin S. Eichenbaum; Benjamin K. Johannsen |
| Abstract: | This paper compares inflation in true price indices to inflation in fixed-weight price indices. We construct model-based inflation measures in time-dependent pricing models that are analogous to measures of inflation in the data, e.g., the Consumer Price Index. In the standard new Keynesian model, when inflation rises rapidly, the differences between inflation in those indices and true price indices are increasing in the degree of price stickiness and the elasticity of substitution across goods. For commonly used parameter values, those differences are large and persistent for increases in inflation of the size seen after 2020 in the U.S. |
| Keywords: | Inflation; New Keynesian Model |
| Date: | 2025–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:100030 |
| By: | Sally Auld |
| Keywords: | central banks; monetary policy transmission; communications; forward guidance; transparency; trust |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2024-03 |
| By: | Alex Chernoff (Bank of Canada); Allen Head (Queen's University); Beverly Lapham |
| Abstract: | We develop and estimate a search model in which identical consumers trade with price-setting firms that differ in productivity. In the model, equilibrium distributions of both prices and markups are non-degenerate and continuous with a firm's price decreasing in its productivity. Variation in the markup across firms is more complicated and depends on both the search process and the distribution of productivity. The model parameters governing each of these are estimated using firm-level data on retail industries in Canada. We use the estimated model to characterize the qualitative and quantitative differences in prices and markups across firms. These differences stem from firm-level variation in demand elasticities driven by productivity heterogeneity and imperfect information about prices. Additionally, we derive analytical expressionsto determine how individual firm prices and markups respond to cost and demand changes. This allows us to analyze empirically heterogeneity in firm-level price and markup pass-through. Our findings reveal substantial heterogeneity in pass-through across firms, highlighting the distributional impact of shocks across consumers purchasing in different regions of the price distribution. Finally, our analysis underscores the importance of accounting for individual firm price and markup adjustments to fully understand pass-through to average prices. |
| Keywords: | Markups, Productivity, Firm Heterogeneity, Search, Pass-through |
| JEL: | J11 D43 E31 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:qed:wpaper:1523 |
| By: | Ranim Assi; Zacharias Maniadis; Sotiris Georganas |
| Abstract: | Consumers’ perceptions of current inflation play a key role in understanding household consumption and investment decisions as well as the impact of monetary policies. Evidence from countries with low or moderate inflation shows that people’s perception of inflation often diverges significantly and systematically from official inflation rates. We examine the relationship between actual and perceived inflation in a hyperinflation environment. Our experimental results show that, opposite to low inflation, hyperinflation is greatly underestimated in people’s perceptions. Moreover the accuracy of inflation perceptions, as inflation rises, exhibits an inverse-U shape, which confirms our novel, preregistered “perception accuracy inversion hypothesis”. |
| Keywords: | inflation, hyperinflation, expectations |
| JEL: | E7 C9 |
| Date: | 2025–05–23 |
| URL: | https://d.repec.org/n?u=RePEc:ucy:cypeua:01-2025 |
| By: | Jonathan Witmer |
| Abstract: | This paper analyzes the optimal quantity of central bank reserves in an economy where reserves and other financial assets provide liquidity benefits. Using a static model, I derive a constrained Friedman rule that characterizes the socially optimal level of reserves, demonstrating that this quantity is neither necessarily large nor small but depends on the marginal benefits of reserves relative to alternative safe assets. The model highlights how the supply of government and private-sector liquid assets influences demand for reserves and the size of a central bank balance sheet. I calibrate and estimate the model to determine the optimal amount of central bank holdings in the United States. I extend the analysis to account for shadow banking, where non-bank intermediaries create short-term liquid assets but generate monitoring costs and externalities. The presence of shadow banking alters the optimal balance of reserves and other assets, potentially constraining optimal balance sheet policy. The results offer new insights into the debate over the size of central bank balance sheets and the interaction between public and private liquidity provision. |
| Keywords: | Monetary policy implementation; Financial institutions; Financial markets; Financial system regulation and policies |
| JEL: | E41 E42 E58 G21 G28 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:25-15 |
| By: | Lang, Jan Hannes; Rusnák, Marek; Herbst, Tobias |
| Abstract: | We examine the differential impact of monetary policy and macroprudential policy on bank lending rates in the euro area, using granular corporate loan-level data for the period 2019-2023. We find three results: First, consistent with the predictions of a stylized theoretical model of bank lending rates, monetary policy exerts an order of magnitude larger impact on lending rates than macroprudential policy. Second, the effectiveness of monetary policy transmission weakens when interest rates are close to or below zero. Third, the impact of macroprudential policy on lending rates increases when banks have limited capital headroom above capital buffer requirements, indicating cautious lending behavior when banks get close to regulatory constraints. Our findings have important policy implications for the joint conduct of monetary and macroprudential policy. JEL Classification: G21, G28, E43, E52 |
| Keywords: | bank capitalization, credit supply, interest rate pass-through, loan-level data |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253057 |
| By: | Morshed, Monzur; Wallace, Jack |
| Abstract: | This paper compares the experiences of Argentina, Ecuador, and Lebanon with dollarization as a response to monetary instability. Using historical analysis and regression results, it evaluates how full, partial, or de facto dollarization impacted inflation control, economic stability, and institutional resilience. Ecuador’s full dollarization in 2000 stabilized prices and reduced volatility, while Argentina’s hard peg without full commitment led to recurring crises. Lebanon’s unofficial dollarization collapsed amid financial mismanagement and loss of confidence. The study concludes that while dollarization can curb inflation, its success depends on credible governance and structural reforms; partial or unmanaged approaches can amplify economic fragility. |
| Date: | 2025–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:ayh3e_v1 |
| By: | Ryan Niladri Banerjee; Jon Frost; Michael Chui; Jose Maria Vidal Pastor |
| Abstract: | Today's two-tier monetary system performs a crucial role: providing money in an elastic way through overdrafts and lines of credit in the face of uncertainty and unforeseen shocks.During the Covid-19 pandemic, such elasticity allowed central banks and commercial banks to provide a discretionary increase in the money supply to manage global shocks.In recent months, banks have expanded their loan commitments to sectors impacted by US tariffs in anticipation of client demand for working capital. |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:101 |
| By: | Acosta Henao, Miguel (Central Bank of Chile); Amado, María Alejandra (Bank of Spain); Pérez Reyna, David (Universidad de los Andes); Martí, Montserrat (Central Bank of Chile) |
| Abstract: | This paper investigates the granular transmission of U.S. monetary policy shocks to deviations from the uncovered interest rate parity (UIPDs) in emerging economies. Using a comprehensive dataset from Chile that accounts for firm-bank relationships and the time-variant characteristics of both firms and banks, we uncover several key findings: (1) Shocks to the federal funds rate (FFR) increase banks’ costs of foreign borrowing; (2) these higher credit costs disproportionately affect small firms, raising their UIPDs more than for large firms; (3) this size-differentiated impact stems from the relatively higher interest rates on domestic currency loans faced by small firms; (4) in contrast, interest rates on dollar-denominated loans respond homogeneously across all firms; (5) we find no differential effect on loan quantities, suggesting an active role of credit supply and demand. We rationalize these findings with a small open economy model of corporate default that incorporates heterogeneous firms borrowing from domestic banks in both foreign and domestic currencies. In our model, a higher FFR reduces the marginal cost of defaulting on domestic-currency debt for small firms more than for large firms |
| Keywords: | Uncovered interest rate parity; U.S. monetary policy; bank lending; firm financing; firm heterogeneity |
| JEL: | E43 E44 F30 F41 |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021387 |
| By: | Sona Benecka |
| Abstract: | This paper proposes a novel framework to the forecast of disaggregated producer prices using both machine learning techniques and traditional econometric models. Due to the complexity and diversity of pricing dynamics within the euro area, no single model consistently outperforms others across all sectors. This highlights the necessity for a tailored approach that leverages the strengths of various forecasting methods to effectively capture the unique characteristics of each sector. Our forecasting exercise has highlighted diverse pricing strategies linked to commodity prices, autoregressive behavior, or a mixture of both, with pipeline pressures being especially pertinent to final goods. Employing a mixture of a wide range of models has proven to be a successful strategy in managing the varied pricing behavior at the sectoral level. Notably, tree-based methods, like Random Forests or XGBoost, have shown significant efficacy in forecasting short-term PPI inflation across a number of sectors, especially when accounting for pipeline pressures. Moreover, newly proposed Hybrid ARMAX models proved to be a suitable alternative for sectors tightly linked to commodity prices. |
| Keywords: | Disaggregated producer prices, forecasting, inflation, machine learning |
| JEL: | C22 C52 C53 E17 E31 E37 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cnb:wpaper:2025/2 |
| By: | Michael Stutchbury |
| Keywords: | monetary policy frameworks; central bank independence; communications; transparency; forward guidance |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2024-06 |
| By: | Connor M. Brennan; Margaret M. Jacobson; Christian Matthes; Todd B. Walker |
| Abstract: | Different series of high-frequency monetary shocks can have a correlation coefficient as low as 0.3 and the same sign in only one half of observations. Both data and methods drive these differences, which are starkest when the federal funds rate is at its effective lower bound. After documenting differences in monetary shock series, we explore their consequence for inference in several specifications. We find that empirical estimates of monetary policy transmission have few qualitative differences. We caution that inference may not be entirely robust to all shock constructions because qualitative differences can emerge when we interchange data and methods. |
| Keywords: | High-frequency monetary policy shocks; Monetary policy transmission; Empirical monetary economics |
| JEL: | E31 E32 E52 E58 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:100031 |
| By: | Michael Smolyansky; Gustavo A. Suarez |
| Abstract: | When the Federal Reserve tightens monetary policy, do the prices of riskier assets fall relative to safer assets? Or, do investors interpret policy tightening as a signal that economic fundamentals are stronger than they previously believed, thus leading riskier assets to outperform? We present evidence that the latter of these two forces empirically dominates within the U.S. corporate bond market. Following an unanticipated monetary policy tightening, riskier corporate bonds outperform safer corporate bonds, demonstrating the importance of an informational, or non-monetary, component within monetary policy announcements. |
| Keywords: | Monetary policy; Corporate bonds; Non-monetary news; Federal Reserve information effect; Reaching for yield |
| JEL: | E40 E52 G12 G14 |
| Date: | 2025–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:100026 |
| By: | Nikolaos Giannakis (Democritus University of Thrace); Periklis Gogas (Democritus University of Thrace); Theophilos Papadimitriou (Democritus University of Thrace); Jamel Saadaoui (University Paris 8); Emmanouil Sofianos (University of Strasbourg) |
| Abstract: | This study aims to predict currency, banking, and debt crises using a dataset of 184 crisis events and 2896 non-crisis cases from 79 countries (1970-2017). We tested eight machine learning methods: Logistic Regression, KNN, SVM, Random Forest, Balanced Random Forest, Balanced Bagging Classifier, Easy Ensemble Classifier, and Gradient Boosted Trees. The Balanced Random Forest had the best performance with a 72.91% balanced accuracy, predicting 149 out of 184 crises accurately. To address machine learning’s black-box issue, we used Variable Importance Measure (VIM) and Partial Dependence Plots (PDP). International reserve holdings, inflation rate, and current account balance were key predictors. Depleting international reserves at varying inflation levels signals impending crises, supporting the buffer effects of international reserves. |
| Keywords: | Currency crises, banking crises, debt crises, international reserve holdings, inflation, machine learning, forecasting |
| JEL: | F G |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2025.6 |
| By: | Ivan Trubelik; Tomas Karhanek; Simona Malovana; Ales Michl |
| Abstract: | This paper analyzes the adoption and evolution of the instant payment system (IPS) in Czechia, focusing on its integration into the Czech Express Real Time Interbank Gross Settlement (CERTIS) system. Since 2018, CERTIS has enabled 24/7 CZK fund transfers, boosting transaction efficiency. Voluntary bank participation led to rapid uptake, and by 2024, IPS-participating banks handled over 90% of CERTIS client transactions, with 50% of interbank retail payments processed instantly. Czechia's IPS stands out for its seamless bank integration, high reliability, and flexible limits. It also outperforms priority payments for lower-value transactions. The paper explores future developments, including cross-border payments and links to central bank digital currencies. |
| Keywords: | CERTIS, instant payment system, real-time settlement, transaction efficiency |
| JEL: | E42 E58 G21 O33 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cnb:wpaper:2025/4 |
| By: | Michael McMahon |
| Abstract: | Interest and attention on central bank communication has grown substantially in the last three decades. Alongside this change, there has been a lot of work to understand the effects of such communication and to guide central banks on how to communicate. This paper is a personal assessment of some of the main lessons that I have taken from this work. It necessarily draws heavily on the lessons from my own work (as these are issues that I have thought most deeply about), but I also try to draw out the views of others in those areas. In addition, I discuss other non-comprehensive, important areas that I haven't worked on (yet) but I think the research has shown important insights from which useful lessons for central banks can be learned. |
| Keywords: | central banks; monetary policy frameworks; communications; inflation expectations; education; uncertainty; trust |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2024-01 |
| By: | Harold Glenn A. Valera (BSP Research Academy, Bangko Sentral ng Pilipinas); Mark J. Holmes (University of Waikato); Vic K. Delloro (Bangko Sentral ng Pilipinas) |
| Abstract: | In this paper, we address the challenge of using aggregate data to study the effects of fuel and rice prices on overall inflation in emerging markets. Our quantile regression analysis using the Philippines' province-level monthly data from 1996 to 2024 finds a strong impact during periods of higher inflation. Indeed, this impact is verified in Indonesia, Thailand, and India. We also find that inflation targeting and rice tariffication reduce such an impact and that high-poverty and rice-deficit areas exhibit a higher fall in rice inflation effect post-tariffication. In addition, the impact of remittances on Philippine inflation is nonlinear, while it is asymmetric for the other three countries. |
| Keywords: | CPI inflation; energy and rice prices; remittances; quantile regression; panel data; emerging markets |
| JEL: | C33 E43 |
| Date: | 2025–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:wai:econwp:25/05 |
| By: | Olivier Coibion; Yuriy Gorodnichenko |
| Abstract: | We discuss how Randomized Control Trials (RCTs) can be used to study the causal effects of inflation expectations on the decisions of households. RCTs create exogenous variation in the inflation expectations of survey participants. When linked to either external information on their actions or subsequent survey waves that measure their ex-post decisions, this can provide clear causal identification of expectations on decisions. We review recent evidence using this strategy and discuss potential challenges associated with this approach. |
| Keywords: | inflation expectations; surveys; consumption |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbaacp:acp2024-05 |
| By: | Ryuichiro Izumi; Weng Fei Leong; Balázs Zélity (Department of Economics, Wesleyan University) |
| Abstract: | Capital controls are often discussed as a potential tool to stabilize macroeconomic fluctuations. However, empirical studies typically find that their use does not systematically respond to the business cycle. This paper revisits the cyclicality of capital inflow controls by considering two possibilities: governments may respond only when output deviations become sufficiently large, and their responses may vary with the underlying macroeconomic policy stance. Using quarterly panel data for 45 advanced and emerging economies from 2000 to 2015, we find that inflow controls are employed countercyclically, but only in response to large output fluctuations. Moreover, the propensity to tighten inflow controls during booms is significantly amplified in countries that pursue more countercyclical fiscal and monetary policies. These findings help reconcile the gap between theoretical expectations and existing empirical findings, suggesting the importance of accounting for threshold effects and macro-policy stance in evaluating capital flow management and incorporating adjustment frictions into theoretical models. |
| Keywords: | capital controls, macroprudential policy, international capital flows |
| JEL: | F32 F33 F41 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wes:weswpa:2025-006 |
| By: | Morshed, Monzur |
| Abstract: | This paper explores the dynamics of mobile money adoption and satisfaction in Kenya, using household survey data from the Research ICT Africa (RIA) series. The study examines demographic and socio-economic determinants of M-Pesa ownership and user satisfaction through logistic and Poisson regression models. Results suggest that traditional barriers such as gender, age, and education have limited influence on M-Pesa adoption and user satisfaction, indicating a narrowing digital divide. Although the intensity of mobile money usage is proxied by self-reported satisfaction scores rather than transaction frequency, the analysis highlights the platform’s widespread acceptance and usability. These findings carry important implications for the design and rollout of central bank digital currencies (CBDCs), particularly in low- and middle-income countries. Kenya’s experience with M-Pesa provides a valuable reference point for future digital currency innovations that are inclusive, trusted, and infrastructure-ready. |
| Date: | 2025–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:msbz4_v1 |
| By: | Phillip An; Karlye Dilts Stedman; Amaze Lusompa |
| Abstract: | This paper investigates the utility of daily data in measuring high-frequency monetary policy surprises, comparing various announcement-day asset price changes with their intradaily (30-minute) counterparts. We find that both frequencies are similarly distributed and often highly correlated, particularly for longer-horizon measures. Testing daily surprises for systematic contamination from non-monetary policy news, we find no evidence to suggest that contemporaneous news releases bias their measurement. Empirical applications, including high-frequency passthrough to Treasury yields and proxy SVAR models, suggest that daily surprises produce results comparable to those obtained with intradaily data. Our findings suggest that while intradaily data remains invaluable for certain applications, daily data offers a practical and robust alternative for assessing monetary policy surprises, particularly when the event, or the reaction to it, extends beyond a narrow window, or when intradaily data is unavailable. |
| JEL: | E43 E44 E52 E58 G14 |
| Date: | 2025–05–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:100052 |
| By: | Tymoigne, Eric |
| Abstract: | A monetary approach that combines Chartalism, Nominalism, and Command origins of monetary systems is often deemed to have emerged only recently, while the Aristotelian approach (Commodity, Metallism, and Market origins of monetary systems) is the only one that existed until the end of the eighteenth/early-nineteenth century. In the major studies of the history of monetary thought, the Chartalism-Nominalism-Command approach is mostly left unmentioned, or at best reduced to an incoherent banality. The paper shows that this approach has a long and rich intellectual history among uropean monetary thinkers. In Europe, Plato was its first exponent, albeit in a very rudimentary way, and so one may call it the “Platonic approach.” It is developed by Roman legists (such as Javolenus, Paulus, and Ulpian) and Medieval legists (such as Du Moulin, Hotman, and Butigella) who note that coins are similar to securities and that debts are serviced when nominal sums are paid rather than specific coins tendered. During the Renaissance and early modern period, a series of scholars and financial practitioners (such as Law, Dutot, Thomas Smith, and James Taylor) emphasize the financial logic behind monetary mechanics and the similarity of coins and notes. In the twentieth century, authors such as Innes, Knapp, Keynes, and Commons build onto the groundwork provided by these past scholars. In China, the Chartalism-Nominalism-Command approach develops independently and dominates from the beginning under Confucian and Legist thoughts. They emphasize the statecraft origins of monetary systems, the role of tax redemption, and the irrelevance of the material used to make monetary instruments. Clay, lead, paper, iron, copper, and tin are normal and convenient means to make monetary instruments, they are not special/emergency materials. The essence of a monetary instrument is not defined by its materiality but rather by its chartality, that is, by the promise it embeds. The Platonic approach rejects the categories and conceptualizations used by the Aristotelian approach and develops new ones, which leads to a different set of inquiries and understanding of monetary phenomena, problems, and history. |
| Keywords: | History of monetary thoughts, monetary theory, Chartalism, Nominalism, asset pricing, redemption |
| JEL: | B10 B11 B20 B26 E42 E62 G12 H30 K12 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124797 |
| By: | Bruno Albuquerque; Mr. Eugenio M Cerutti; Nanyu Chen; Melih Firat |
| Abstract: | The growing role of nonbanks in corporate credit intermediation raises important but underexplored questions about how both monetary policy (MP) and macroprudential policies (MaPP) affect lending and the real economy. Using syndicated loan data, we examine the joint impact of MP and MaPP shocks on credit supply to nonfinancial firms. Our findings show that nonbanks act as shock absorbers, cushioning firms—particularly those with existing nonbank relationships—from policy tightening. We also find that these shocks drive credit away from weaker banks toward nonbanks, raising concerns about credit quality. Finally, we provide evidence that MaPPs on banks can lead them, especially weaker banks, to shift lending to nonbanks and away from nonfinancial corporations. This allows nonbanks to expand their role in corporate credit markets. Overall, our findings highlight that tighter MP and MaPP may unintentionally push credit intermediation into a sector largely outside the regulatory perimeter, posing new financial stability risks. |
| Keywords: | Housing booms; Housing busts; Credit booms; Macroprudential policies |
| Date: | 2025–05–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/096 |
| By: | Christopher Loewald; Rudi Steinbach; Jeffrey Rakgalakane |
| Abstract: | In this paper, we set out the macroeconomic, growth, fiscal and distributional implications of reducing the inflation target from 4.5% to 3%. |
| Date: | 2025–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11079 |
| By: | Valeriu Nalban; Luis-Felipe Zanna |
| Abstract: | Weather-related shocks are of a supply-side nature and therefore present significant challenges for monetary policy. Using a Quarterly Projection Model (QPM) framework, this paper provides an overview of weather-relevant analytical exercises that help to understand the propagation channels of these shocks, the policy trade-offs they imply, and the ensuing implications for the conduct of monetary policy. The exercises highlight the important role of economic characteristics and frictions, such as the weight of food expenditures in the consumption basket, the GDP share of the agriculture sector, the degree of imports substituting for the damaged domestic agricultural supply, the extent of inflation expectations’ anchoring and central bank credibility, and the specific characteristics of the monetary policy framework, including the degree of exchange rate flexibility and the definition of the price stability objective. Overall, the extent of these characteristics and frictions in developing countries render them more vulnerable and constitute bigger challenges in monetary policy conduct relative to developed economies. |
| Keywords: | Monetary Policy; Weather Shocks; Quarterly Projection Model; Transmission Mechanism; Developing Countries |
| Date: | 2025–05–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/095 |
| By: | Rashad Ahmed; Iñaki Aldasoro |
| Abstract: | This paper examines the impact of dollar-backed stablecoin flows on short-term US Treasury yields using daily data from 2021 to 2025. Estimates from instrumented local projection regressions suggest that a 2-standard deviation inflow into stablecoins lowers 3-month Treasury yields by 2-2.5 basis points within 10 days, with limited to no spillover effects on longer tenors. We also find evidence of asymmetric effects: stablecoin outflows raise yields by two to three times as much as inflows lower them. Decomposing the yield impact by issuer shows that USDT (Tether) has the largest contribution followed by USDC (Circle), consistent with their relative size. Our results highlight stablecoins' growing footprint in safe asset markets, with implications for monetary policy transmission, stablecoin reserve transparency, and financial stability. |
| Keywords: | stablecoins, treasury securities, money market funds, safe assets |
| JEL: | E42 E43 G12 G23 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1270 |
| By: | Fabio Milani |
| Abstract: | This paper estimates a New Keynesian model with a nonlinearity in the monetary policy rule to capture the practice of inflation targeting with target zones or tolerance bands. Private-sector agents form subjective expectations, update their beliefs over time using a perceived model of the economy, and are subject to shifts in sentiment. The model is estimated using data on realized macroeconomic variables and survey data on expectations for four inflation-targeting economies: Australia, Canada, New Zealand, and Sweden. The results show that central banks do not treat target bands as zones of inaction. Their policy reactions when inflation falls within the band are comparable to or even exceed the reactions when inflation moves outside the band, and they always satisfy the Taylor principle. Private-sector expectations respond similarly to structural and sentiment shocks regardless of the inflation regime. In all cases, the data favor the simpler specification in which agents form expectations based on linear perceived laws of motion, without accounting for the nonlinearity induced by monetary policy. |
| Keywords: | inflation targeting, tolerance bands, target ranges, survey expectations, learning, nonlinear monetary policy rules |
| JEL: | E31 E32 E52 E58 E70 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11910 |
| By: | Rocío Elizondo; Julio A. Carrillo |
| Abstract: | This paper compares inflation expectations from surveys and markets across different horizons for Mexico, between 2000 and 2024. The analysis evalues descriptive statistics, bias, efficiency, discrepancy, convergence level, and response to inflation surprises. The results suggest that both expectations are generally biased, with exception of short-term market expectations. The two types of expectations are inefficient as they include past forecast errors and do not seem to incorporate all available information. The discrepancy between the two types of expectations is negatively related to the short-term interest rate across all horizons and positively related to inflation, its quadratic change, and exchange rate volatility for some horizons. Short- and medium-term expectations respond to inflation surprises, while long-term expectations do not. Finally, their estimated convergence level is more stable and with lower levels when information from both types of expectations is combined. |
| Keywords: | Survey-based inflation expectations;Market-based inflation expectations;Forecast accuracy;Bias and efficiency;Discrepancy. |
| JEL: | C12 C22 E31 E52 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdm:wpaper:2025-07 |