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on Monetary Economics |
| By: | Romain Meuwissen; Martin Rohár |
| Keywords: | Stablecoins, flow of funds, financial intermediation, financial stability, financial regulation, monetary architecture, dollarisation, international role of the euro, bank funding, digital money |
| JEL: | E42 E44 G28 O33 |
| Date: | 2026–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:stm:wpaper:79 |
| By: | International Monetary Fund |
| Abstract: | The paper briefs the Executive Board on the further considerations on CBDC. These cover the positioning of CBDC in the payments landscape, cyber resilience of the CBDC ecosystem, CBDC adoption, CBDC data use and privacy protection, implications for monetary policy operations, and cross-border payments with retail CBDC. |
| Keywords: | Capacity development; CBDC; Central bank digital currencies; Adoption; Collaboration; Cross-border payments; Cyber resilience; Data use and privacy protection; Monetary operations; Payment systems; Positioning CBDC; CBDC data; CBDC system; CBDC adoption; CBDC design; data use; position CBDC vis-à-vis; Digital financial services; Monetary base; Global |
| Date: | 2024–11–08 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfpps:2024/052 |
| By: | Alicia Aguilar (BANCO DE ESPAÑA) |
| Abstract: | This paper provides a novel and high-frequency index of sovereign fragmentation in the euro area. The proposed methodology offers a decomposition of sovereign yields into the common trend, market conditions, and fundamentals-based divergence, which are uncorrelated to fragmentation. Therefore, the fragmentation index constitutes a bottom-line indicator for euro area central banks, as it measures disorderly market dynamics in sovereign markets not warranted by fundamentals. In that sense, this paper provides relevant conclusions about the effectiveness of monetary policy interventions, pointing to the significant effect of market stabilisation announcements, such as the Transmission Protection Instrument (TPI), in reducing sovereign fragmentation. I contribute to the literature by estimating the uncorrelated drivers of euro area yields divergence using a restricted principal components analysis. The estimated factors are then used to assess the effect of fragmentation, market conditions and fundamentals on country yields through several economic regimes, pointing to differences across countries and over time. |
| Keywords: | principal components, monetary policy, quantitative easing, sovereign debt, financial crises, sovereign bond rates |
| JEL: | C38 E52 E58 H63 G01 G12 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2520 |
| By: | Santiago Camara; Lawrence J. Christiano; Husnu Dalgic |
| Abstract: | We investigate the global transmission of US monetary policy shocks. The existing literature finds that a US monetary contraction causes a contraction in economic activity not only in the US but also abroad. This sharply contradicts the traditional Mundell-Fleming view. Much of the existing literature refers to frictions in international financial markets as reasons for the failure of the traditional view. Instead, we argue that trade is key for understanding the transmission of US monetary policy shocks. |
| Keywords: | Monetary policy spillovers, Trade channel, Small open economy DSGE models, Exchange rates. |
| JEL: | E44 E52 F31 F32 F41 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_782 |
| By: | International Monetary Fund |
| Abstract: | The expansion of central bank balance sheets has become a critical topic in the wake of the Global Financial Crisis and the COVID-19 pandemic. Central banks have taken unprecedented measures to ensure price stability and financial stability, particularly when traditional policy tools were insufficient. However, this expansion has led to significant balance sheet risks, resulting in notable losses as central banks have adjusted their policies in response to rising inflation. This guidance note explores these risks and introduces a modeling framework to assess them. While essential for achieving stability, the expansion of central bank balance sheets introduces significant risks that require careful management. The proposed modeling framework is a valuable tool for assessing these risks and guiding capital policy. Exploring the relationship between balance sheet size and economic outcomes could yield beneficial insights for future central bank strategies. |
| Keywords: | Central bank; balance sheet; stress testing; balance sheet risk; central bank equity; forecasting balance sheet; central bank bank transfer; balance sheet action; central bank profit; Financial statements; Central bank policy rate; Central bank balance sheet; Yield curve; International reserves; Global |
| Date: | 2024–12–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfpps:2024/067 |
| By: | Bahaj, Saleem; Reis, Ricardo |
| Abstract: | By controlling the scarcity of an offshore parallel currency, policymakers can manage capital flows and steer the exchange rate. This is an alternative policy to setting the rate of a Tobin tax. However, its fiscal implications are distinct, and this paper lays them out. Having a parallel currency creates both seigniorage and liquidity revenues. The two revenues have different sizes and different Laffer curves, both of which vary with the regime for the exchange rate, with liquidity policies, and with the size of the offshore market. Quantitatively, the fiscal footprint of offshore money management is small and the Laffer curve is flat, boosting the chances that it can be used independently of fiscal pressures. |
| Keywords: | integrated policy framework;CNH;financial transaction taxes;fiscal-monetary interactions |
| JEL: | F31 F33 E51 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141134 |
| By: | Dennis Bonam; Dorinth van Dijk; Gavin Goy; Bing Zhu |
| Abstract: | We provide new evidence on the international spillover effects of US monetary policy through global commercial real estate (CRE) markets. Using a global VAR-X model that exploits both city- and country-level data, we account for spatial dependencies arising from cross-border investor ownership of CRE. A US quantitative easing shock leads to a persistent rise in CRE prices, both within and outside the US, and an expansion of credit, but mostly in the US. To interpret these findings, we develop an open economy New Keynesian model with CRE markets, which highlights the role of increased domestic demand for foreign CRE as a key transmission channel. Moreover, the model reveals that spillover effects can spill back to the US via trade linkages, amplifying the initial effects of US monetary policy. |
| Keywords: | monetary policy; commercial real estate; international spillovers; quantitative easing; global VAR-X model; New Keynesian model; |
| JEL: | C32 E32 E52 F42 R33 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:872 |
| By: | Thomas Drechsel; Daniel Lewis; Davide Melcangi; Laura Pilossoph |
| Abstract: | To study monetary policy transmission at the firm level, researchers typically consider heterogeneity along a small number of firm characteristics, such as size or leverage. We instead estimate the full distribution of firms’ investment responses to monetary policy, using a clustering regression framework. Our novel approach captures multidimensional and unobservable heterogeneity across firms and time. We find that investment by most firms in most time periods responds little to monetary policy. Only about 5% of firm-time observations are associated with a strong response. We then investigate the sources of heterogeneity ex post. We find that most of the variation in investment sensitivity arises within firms over time. Although several firm characteristics predict responsiveness to monetary policy, the majority of heterogeneity remains unexplained by firm observables. We demonstrate that our empirical estimates provide new targets for disciplining structural models of firm heterogeneity. |
| JEL: | D25 E22 E32 E52 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35867 |
| By: | Sevrin Waights; Liliana Cuccu; Maximilian Priem |
| Abstract: | We provide the first estimates of minimum wage effects on the aggregate price level using data on the near-full German consumer basket across four national reforms, 2015-2024. Drawing on a structural model of pricing under imperfect competition, we utilise minimum wage cost shocks rather than the commonly used firm-level ‘bite’ that we show to be biased under strategic complementarity. Labour cost pass-through is 83-94 percent, at the higher end of estimates for other cost shocks. The implied macro-price elasticity is 0.024. The largest increase in October 2022 to €12 raised the aggregate price level by 0.39 percent. |
| Keywords: | Minimum wages, Consumer prices, Inflation, Cost pass-through, Strategic complementarity |
| JEL: | E31 J08 J30 J38 L11 |
| Date: | 2026–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0112 |
| By: | Thomas Drechsel; Daniel J. Lewis; Davide Melcangi; Laura Pilossoph |
| Abstract: | It is well known that monetary policy affects firms’ investment decisions. But which firms are the most responsive to changes in interest rates? And does this responsiveness vary over time? The literature has given diverse answers to this question, focusing on characteristics such as firm size, age, and financial position, and mostly studying these traits in isolation. In this post based on a recent Staff Report, we explore how investment responsiveness to monetary policy changes across firms and over time. We find that investment by most firms in most time periods responds little to monetary policy. For some firms in some periods, however, investment is very responsive to changes in interest rates. While these instances of strong sensitivity correlate with several firm traits, there is substantial variation that cannot easily be linked to specific characteristics of firms. Our findings therefore underscore the importance of considering the entire distribution of investment responses rather than focusing on the average effect. |
| Keywords: | monetary policy; investment; firms |
| JEL: | E22 E32 |
| Date: | 2026–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:103898 |
| By: | Eric Vansteenberghe |
| Abstract: | Two coefficients enter nearly every quantitative argument about monetary policy: the Phillips-curve slope and the policy rule's response to inflation. For seventy years, each generation that estimated them identified the coefficient conditional on assumptions it maintained, and its successor relaxed one of them, naming the bias this exposed. This survey reconstructs the two programs as a single identification problem. It distinguishes five senses in which a coefficient has been called identified, reads each generation of the curve and of the rule in that key, and shows that the programs fail together because each borrows its identifying condition from the other. The same sequence ran on the latent inflation target and on the optimal rule. The survey closes on what the credible designs license when they leave a range rather than a point: bounds, signs and orderings, and decisions designed for a range. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.06007 |
| By: | FABRICE COLLARD; PATRICK FÈVE; PHILIPP WANGNER |
| Abstract: | Does a more persistent demand shock always generate a larger output response? Conventional wisdom says yes: forward-looking agents front-load spending in anticipation of higher lifetime resources, and the more lasting the shock, the stronger the expansion. This paper shows that this logic fails in New Keynesian models with an active monetary policy. The interplay between persistence and monetary policy stance governs a fundamental trade-off between two opposing forces: a permanent income channel that amplifies output, and a real interest rate channel that dampens it. Their balance generates three monetary policy regimes. In the empirically relevant intermediate regime, the output multiplier is hump-shaped in persistence. |
| Keywords: | DemandShocks, MonetaryPolicy, NewKeynesianModel, Persistence. |
| JEL: | E32 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_785 |
| By: | Bologna, Pierluigi; van Hengel, Marco; D’Andrea, Angelo; Busurelo, Lucija; Gawart, Karolina; Grecu, Robert; Lagaria, Katerina; Liebeg, David; Lima, Diana; Löhe, Sebastian; Palicz, Alexandr; Reginster, Alexandre; Coelho, Pedro Sousa; Tumino, Marcello; Uzum, Leonard; Vauhkonen, Jukka; Vignat, Paul; Naser, Safwan |
| Abstract: | After the global financial crisis, all EU countries have developed within their jurisdictions a dedicated macroprudential pillar of financial oversight, in line with EU regulations and recommendations. However, governance structures differ, reflecting country-specific rationales and path-dependent choices. This paper provides an overview of the various institutional and operational frameworks for macroprudential policy in EU countries. This overview aims to deliver insights on the key aspects of these frameworks and their impact on the use of macroprudential policy. The analysis is based on i) a literature review, ii) a stocktaking exercise based on a survey among EU Member States and iii) country deep dives. JEL Classification: G18, G28 |
| Keywords: | financial stability, governance, institutional framework, macroprudential policy |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2026400 |
| By: | Pierlauro Lopez (Federal Reserve Bank of Cleveland); Francisco Vázquez-Grande (Federal Reserve Board); David López-Salido (Banco de España) |
| Abstract: | A simple production economy with nominal price rigidities explains several key asset pricing facts, including the average slopes and cyclicality of equity and interest rate term structures. Nominal rigidities amplify the procyclicality of dividends after negative productivity shocks and generate countercyclical inflation, as sluggish price adjustment leads to a gradual dividend recovery. Consequently, short-duration equities (bonds) have more (less) procyclical payoffs than their long-duration counterparts. Slow-moving consumption habits produce large, countercyclical risk prices, yielding realistic asset valuations. Extending Campbell-Cochrane preferences with both market and home consumption habits allows them to operate in production economies while preserving realistic macroeconomic dynamics. |
| Keywords: | equity and bond yields, Campbell-Cochrane habits, nominal rigidities, macrofinance separation, new Keynesian model |
| JEL: | E43 E44 G12 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2635e |
| By: | Wilko Bolt; Nicole Jonker |
| Abstract: | This paper investigates whether the primary current account that consumers typically use for their everyday shopping and banking transactions remains an effective cross-selling channel for banks amid digitalisation, regulatory reform and increased competition. Using a unique 2024 consumer survey of 2, 326 Dutch consumers, we find no evidence of a broad structural decline in banks’ overall cross-selling opportunities in the Netherlands. The primary current account continues to “anchor†bank-customer relationships. However, this anchoring role varies by product category and consumer segment. Cross-selling has weakened for savings and investment products, while remaining relatively stable for mortgages. Furthermore, digitalisation is not only associated with more multi-banking but also supports financial product acquisition at the consumers’ main bank, suggesting that it does not uniformly erode incumbent banks’ cross-selling capacity. Consumer preferences are central: perceived benefits of single-banking strengthen cross-selling and reduce multi banking, whereas perceived transparency of financial conditions has a modest effect. |
| Keywords: | Consumer behaviour; Retail banking; Cross-selling; Multi-banking; Digitalisation; Transparency |
| JEL: | D14 G21 G28 O33 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:873 |
| By: | Husnu C. Dalgic; Brittany Almquist Lewis; Andrea Modena |
| Abstract: | We show that strengthening creditor rights can exacerbate financial instability, par ticularly under long debt maturities and low collateral volatility. We build a model of financial intermediaries that raise financing by pledging collateral in the sale and repurchase (repo) market. In the short term, increasing collateral pledgeability makes repo creditors safer and reduces debt rollover risk; however, it also expands long-term debt capacity and leverage, ultimately heightening run risk. This instability is a dis tinct feature of environments with long-term liabilities and low-volatility assets, where market discipline fails to constrain post-policy leverage. We test our model’s predic tions by exploiting the 2005 BAPCPA bankruptcy reform, which expanded creditor protections via repo safe harbors. Using hand-collected data on dealer repo collateral, we confirm that while the law enhanced collateral pledgeability, it fueled short-term leverage and precipitated sharper de-leveraging during the downturn |
| Keywords: | repo, collateral, safe harbor, bankruptcy, leverage, dealer banks, bank runs. |
| JEL: | G01 G21 G23 G28 G33 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_783 |
| By: | Rafael Guerra; Gabriel Zelpo |
| Abstract: | This paper analyses the state-dependent effects of geopolitical risks on gold prices (i.e. the safe-haven role of gold), conditional on financial conditions. Geopolitical risks are often associated with tighter financial conditions. However, recent data reveal a decoupling be tween such shocks and more restrictive financial conditions, raising the question of how gold returns are affected by geopolitical shocks, conditional on the macro-financial environment. Using monthly data from 1990 to 2026, we find that increases in geopolitical risks– both geopolitical threats and realised events– increase gold returns, with stronger effects ob served during periods of loose financial conditions. We decompose this relationship into two mechanisms: (i) the credit and liquidity risk channel and (ii) the opportunity cost channel. Our findings indicate that the relationship operates most clearly through the first channel, suggesting that the key factor is investors’ capacity to rebalance, while the evidence for the second channel is less conclusive. Finally, we also find that the largest impact occurs when periods of loose financial conditions are compounded with periods of geopolitical escala tions, as seen in 2024–26. These insights highlight the relevance of understanding gold as a safe-haven asset amid complex macro-financial conditions. |
| Keywords: | gold prices, geopolitical risk, financial conditions |
| JEL: | G15 E44 F51 G12 Q02 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1380 |
| By: | Peter Haan; Julia Schmieder; Izabela Wnuk-Soares |
| Abstract: | We study how immigration affects prices through changes in labor supply. Using policy-driven increases in immigration to Germany and administrative data covering the universe of nursing homes, we find that one additional foreign-born woman per 100 residents reduces nursing-home care prices by 2.6 percent. The price effects are concentrated in more competitive markets. Examining potential mechanisms, we find that immigration lowers labor costs as nursing homes shift toward lower-paid foreign-born workers. We find no evidence of declines in inspection-based measures of quality or of scale effects. Finally, immigration increases the use of informal care, potentially strengthening competitive pressure from the broader care market. |
| Keywords: | Immigration, labor supply, prices, nursing homes |
| JEL: | J61 F22 J30 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26224 |
| By: | Hasliza Hassan (Centre for Management and Marketing Innovation, COE for Business Innovation and Communication, Multimedia University, Cyberjaya, Selangor, Malaysia Author-2-Name: Anusuyah Subbarao Author-2-Workplace-Name: Centre for Management and Marketing Innovation, COE for Business Innovation and Communication, Multimedia University, Cyberjaya, Selangor, Malaysia Author-3-Name: Aysa Siddika Author-3-Workplace-Name: BRAC Business School, BRAC University, Merul Badda, Dhaka, Bangladesh Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - As the use of the internet and technology becomes integrated into modern lifestyles, various products and services have been digitalised, including e-wallets. With an ever-increasing number of users, this research explores potential ways to boost e-wallet usage through performance expectancy and perceived enjoyment. Methodology/Technique - A quantitative survey was distributed to working adults in the Klang Valley, Malaysia. A total of 142 responses were used for descriptive analysis and structural equation modelling. Findings - Both performance expectancy and perceived enjoyment influence the behavioural intention to continue using an e-wallet. Performance expectancy is more important than perceived enjoyment in ensuring the continuous use of the e-wallet. Novelty - The momentum of digitalisation in e-wallet usage can be further stimulated by emphasising performance expectancy and perceived enjoyment. It is expected that more people will move towards digital payment transactions, specifically by using e-wallets, if the system is reliable and convenient to use. Catching up with the industrial revolution may not be easy since there are always people who prefer to stay in the status quo. This research highlights potential ways to shape a digital nation. Type of Paper - Empirical" |
| Keywords: | Behavioural Intention; E-Wallet; Perceived Enjoyment; Performance Expectancy; Technology Adoption; Working Adults. |
| JEL: | N75 O14 O32 O33 Q55 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:gtr:gatrjs:jmmr371 |
| By: | Couaillier, Cyril; Faber, Finn; Rodriguez d’Acri, Costanza; Shaw, Frances; Passinhas, Joana |
| Abstract: | We introduce two indicators to track the build-up of vulnerabilities in the euro area banking sector on a quarterly basis by leveraging the information collected in EU-wide solvency stress tests. First, we introduce an indicator of conditional capital depletion, the Stress Vulnerability Index (SVI), which quantifies potential losses under adverse scenarios when tail credit risk is highest. Second, we introduce an indicator of earnings vulnerability, the Profitability Vulnerability Index (PVI), which assesses the capacity of the banking sector to generate capital organically. While the two indices spike synchronously during systemic crises, they can also decouple. We show that this occurs when tail risks to capital subside but earnings remain compressed, or conversely, when recessionary fears mount while current profitability strengthens. These divergences provide actionable signals for macroprudential policy by distinguishing between the accumulation of solvency risks and the impairment of loss absorption capacity. In doing so, the indices support decisions on the activation, build-up, stability or release of prudential buffers. We validate the usefulness of the indicators by showing that both indicators were strongly associated with the probability that euro area banks received state aid in the aftermath of the Great Financial Crisis. JEL Classification: E61, G01, G21, G28 |
| Keywords: | bank capital, financial stability, stress test |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263295 |