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on Monetary Economics |
| By: | Guender, Alfred V. |
| Abstract: | The effectiveness of the bank lending channel of monetary policy hinges on the extent to which changes in the availability of bank credit relative to non-bank credit are systematically transmitted to the real sector of the economy. On this count, there is no evidence of a link between three finance mix , variables and economic activity in New Zealand during selected intervals over the 1967-87 period. Similar, unfavourable results are reported by the investigation of the connection between movements in an interest rate spread and real economic performance between 1975 and 1994. Moreover, neither the finance mix variable nor the spread respond consistently to changes in various indicators of monetary policy. The results reported in the paper cast serious doubt on the existence of a potent bank lending channel of monetary policy in New Zealand either before or after the reforms of the mid-1980s. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263783 |
| By: | Blejer, Mario I.; Leiderman, Leonardo |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:262900 |
| By: | Harry Aytug |
| Abstract: | Does euro adoption affect long-run economic growth? Existing evidence is mixed, reflecting limited treated countries, long horizons that challenge inference, and heterogeneity across member states. We estimate causal dynamic and heterogeneous treatment effects using Causal Forests with Fixed Effects (CFFE), a machine-learning approach that combines causal forests with two-way fixed effects. Under a conditional parallel-trends assumption, we find that euro adoption reduced annual GDP growth by 0.3-0.4 percentage points on average. Effects emerge shortly after adoption and stabilize after roughly a decade. Average effects mask substantial heterogeneity. Countries with lower initial GDP per capita experience larger and more persistent growth shortfalls than core economies. Weaker consumption and productivity growth contribute to the overall effect, while improvements in net exports partially offset these declines. A two-country New Keynesian DSGE model with hysteresis generates qualitatively similar patterns: one-size-fits-all monetary policy and scarring mechanisms produce larger output losses under monetary union than under flexible exchange rates. By jointly estimating dynamic and heterogeneous treatment effects, the analysis highlights the importance of country characteristics in assessing the long-run consequences of monetary union. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.20169 |
| By: | Gabriel Montes-Rojas (IIEP-UBA/CONICET); Fernando Toledo (UNLP); Nicolás Bertholet (UBA-IIEP); Kevin Corfield (UBA) |
| Abstract: | We study optimal monetary policy when a central bank maximizes a quantile utility objective rather than expected utility. In our framework, the central bank’s risk attitude is indexed by the quantile index level, providing a transparent mapping between hawkish/dovish stances and attention to adverse macroeconomic realizations. We formulate the infinite-horizon problem using a Bellman equation with the quantile operator. Implementing a Euler-equation approach, we get Taylor-rule-type reaction functions. Using an indirect inference approach, we derive an implicit quantile index of central bank risk aversion. An empirical implementation for the US is outlined based on reduced-form laws of motion with conditional heteroskedasticity, enabling estimation of the new monetary policy rule and its dependence on the Fed risk attitudes. The results reveal that the Fed has mostly a dovish-type behavior but with some periods of hawkish attitudes. |
| Keywords: | Taylor rule; inflation; output gap; quantile preferences; dynamic programming; recursive model. |
| JEL: | C22 C61 E52 E58 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:384 |
| By: | Enrique G. Mendoza; Vincenzo Quadrini |
| Abstract: | We propose a framework for studying financial and macroeconomic dynamics in an environment where liquid assets have a productive use but their supply is limited (i.e., the economy is starved for liquidity). The private demand for financial assets arises from the need to hold them for production. The private supply of financial assets is limited and unstable because of borrowing constraints and default risk. We discuss open-economy applications that analyze the accumulation of foreign reserves by emerging economies, the increase in public debt issued by advanced economies, the rapid growth of emerging economies, structural changes in financial markets, and financial globalization. A key result is that most of these developments led to a decline in interest rates and an increase in global macroeconomic volatility, driven by riskier borrower portfolios. |
| JEL: | F40 F41 G15 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34688 |
| By: | Dimitris Korobilis; Leif Anders Thorsrud |
| Abstract: | From the perspective of flexible inflation targeting using a simple targeting rule, this paper introduces the Monetary Policy Deviation Error (MPDE) as a novel metric for assessing central bank performance and deliberations. The MPDE captures potentially time-varying shifts in the trade-off between stabilizing inflation and supporting real economic activity. Specifically, it quantifies the gap between the intended trade-off envisioned by policymakers and the trade-off realized through actual monetary policy outcomes. Under an optimal and unbiased monetary policy strategy, the MPDE should average to zero. Nonzero deviations indicate misalignment between the central bank’s stated objectives and the trade-offs actually achieved, suggesting that an alternative interest rate path would have better aligned outcomes with intentions. Applying the MPDEtoevaluate the monetary policy strategies of Norges Bank and the Reserve Bank of New Zealand, we find posterior evidence supporting optimal policy alignment in the case of New Zealand. |
| Keywords: | Monetary policy, Forecast targeting, Evaluation, Time-varying parameters |
| JEL: | C22 E52 E58 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2025_08 |
| By: | Blejer, Mario I. |
| Keywords: | Industrial Organization, Labor and Human Capital |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:262901 |
| By: | Akinlade, Femi |
| Abstract: | This paper revisits the theoretical and empirical evolution of the Phillips Curve through the lens of modern New Keynesian macroeconomics. While the traditional unemployment–inflation relationship has long been viewed as unstable, recent advances attribute its variability to the interaction of expectations, nominal rigidities, and structural features such as openness and imported marginal costs. The review synthesizes key developments in the New Keynesian Phillips Curve, including forward-looking price setting, hybrid indexation, sticky-information dynamics, and small open-economy extensions. Empirical evidence across advanced, emerging, and transition economies reveals substantial heterogeneity in slope, persistence, and the relative weight of backward- and forward-looking components, particularly across tranquil and recessionary periods. The findings highlight that the Phillips Curve is conditional rather than structural, with inflation dynamics fundamentally shaped by the credibility of monetary policy, the structure of expectations, and the sensitivity of marginal costs to domestic and external shocks. |
| Keywords: | New Keynesian Phillips Curve, inflation |
| JEL: | E3 E31 E5 E52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126878 |
| By: | Tara Iyer; Agustin Roitman; Mr. James P Walsh |
| Abstract: | Inflation in Türkiye has been high since 2021. This paper investigates the sources of this inflation and the impact of mitigating exchange rate volatility. Two main findings emerge. First, there has been a significant divergence in inflation dynamics across CPI components since late 2021—in particular, services inflation has exhibited more inertia than goods inflation, a result that stands out in both historical and cross-country contexts. The persistence in services inflation has been generally broad-based, with rental services playing an important role. Second, exchange rate shocks are estimated to have a smaller impact on services inflation than on goods inflation. The peak services inflation response to a nominal exchange rate shock is estimated to be fairly muted, at just one-tenth the size of the shock. Indeed, since mid-2023, there has been an unusually sharp rise in the relative price of services, as goods inflation has been more sensitive to exchange rate movements. These findings suggest that when inflation persistence—especially in services—is relatively high, inflation stabilization may require complementary policies to break inertia beyond a stable currency. |
| Keywords: | Türkiye; Services Inflation; Inflation Inertia; VAR; Exchange Rate Pass-Through |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/006 |
| By: | Menon, Jayant |
| Abstract: | The resilience of trade balances of the major industrialised economies to changes in their exchange rates has evoked interest in the exchange rate pass-through relationship. So far, there has not been a comprehensive survey of this literature. The paper aims to fill this gap in two ways. First, it pieces together the theoretical literature on exchange rate pass-through. Second, it provides a critical survey of the empirical literature on exchange rate passthrough. Emphasis is placed on the data and methodology employed in previous work. This is done in order to guide future work in this growing area of research. |
| Keywords: | Agribusiness, Agricultural and Food Policy, Agricultural Finance, International Relations/Trade |
| URL: | https://d.repec.org/n?u=RePEc:ags:copspp:266332 |
| By: | Guender, Alfred V.; Tam, Julie |
| Abstract: | There is a great deal of support for nominal income targeting in the literature on strategies for monetary policy in a closed economy framework. Is nominal income targeting equally attractive in a small open economy? This paper compares nominal income targeting to alternative monetary policy rules in a stochastic macro model for a small open economy. We find that both, the weighting in the overall price level of the exchange rate and foreign prices and the elasticity of output supplied with respect - to the real exchange rate, are important factors in assessing the attractiveness of nominal income targeting. In a small open economy where the size of both parameters is not negligible, a rule targeting the overall price level may actually be preferred to nominal income targeting. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263799 |
| By: | Dimitris Korobilis |
| Abstract: | I introduce a high-dimensional Bayesian vector autoregressive (BVAR) framework designed to estimate the effects of conventional monetary policy shocks. The model captures structural shocks as latent factors, enabling computationally efficient estimation in high-dimensional settings through a straightforward Gibbs sampler. By incorporating time variation in the effects of monetary policy while maintaining tractability, the methodology offers a flexible and scalable approach to empirical macroeconomic analysis using BVARs, well-suited to handle data irregularities observed in recent times. Applied to the U.S. economy, I identify monetary shocks using a combination of high-frequency surprises and sign restrictions, yielding results that are robust across a wide range of specification choices. The findings indicate that the Federal Reserve’s influence on disaggregated consumer prices fluctuated significantly during the 2022–24 high-inflation period, shedding new light on the evolving dynamics of monetary policy transmission. |
| Keywords: | Disaggregated consumer prices; Latent factors; High-dimensional Bayesian VAR; Time-varying parameters; Sign restrictions; High frequency data |
| JEL: | C11 C32 C55 E31 E52 E58 E66 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2025_09 |
| By: | Blejer, Mario I.; Leiderman, Leonardo |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:262905 |
| By: | Neilon, Gabriella; Guest, Oliver; Steenkamp, Daan |
| Abstract: | Inflation surprises are expected to change market expectations of how the central bank’s policy settings will change, and cause repricing of short term rates and risk premia, which should affect the market value of a variety of assets. This note assesses the sensitivity of the South African rand and sovereign yield curve to inflation surprises. Though impacts are generally small in absolute terms, we show that the currency tends to appreciate after positive headline inflation surprises, while the currency has tended to depreciate after positive core inflation surprises. Contrary to expectation, we show that positive headline and core surprises have tended to be associated with a flatter curve. Our results suggest that the impact of inflation surprises tend to be swamped by external shocks or spikes in domestic idiosyncratic risk. We note, for example, that the largest day-to-day shifts in the yield curve and currency on days of consumer price data releases have been associated with external shocks or spikes in South Africa-specific risks. |
| Keywords: | E58, E43, G12 |
| JEL: | E43 E58 G12 |
| Date: | 2025–12–12 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127318 |
| By: | Guender, Alfred V. |
| Abstract: | Based on quarterly data for Canada, Germany, the United Kingdom, and the United States, this paper tests the New Classical view against the extended New Keynesian view about the factors underlying the output-inflation tradeoff. The simple Lucas is amended to reflect the presence of serial correlation in nominal aggregate demand shocks. We find that the mean rate of inflation has a statistically significant negative effect on the coefficient of the anticipated component of nominal aggregate demand shocks in all four countries and a statistically significant negative effect on the coefficient of the unanticipated component in every country but Germany. Aggregate volatility affects the output-inflation tradeoff in two of the four countries. These findings are in line with the New Keynesian view but cast serious doubts on the New Classical view. |
| Keywords: | Financial Economics, International Development |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263750 |
| By: | Danila Ovechkin (Bank of Russia, Russian Federation) |
| Abstract: | This study investigates the hypothesis of a nonlinear relationship between aggregate demand and inflation in the Russian economy. To detect the nonlinear effect, the aggregated Consumer Price Index was decomposed into cyclical (more sensitive to aggregate demand) and acyclical (less sensitive to aggregate demand) components. The decomposition methodology employed in the paper reveals a stable nonlinear link between aggregate demand and inflation. It is shown that the slope of the Phillips curve becomes significantly steeper, i.e., the sensitivity of inflation to economic activity increases, when two conditions are met simultaneously: 1) current general price growth rates exceed long-term inflation expectations; 2) the output gap is positive. Furthermore, it is established that the use of a nonlinear Phillips curve can significantly improve forecast accuracy if a preliminary decomposition of the CPI into cyclical and acyclical components is performed. The forecasting accuracy is asymmetric: inflation forecasts derived from Phillips curves (both linear and nonlinear) demonstrate higher precision during crisis periods. The obtained result proves robust to changes in the trend estimation method, alterations in the nonlinearity condition (using only a positive output gap), the exclusion of sharp CPI changes from the sample, and shifts in the left and right boundaries of the sample. The robustness of the result is also demonstrated with respect to the shock control procedure used in CPI decomposition: even without this procedure, the ability to detect the nonlinear relationship and the improved forecast accuracy (at least at the 9- to 12-month horizon) are preserved. |
| Keywords: | Phillips curve, inflation, business cycle, nonlinearity |
| JEL: | C22 C53 E31 E47 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps161 |
| By: | Konstantin Styrin (Bank of Russia, Russian Federation) |
| Abstract: | This paper studies how the effect of macroeconomic shocks on inflation depends on the severity of restrictions on international borrowing and imports. Using a calibrated model of a small open economy, I show that the effect of a change in the terms of trade, while being neutral in the absence of these restrictions, becomes inflationary in their presence. Inflation pressures emerge due to a higher interest rate on external borrowing, which is raised in order to pay for imports, and also due to trade costs, which have a direct effect on the domestic price of imported goods. As a consequence, monetary policy in the presence of restrictions on financial and trade transactions becomes tighter |
| Keywords: | monetary policy transmission; financial restrictions; trade restrictions |
| JEL: | E52 E58 G01 G28 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps141 |
| By: | Ko Munakata |
| Abstract: | This paper extends the menu cost model of Gertler and Leahy (2008) by introducing a drift in the aggregate markup. Assuming that the drift is always negative and not large, consistent with moderate and positive trend inflation, the paper analytically characterizes firms' value function and markup distribution. It derives explicit equations sufficient to close the model in general equilibrium, making the calculation of impulse responses to aggregate shocks as easy as in conventional representative-agent New Keynesian models. In addition, the paper shows two implications of the model. First, the model replicates the empirically observed positive correlation between the inflation rate and the frequency of price changes. Second, the model yields an explicit equation representing the Phillips curve, with additional terms that make the inflation rate more responsive to aggregate shocks. |
| Keywords: | menu cost, Phillips curve, trend inflation, frequency of price changes |
| JEL: | E23 E31 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1327 |
| By: | Sergey Ivashchenko (Bank of Russia, Russian Federation); Andrey Sinyakov (Bank of Russia, Russian Federation) |
| Abstract: | It is well-documented in economic literature that inflation expectations exhibit significant heterogeneity across various economic agents, notably households, firms, and financial institutions. This paper investigates the relative importance of these agents' expectations in shaping inflation dynamics within a general equilibrium framework. We introduce non-rational, non-systematic expectation shocks into an otherwise standard small open economy New-Keynesian model, calibrated and estimated using Russian data. This novel approach allows us to isolate exogenous variations in inflation expectations specific to each agent type and assess their distinct impacts on realized inflation. Our results demonstrate that central banks must respond explicitly to non-rational, non-systematic expectation shocks originating from private agents. Importantly, we find that expectation shocks from financial institutions (banks) exert a larger influence on realized inflation than shocks originating from households or firms. This outcome remains robust across multiple variations in model structure and parameterization. In contrast, the inflationary effects of households’ and firms’ expectation shocks manifest in ways unpredictable to these agents themselves, highlighting an expectations-feedback gap. The findings have important implications for monetary policy, particularly regarding communication strategies. |
| Keywords: | inflation expectations, heterogeneous agents, expectation shocks, monetary policy, financial institutions, New-Keynesian model, general equilibrium, diversity in inflation expectations |
| JEL: | E31 E37 E52 D84 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps152 |
| By: | Denis Krylov (Bank of Russia, Russian Federation) |
| Abstract: | Movements in food prices have a major input in consumer price index and, thus, a significant impact on the living standards. Given the increased volatility of world food prices, it is essential that we understand the impact of this external driver of inflation on domestic price trends in order to produce a more accurate forecast of inflation and conduct a more efficient monetary policy. This work presents a VARX model applied to data from 2003 to 2021. Statistically significant impact of world food prices on domestic consumer and producer food prices in Russia was observed in 2003-2014, both at nation level and across its regions. After 2014, when there was a transition to a floating exchange rate, inflation targeting policy, accelerated development of import-substituting agricultural production and the Russian government employment of a more active trade policy in agriculture and food products, the average pass- through effect declined materially and is no longer statistically significant. The overall pass-through effect is greater in the case of rising world prices compared to decreasing world prices, while no statistically significant differences are found among regions. Meanwhile, the pass-through effect of world food prices on internal producer prices exhibits a significant regional heterogeneity. |
| Keywords: | world food prices, pass-through effect, Russian regions, consumer prices, producer prices, vector autoregression |
| JEL: | C32 E31 F42 R11 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps126 |
| By: | Sergio Correia; Stephan Luck; Emil Verner |
| Abstract: | We study the causes and consequences of bank runs using a novel dataset on bank runs in the United States from 1863 to 1934. Applying natural language processing to historical newspapers, we identify 4, 049 runs on individual banks. Runs are considerably more likely in weak banks but also occur in strong banks, especially in response to negative news about the real economy or the broader banking system. However, runs typically only result in failure for banks with weak fundamentals. Strong banks survive runs through various mechanisms, including interbank cooperation, equity injections, public signals of strength, and suspension of convertibility. At the local level, bank failures (with and without runs) translate into substantially larger declines in deposits and lending than runs without failures. Our findings suggest that poor bank fundamentals are necessary for bank runs to translate into failure and for bank distress to generate severe economic consequences. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.20285 |
| By: | Tingyi Lin |
| Abstract: | Do vulnerabilities in Decentralized Finance (DeFi) destabilize traditional short-term funding markets? While the prevailing "Contagion Hypothesis" posits that the liquidation of stablecoin reserves triggers fire-sale spirals that transmit distress to traditional markets , we document a robust "Flight-to-Quality" effect to the contrary. In the wake of major DeFi exploits, spreads on 3-month AA-rated commercial paper (CP) exhibit a paradoxical narrowing. We identify a "liquidity recycling" mechanism driving this outcome: capital fleeing DeFi protocols is re-intermediated into the traditional financial system via Prime Money Market Funds (MMFs) , where strict regulatory constraints (e.g., SEC Rule 2a-7) compel these funds to purchase high-quality paper. Our estimates indicate that this institutional demand shock quantitatively overwhelms the supply shock driven by stablecoin issuer redemptions. Rather than acting as vectors of financial contagion , these crypto native shocks serve as an inadvertent "safety valve" in segmented markets , providing transient liquidity support and effectively subsidizing borrowing costs for high-grade issuers in the real economy. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.08263 |
| By: | Sinem Hacioglu Hoke; Daniel A. Ostry; Hélène Rey; Adrien Rousset Planat; Vania Stavrakeva; Jenny Tang |
| Abstract: | Drawing on 100 million transactions, we show how speculators, hedgers, and market makers interact in the world’s largest FX derivatives market, and that derivatives trading can affect exchange rates. Firms in the largest client sectors—pension and investment funds, insurers, and nonfinancials—use FX derivatives primarily to hedge currency risk, with dealer banks providing the liquidity. Hedge funds, with comparatively smaller net exposures, trade speculatively, whereas dealer banks insulate themselves from changes in speculative demand by taking offsetting positions with hedgers, especially nonfinancials. Non-bank market makers, instead, take residual exchange-rate exposures “on the margin”. Hedge funds’ speculative flows help transmit monetary policy shocks to exchange rates, while investment funds' unwinding of hedges contribute to dollar appreciations when credit risk rises. Our results highlight that exchange rates depend on the composition of trading activities in FX derivatives markets. |
| JEL: | F30 F31 G15 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34588 |
| By: | Blejer, Mario I.; Fernandez, Roque B. |
| Abstract: | This paper analyses the effects of monetary expansion on real output in a small open economy. A two-sector model (traded and nontraded goods) is considered and it is postulated that real effects can arise only from changes in the exogenous component of the money supply (domestic'-credit creation). The model is used to test the Mexican experience and it is found that when appropriately defined to allow for the openness of the economy, unexpected monetary growth raises the cyclical component of real output in the nontraded-goods sector and tends to reduce it in the traded-goods sector. |
| Keywords: | Agribusiness, Production Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:262903 |
| By: | Blejer, Mario I. |
| Keywords: | Agricultural and Food Policy |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:262897 |
| By: | Sergey Ivashchenko (Bank of Russia, Russian Federation) |
| Abstract: | The small-scale open economy dynamic stochastic general equilibrium (DSGE) models are estimated with a second-order approximation. The models differ in monetary policy rules. Optimal policy under commitment is best according to marginal likelihood. The conventional Taylor-type rule performs better in short-term forecasting but loses to other policies in long-term forecasting. Monetary policy rules heavily influence the dynamic and estimated parameters of models. They may produce a "price puzzle" and easily lead to the absence of inflation anchoring. The most interesting results relate to the performance of different rules in economies estimated with other rules. Very hawkish policies in a usual economy lead to a non-unique solution. An explosive trajectory is produced by the usual policy in an economy with a fiscal authority that does not care about debts/assets. Only the optimal policy under commitment can work in each of them. However, it may lead to a worse loss function than that produced by simple rules. |
| Keywords: | DSGE; monetary policy; estimated optimal policy under commitment |
| JEL: | C31 C32 E37 E52 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps144 |
| By: | Alina Evstigneeva (Bank of Russia, Russian Federation); Yulia Shchadilova (Bank of Russia, Russian Federation) |
| Abstract: | Transparency is one of the key quantitative indicators of the quality of central bank communication. The more information a central bank releases about its policy, the more transparent its communication is considered to be. Globally, there are several popular indices to assess the transparency of communication. However, all of them fail to assess the transparency of central banks for the population. This paper is set to fill in this gap, which is especially important given the pivot of monetary authorities towards expanding communication with the general public. The BATI (Broader Audience Transparency Index) assesses 20 central banks in developed and developing countries in terms of the key functions of their public communication (information, education, accountability, and signalling). In total, the index has 40 criteria, of which three are punitive. They downgrade central bank assessments for redundant style, bureaucratic syntax, and contradictory signals, which may endanger dialogue with the public. When drafting the BATI criteria we incorporated the results of other researchers across various areas, i.e. monetary policy, government information policy in a general sense, marketing, brand management, and cognitive psychology. The BATI is based on indicators the value of which has been established in empirical studies or thoroughly founded in theoretical academic papers. When evaluating the index criteria, we employed both the standard method of expert assessment of communication with the help of lists (traditionally used to create transparency indices) and NLP and LLM methods for handling non-structured data. Specifically, 23 out of the 40 criteria of the index were defined using expert assessment, four – LLM models, and 13 – machine text analysis. The Bank of Canada, the Bank of England and the European Central Bank received the highest BATI scores among central banks for communication with the general public. The Bank of Russia is ranked fourth with 17.31 points out of 37. It belongs to the group of central banks that use advanced practices in communication with the public but have certain gaps in some communication functions. At the same time, the Bank of Russia has the highest score in audience education (tied with the US Federal Reserve System and the Reserve Bank of Australia). In general, the BATI index value is significantly higher in developed economies than in developing countries. This is consistent with the findings of studies on central bank transparency for professional audiences. The Bank of Russia is an exception among developing countries. It is closer to central banks in developed economies on almost all criteria of transparency for broader audience. The main academic novelty of this paper is the attempt to bridge the gap in terms of the absent instrument for assessing central bank efforts to enhance transparency for the general public. Our proposed BATI index assesses the extent of central bank efforts within each of the main communication functions and can help monetary authorities choose the options how to further develop their information policies. Moreover, our newly created instruments for automated handling of non-structured data also make a contribution to the literature. |
| Keywords: | monetary policy, communication, transparency, text analysis, LLM |
| JEL: | E52 E58 E71 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps136 |
| By: | Menon, Jayant |
| Abstract: | The volatility displayed by floating exchange rates has revived interest in the relationship between exchange rates and traded goods prices. This paper aims to provide a theory of exchange rates and traded goods prices in the short-run. In particular, it examines how various factors can cause exchange rate pass-through to be incomplete in the short-run but not in the long-run. These include: (i) menu costs, (ii) the costs of changing supply, (iii) the dynamics of demand response to price changes, (iv) orderdelivery lags, (v) forward exchange cover, and (vi) the currency denomination of trade contracts. From a policy perspective, the presence of these factors could account for the often prolonged adjustment of trade balances to exchange rate changes, and the failure of exchange rate volatility to perceptibly affect the volume of international trade flows. |
| Keywords: | Demand and Price Analysis, International Relations/Trade |
| URL: | https://d.repec.org/n?u=RePEc:ags:copspp:266368 |
| By: | Lin, Lin; Ortega, David L. |
| Keywords: | Agribusiness |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360618 |
| By: | Dalziel, Paul |
| Abstract: | This paper introduces a finance channel for monetary policy. Following Black (1970) there is no money commodity in the paper's model. Instead, the medium of exchange is bank deposits supplied by the financial system in response to optimal rational expectations decisions by firms about financing investment in new capital assets, and demanded by households as part of their optimized financial portfolio of accumulated savings. The model demonstrates how central banks maintain price stability through changes in base interest rates (the Wicksell monetary policy rule) which influence the debt financing decisions of firms. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263800 |
| By: | Jo, Jungkeon |
| Keywords: | Agricultural and Food Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360650 |
| By: | Parot, Rodrigo; Rodriguez, Martha |
| Keywords: | Financial Economics, International Development |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:263694 |
| By: | Hardhik Mohanty; Bhaskar Krishnamachari |
| Abstract: | USDC and USDT are the dominant stablecoins pegged to \$1 with a total market capitalization of over \$300B and rising. Stablecoins make dollar value globally accessible with secure transfer and settlement. Yet in practice, these stablecoins experience periods of stress and de-pegging from their \$1 target, posing significant systemic risks. The behavior of market participants during these stress events and the collective actions that either restore or break the peg are not well understood. This paper addresses the question: who restores the peg? We develop a dynamic, agent-based mean-field game framework for fiat-collateralized stablecoins, in which a large population of arbitrageurs and retail traders strategically interacts across explicit primary (mint/redeem) and secondary (exchange) markets during a de-peg episode. The key advantage of this equilibrium formulation is that it endogenously maps market frictions into a market-clearing price path and implied net order flows, allowing us to attribute peg-reverting pressure by channel and to stress-test when a given mechanism becomes insufficient for recovery. Using three historical de-peg events, we show that the calibrated equilibrium reproduces observed recovery half-lives and yields an order flow decomposition in which system-wide stress is predominantly stabilized by primary-market arbitrage, whereas episodes with impaired primary redemption require a joint recovery via both primary and secondary markets. Finally, a quantitative sensitivity analysis of primary-rail frictions identifies a non-linear breakdown threshold. Beyond this point, secondary-market liquidity acts mainly as a second-order amplifier around this primary-market bottleneck. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.18991 |
| By: | Nicolas Laurence (UGA - Université Grenoble Alpes, PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble-UGA - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes) |
| Abstract: | Special Drawing Rights (SDRs) have regained prominence as international institutions search for ways to respond to recurring financial crises, rising inequalities, and accelerating climate change. As the only international reserve asset not tied to a national currency, SDRs have been debated as potential instruments for redistributive and ecological purposes, particularly since the unprecedented 650 billion USD allocation of 2021. Yet the terms of these debates reveal the persistent dominance of macro-financial logics over alternative framings. This article develops an analysis of how institutional discourses on SDR reform reflect and reproduce the tension between international monetary hierarchy and ecological vulnerability. It shows that ecological concerns are not absent from official debates but systematically translated into the language of liquidity, debt sustainability, and creditworthiness. Such translation renders ecological values legible while erasing their normative specificity, thereby constraining their transformative potential. By linking international political economy with social ecological economics, the article foregrounds the processes of inclusion, translation, and marginalisation through which plural values are managed in global monetary governance. SDRs thus serve less as instruments of ecological transition than as a diagnostic site for understanding the limits of integrating ecological criteria into a system still structured by financial stability and monetary hierarchy. |
| Keywords: | Latent Dirichlet Allocation, Ecologically Unequal Exchange, Ecological Economics, Monetary Hierarchy, Special Drawing Rights |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05446729 |
| By: | Cardoso, Eliana A. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:263623 |
| By: | Alexandra Glazova (Bank of Russia, Russian Federation); Maxim Nevalennyi (Bank of Russia, Russian Federation); Andrey Sinyakov (Bank of Russia, Russian Federation) |
| Abstract: | This article presents a diagrammatic model of a small open economy. The dynamics of this graphical model are illustrated using impulse responses from the corresponding formal semi- structural model (Quarterly Projection Model, QPM). This graphical model reflects the modern understanding of how a fiat monetary economy and the current global financial system operate.1 It describes the specifics of monetary policy (MP) responses to supply and demand shocks under inflation targeting and the importance of anchoring inflation expectations. It explicitly considers the foreign exchange market (taking into account its potential imperfections) and demonstrates the role of the exchange rate in the transmission of MP. The model helps to link the global financial (credit) cycle to accumulating risks to financial stability, which create constraints on MP (‘dilemma, not trilemma’) and require the use of additional policy instruments. In our view, the presented diagrammatic model is a simpler version of the graphical model for analysing monetary policy in a small open economy than that proposed by Basu and Gopinath (2024). Therefore, it is suitable for less experienced readers—undergraduate students. The model not only accounts for the constraints facing monetary policy in a small open developing economy with developed financial markets but also allows for the analysis of extreme cases, like the closure of the financial account of the balance of payments and the associated changes in monetary policy transmission. Consequently, the model can be used to explain the rationale behind the Bank of Russia’s monetary policy decisions over the entire inflation targeting period. The authors provide a detailed analysis of the Bank of Russia’s decisions from 2022 onward using the model. |
| Keywords: | monetary policy, small open economy, foreign exchange market, inflation targeting, monetary policy dilemma, diagrammatic general equilibrium model, Quarterly Projection Model (QPM), Bank of Russia |
| JEL: | E58 F38 F41 G28 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps154 |
| By: | Vadim Grishchenko (Bank of Russia, Higher School of Economics, Russian Federation); Maria Lymar (Bank of Russia, MSU, Russian Federation); Andrei Sinyakov (Bank of Russia, Russian Federation) |
| Abstract: | In theory, the anchoring of household inflation expectations contributes a lot to the success of inflation targeting, since inflation expectations may significantly influence consumer and financial decisions. In this paper, we estimate the causal relationship between information and the inflation expectations of Russian households using a randomized controlled trial (RCT) approach applied to the data of the 6th wave of the Survey of Consumer Finance (2024). To the best of our knowledge, this is the first study of this kind based on Russian data. According to our estimates, direct, quantitative estimates of future inflation are more sensitive to incoming information. Respondents react most strongly to the treatment about growth in the money supply in the previous year, adjusting their inflation expectations upwards. At the same time, as opposed to research based on data from other countries, we find no relationship between information about inflation in the past year or about the central bank's target and its success in inflation targeting, on the one hand, and household inflation expectations, on the other. This means that monetary policy should react more strongly to pro-inflationary shocks to achieve the target. Actions, not words, matter the most. |
| Keywords: | inflation expectations, randomized controlled trial (RCT), Household Survey of Consumer Finances, central bank communication policy |
| JEL: | C83 C93 D84 E31 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps148 |
| By: | María Alejandra Amado (BANCO DE ESPAÑA) |
| Abstract: | Macroprudential FX regulations aim to reduce systemic currency-mismatch risks, yet their distributional effects on firms’ access to credit remain poorly understood. This paper studies Peru’s 2014 dedollarization policy, which sharply increased reserve requirements on banks’ foreign-currency liabilities in proportion to their dollar lending to nontradable firms. Exploiting cross-sectional variation in banks’ exposure and using administrative loan-level data covering the universe of firms, I find that moving from the median to the 75th percentile of exposure reduces growth in total new loans by roughly 10 percentage points for micro and small firms, with no significant effects for medium or large firms. Larger firms absorb the shock by reallocating borrowing across banks and into local currency credit, whereas micro firms experience sharp declines in both dollar and total credit, higher borrowing costs, and modest employment losses. The results highlight a trade-off between macroprudential objectives and credit access for small firms. |
| Keywords: | macroprudential FX regulations, currency mismatch, small firms, emerging markets, borrowing constraints, bank lending channel |
| JEL: | E43 E58 F31 F38 F41 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2604 |
| By: | Guender, Alfred V. |
| Abstract: | The empirical examination of the output-inflation tradeoff in the United States over a 30 year period reveals that both aggregate uncertainty and average inflation were instrumental in shaping the output-inflation tradeoff. The division of the whole sample period into two distinct sets of subintervals suggests that the New Keynesian view according to which the output-inflation tradeoff is sensitive to changes in average inflation held only unambiguously in the latter part of the respective sample period. The empirical results suggest further that the tradeoff appears to have been sensitive only to changes in aggregate uncertainty in the early part of the sample period, a fact consistent with the New Classical view. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263747 |
| By: | Leiderman, Leonardo |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:cladsp:263593 |
| By: | Hamoon Soleimani |
| Abstract: | Bitcoin operates as a macroeconomic paradox: it combines a strictly predetermined, inelastic monetary issuance schedule with a stochastic, highly elastic demand for scarce block space. This paper empirically validates the Endogenous Constraint Hypothesis, positing that protocol-level throughput limits generate a non-linear negative feedback loop between network friction and base-layer monetary velocity. Using a verified Transaction Cost Index (TCI) derived from Blockchain.com on-chain data and Hansen's (2000) threshold regression, we identify a definitive structural break at the 90th percentile of friction (TCI ~ 1.63). The analysis reveals a bifurcation in network utility: while the network exhibits robust velocity growth of +15.44% during normal regimes, this collapses to +6.06% during shock regimes, yielding a statistically significant Net Utility Contraction of -9.39% (p = 0.012). Crucially, Instrumental Variable (IV) tests utilizing Hashrate Variation as a supply-side instrument fail to detect a significant relationship in a linear specification (p=0.196), confirming that the velocity constraint is strictly a regime-switching phenomenon rather than a continuous linear function. Furthermore, we document a "Crypto Multiplier" inversion: high friction correlates with a +8.03% increase in capital concentration per entity, suggesting that congestion forces a substitution from active velocity to speculative hoarding. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.07886 |
| By: | Danila Ovechkin (Bank of Russia, Russian Federation) |
| Abstract: | The deviation of aggregate demand from its equilibrium level is traditionally considered as an important factor of inflation. However, modern studies increasingly find it difficult to detect a significant connection between the growth of consumer prices and changes in business activity, which raises questions about the efficiency of monetary policy. One of the most effective ways to solve the problem of the missing relationship between inflation and business activity is to study the components of the price index for the heterogeneity of the influence of business activity on the inflation of individual components. Foreign studies show that the Phillips curve, which has become flat in relation to the aggregate price index, stays steep in relation to individual goods and services. This paper examines the influence of business activity on the inflation of components of the CPI in the Russian economy. The decomposition of the CPI into cyclical (sensitive to changes in aggregate demand) and acyclical (determined to a greater extent by other factors) components is carried out on the basis of an estimate of the coefficients of the Phillips curve modified for disaggregated price dynamics. The modified Phillips curve takes into account the change in the monetary policy regime, the impact of the exchange rate and relative prices on the inflation of CPI components, as well as the asymmetric response of the growth of prices of individual goods and services to the shock of the general price level growth. The results obtained confirm the hypothesis of the heterogeneity of the influence of demand on the inflation of individual goods and services in the Russian economy. Cyclical inflation is shown to be much more closely related to business activity than the general price level inflation. The dynamics of cyclical and acyclical inflation in 2021-2024 fully corresponds to the dynamics of aggregate demand. Only the modified Phillips curve made it possible to carry out such a decomposition, the results of which are stable to changes in the proxies for business activity, as well as to the methods of weighting the inflation of the CPI components. The results obtained can be further used in the analysis of price dynamics and the implementation of monetary policy. |
| Keywords: | inflation, business cycle, cyclical inflation, acyclical inflation, Phillips curve |
| JEL: | C22 E31 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bkr:wpaper:wps149 |
| By: | Joe Cannataci; Benjamin Fehrensen; Mikolai G\"utschow; \"Ozg\"ur Kesim; Bernd Lucke |
| Abstract: | The European Central Bank (ECB) is working on the "digital euro", an envisioned retail central bank digital currency for the Euro area. In this article, we take a closer look at the "digital euro FAQ", which provides answers to 26 frequently asked questions about the digital euro, and other published documents by the ECB on the topic. We question the provided answers based on our analysis of the current design in terms of privacy, technical feasibility, risks, costs and utility. In particular, we discuss the following key findings: (KF1) Central monitoring of all online digital euro transactions by the ECB threatens privacy even more than contemporary digital payment methods with segregated account databases. (KF2) The ECB's envisioned concept of a secure offline version of the digital euro offering full anonymity is in strong conflict with the actual history of hardware security breaches and mathematical evidence against it. (KF3) The legal and financial liabilities for the various parties involved remain unclear. (KF4) The design lacks well-specified economic incentives for operators as well as a discussion of its economic impact on merchants. (KF5) The ECB fails to identify tangible benefits the digital euro would create for society, in particular given that the online component of the proposed infrastructure mainly duplicates existing payment systems. (KF6) The design process has been exclusionary, with critical decisions being set in stone before public consultations. Alternative and open design ideas have not even been discussed by the ECB. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.18644 |
| By: | Cilengi Kandolo, Augustin |
| Abstract: | This paper analyzes the effects of exchange rate regime dualism on the coordination of economic policies in the Democratic Republic of the Congo (DRC). Although the country officially adopted a floating exchange rate regime in 2001, the economy remains highly dollarized and characterized by persistent segmentation between the official and parallel foreign exchange markets. This institutional mismatch raises concerns about the effectiveness of macroeconomic policy coordination. Using annual data for the period 1995–2024, the study applies a linear econometric model in which inflation serves as a synthetic indicator of macroeconomic coordination. The model includes the degree of dollarization, money supply growth, the fiscal deficit, and an indicator capturing foreign exchange market dualism. The results indicate that inflation dynamics in the DRC are mainly driven by monetary expansion and changes in the degree of dollarization. Exchange rate market dualism influences inflation indirectly by weakening monetary transmission mechanisms. Furthermore, the shift to a floating exchange rate regime in 2001 does not appear to have generated a significant structural break in inflation behavior. These findings suggest that the primary constraint on macroeconomic coordination in the DRC does not stem from the formal exchange rate regime choice itself, but rather from the coexistence of a de jure floating regime and a de facto highly dollarized monetary system. The paper underscores the importance of coherent and credible policy strategies aimed at strengthening monetary credibility and improving coordination among monetary, fiscal, and exchange rate policies. |
| Keywords: | Exchange rate regimes; Dollarization; Inflation dynamics; Macroeconomic policy coordination, Democratic Republic of Congo. |
| JEL: | E31 E42 E52 E63 F31 |
| Date: | 2026–01–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127804 |
| By: | Peng, Rundong; Ortega, David L. |
| Keywords: | Institutional and Behavioral Economics |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360716 |
| By: | Romain Baeriswyl; Kene Boun My; Camille Cornand |
| Abstract: | In a monetary system in which risk-free and risky money coexist, Gresham's law predicts that people will prefer to hoard risk-free money as a store of value and spend risky money as a medium of exchange. Establishing a payment system on the basis of risk-free money, such as a retail CBDC, while maintaining the fractional reserve banking system in place poses numerous challenges. In a laboratory experiment, we demonstrate that when the holding of risk-free money is unrestricted, people hold and pay with it extensively. However, when the ability to hold risk-free money is limited by a ceiling or an unattractive interest rate, people tend to hoard risk-free money and use risky money for payments. |
| Keywords: | Central Bank Digital Currency, Gresham's law, Laboratory experiment |
| JEL: | E52 E58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2026-03 |
| By: | Steele, David; Wright, Julian |
| Abstract: | The ex post failure of uncovered interest parity (i.e. the forward premium bias) in the post-Bretton Woods era is well documented. Recently, explanations have been offered for this failure which have centred upon the unusual monetary experience over this period. We test these explanations using data from earlier periods as well as subsequent to the adoption of an inflation target. Canada operated a flexible exchange rate regime during the Bretton Woods era, providing a unique opportunity to examine ex post deviations from uncovered interest parity. Canada is also unusual in that it has pursued an explicit inflation rate target since February 1991. We find no forward premium bias over the flexible rate period during Bretton Woods, as well as prior to Canada's adoption of inflation rate targeting (when learning would be expected to have taken place), while a forward premium bias does exist during the inflationary/disinflationary period or subsequent to the new monetary regime. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263781 |
| By: | Carlos Cañizares Martínez (BANQUE CENTRALE DU LUXEMBOURG); Adriana Lojschová (NATIONAL BANK OF SLOVAKIA); Alicia Aguilar (BANCO DE ESPAÑA) |
| 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 inflation. 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 predominance of fixed-rate mortgages in Slovakia or interaction between monetary and macroprudential policy. We also discuss the possible country characteristics that might drive these results and policy implications. |
| Keywords: | monetary policy, non-linearities, local projections, euro area |
| JEL: | C32 C36 E42 E52 E58 R21 R31 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2602 |
| By: | Fernando Avalos; Boris Hofmann; José María Serena Garralda |
| Abstract: | Private equity funds play an increasingly important role in financial systems. Yet, the impact of monetary policy on their activity has been little explored so far. In this paper, we analyse the transmission of monetary policy through private equity (PE) deals, focusing on the impact on: (i) the volume of private equity deals; (ii) the use of leverage; and (iii) the pricing of those deals. We find that contractionary monetary policy shocks to the short end of the yield curve tend to dampen private equity activity, by reducing deal volumes, the use of leverage and deal prices. A credit channel of monetary transmission seems to affect deal volumes and the use of leverage, while a valuation channel appears to drive the transmission to deal pricing. Monetary policy shocks to the long end of the yield curve have weaker effects on PE activity. |
| Keywords: | private equity, buyouts, monetary policy, credit spreads, equity risk premium |
| JEL: | G21 G32 F32 F34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1326 |
| By: | Tiago Neves Sequeira (University of Coimbra, CeBER and Faculty of Economics); Pedro Lima (University of Coimbra, CeBER and Faculty of Economics); Joshua Duarte (University of Coimbra, CeBER and Faculty of Economics) |
| Abstract: | We develop an overlapping generations endogenous growth model with cash-in-advance constraints for (i) consumers and (ii) R&D firms which is consistent with an effect of inflation on the skill-premium labor share. Inflation decreases the skill premium in both cases and decreases the labor share through (i) which it increases through (ii). The newly described effect of inflation on the labor share is consistent with empirical evidence for a short-run effect. |
| Keywords: | inflation, labor share, human capital |
| JEL: | E24 J64 L11 O33 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:gmf:papers:2025-04 |
| By: | Ryuichiro Hirano (Bank of Japan); Yutaro Takano (Bank of Japan); Kosuke Takatomi (Bank of Japan) |
| Abstract: | This paper estimates Japan's trend inflation and its determinants using a trend-cycle BVAR decomposition. The estimation results indicate that trend inflation in Japan remained subdued as the public had gradually lowered their medium- to long-term inflation expectations following the collapse of the asset price bubble in the early 1990s. The analysis further reveals that subdued real income growth, relative to the labor productivity and labor supply growth, also exerted downward pressure on trend inflation during the period from the 2000s to the early 2010s, when trend inflation was particularly restrained. These findings suggest that monitoring medium- to long-term inflation expectations and trends in structural factors of the economy is important for assessing its long-run inflation trend. |
| Keywords: | Trend Inflation; Trend-Cycle BVAR Decomposition |
| JEL: | C22 E24 E31 E52 E58 |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp26e01 |
| By: | Wright, Julian |
| Abstract: | This paper presents a model where shocks to interest rates, company earnings and the earnings of financial intermediaries all affect the investment of small but not large firms. These shocks also affect the extent of financial intermediation and companies' debt choice. Evidence from micro and macro data supports the model's predictions. I show that shocks which work by weakening the financial position of firms can explain a sizeable part of the growth slowdown in recessions. Conversely, I show that shocks which work by restricting the ability of financial intermediaries to lend are not significant. Consistent with this I find little evidence of a bank lending channel. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263780 |
| By: | Hamoon Soleimani |
| Abstract: | Since its inception, Bitcoin has been positioned as a revolutionary alternative to national currencies, attracting immense public and academic interest. This paper presents a critical evaluation of this claim, suggesting that Bitcoin faces significant structural barriers to qualifying as money. It synthesizes critiques from two distinct schools of economic thought - Post-Keynesianism and the Austrian School - and validates their conclusions with rigorous technical analysis. From a Post-Keynesian perspective, it is argued that Bitcoin does not function as money because it is not a debt-based IOU and fails to exhibit the essential properties required for a stable monetary asset (Vianna, 2021). Concurrently, from an Austrian viewpoint, it is shown to be inconsistent with a strict interpretation of Mises's Regression Theorem, as it lacks prior non-monetary value and has not achieved the status of the most saleable commodity (Peniaz and Kavaliou, 2024). These theoretical arguments are then supported by an empirical analysis of Bitcoin's extreme volatility, hard-coded scalability limits, fragile market structure, and insecure long-term economic design. The paper concludes that Bitcoin is more accurately characterized as a novel speculative asset whose primary legacy may be the technological innovation it has spurred, rather than its viability as a monetary standard. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.07840 |
| By: | Menon, Jayant |
| Abstract: | This paper estimates exchange rate pass-through for Australian manufactured imports by applying an econometric procedure which avoids the pit-falls in previous studies to a carefully assembled data set. For the first time, we provide estimates of pass-through based on the Johansen (1988) ML procedure. Our finding of incomplete passthrough has important implications for policy and the macroeconomy. Incomplete pass-through brings into question the validity of the "small" country assmption and the exogeneity of the terms of trade with respect to exchange rate changes. We may also have to reconsider the extent of the apparent inflationary (deflationary) consequences of exchange rate depreciations (appreciations), and the effects of exchange rate variability on international trade flows. |
| Keywords: | International Relations/Trade |
| URL: | https://d.repec.org/n?u=RePEc:ags:copspp:266333 |
| By: | Powell, Alan A. |
| Abstract: | Dornbusch's 1976 overshooting exchange rate model (hereafter, DBM) has long been known to underpin several large macro models, including the Murphy Model (MM). But the dynamic adjustment paths of variables in MM differ markedly from those in DBM, even qualitatively. A leading case in point is the exchange rate which in MM undershoots its new long run-equilibrium value after the injection of a monetary shock, and then actually moves away from this equi-librium for a time before approaching it via a damped cyclical adjustment path (whereas the corresponding path in DBM is monotonic). This paper gives a simplified account of how this comes about. The emphasis is not so much on theoretical rigour but on providing a convincing practical demonstration. Using the simplest form of DBM as a starting point, it is shown how one can develop a miniature model exhibiting an MM-like response to a monetary shock. The key idea is that aggregate demand does not respond instantaneously (as in DBM) to shocks in the macroeconomic environment, but shows some degree of inertia. Nothing more is required to reconcile the qualitative dynamics of MM with DBM. |
| Keywords: | International Relations/Trade |
| URL: | https://d.repec.org/n?u=RePEc:ags:copspp:266341 |
| By: | Emilio Barucci (Politecnico di Milano); Andrea Gurgone (University of Oxford); Giulia Iori (Ca’ Foscari University of Venice; University of London); Michele Azzone (Politecnico di Milano) |
| Abstract: | We analyse financial stability and welfare impacts associated with the introduction of a Central Bank Digital Currency (CBDC) in a macroeconomic agent-based model. The model considers firms, banks, and households interacting on labour, goods, credit, and interbank markets. Households move their liquidity from deposits to CBDC based on the perceived riskiness of their banks. We find that the introduction of CBDC exacerbates bank-runs and may lead to financial instability phenomena. The effect can be changed by introducing a limit on CBDC holdings. The adoption of CBDC has little effect on macroeconomic variables but the interest rate on loans to firms goes up and credit goes down in a limited way. CBDC leads to a redistribution of wealth from firms and banks to households with a higher bank default rate. CBDC may have negative welfare effects, but a bound on holding enables a welfare improvement. |
| Keywords: | Agent-Based Model, Central Bank Digital Currency, Financial Stability, Bank-run |
| JEL: | E42 E44 E47 E52 E58 G01 G21 G28 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2026:01 |
| By: | Degiannakis, Stavros; Delis, Panagiotis; Filis, George |
| Abstract: | The aim of this study is to develop a forecasting framework for household-level inflation in Greece using domestic, global and energy-related predictors for the period 2009-2022. We show that significant forecasts gains are obtained when models incorporate global conditions and energy prices, relative to our benchmark model, the AR(1). More importantly, though, we find that although the global economic activity, global supply chain pressure and geopolitical risk are important predictors for all households, there are other predictors which demonstrate a household-specific forecast performance. Even more, we show that the energy factors are more important predictors for the low-income households. Overall, these results demonstrate (i) that aggregate inflation forecasts are not representative of the Greek households and (ii) the importance of household-specific inflation forecasting, which could be used as an early warning system that identifies the factors that could drive inflation inequality across the different households. |
| Keywords: | Household-level inflation, inflation inequality, Greece, forecasting, DMA, quantile regression. |
| JEL: | C52 C53 D14 E31 E37 |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127228 |
| By: | Fernando Ávalos (BANK FOR INTERNATIONAL SETTLEMENTS); Boris Hofmann (BANK FOR INTERNATIONAL SETTLEMENTS); Jose M. Serena (BANCO DE ESPAÑA) |
| Abstract: | Private equity funds play an increasingly important role in financial systems. Yet the impact of monetary policy on their activity has been little explored so far. In this paper, we analyse the transmission of monetary policy through private equity (PE) deals, focusing on the impact on: (i) the volume of private equity deals; (ii) the use of leverage; and (iii) the pricing of those deals. We find that contractionary monetary policy shocks at the short end of the yield curve tend to dampen private equity activity, by reducing deal volumes, the use of leverage and deal prices. A credit channel of monetary transmission seems to affect deal volumes and the use of leverage, while a valuation channel appears to drive the transmission to deal pricing. Monetary policy shocks at the long end of the yield curve have weaker effects on PE activity. |
| Keywords: | private equity, buyouts, monetary policy, credit spreads, equity risk premium |
| JEL: | G21 G32 F32 F34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2605 |
| By: | Martin Hodula; Simona Malovana |
| Abstract: | Do domestic or foreign interest rates matter more for investor behavior in a small open economy? This paper examines how domestic investors adjust mutual fund allocations in response to monetary policy shocks, using granular Czech mutual fund data from 2009 to 2023. Employing a local projection framework with an instrumental variables strategy, we show that fund flows react strongly to exogenous changes in interest rate differentials. Foreign monetary policy shocks are found to have a more pronounced effect than domestic ones. These responses occur almost exclusively through adjustments in inflows, with outflows remaining largely stable, indicating that monetary policy influences new allocations rather than causing redemptions. Exchange rate movements, economic sentiment, and fund liquidity further modulate these effects, making them stronger when the currency depreciates, sentiment is negative, or funds are less liquid. |
| Keywords: | Domestic investors, foreign monetary policy, interest rate differentials, liquidity, mutual fund flows, small open economy |
| JEL: | E44 E52 F32 G11 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cnb:wpaper:2025/11 |
| By: | Gabriela Araujo; David Rivero Leiva; Hugo Rodríguez Mendizábal |
| Abstract: | This paper develops a general equilibrium banking model where lending and payment flows endogenously link credit, liquidity, and solvency risks. Banks issue deposits at loan origination. As deposits circulate, reserve settlement creates liquidity exposure and repayment shortfalls generate credit and solvency risks. These risks are jointly determined by credit provision and bound balance sheet expansion at an internally determined profitability threshold rather than an external funding or capital limit. We present an application of the theory that provides a new look to the bank lending channel where monetary policy operates through the endogenous generation of bank risks. Our quantitative results align with empirical observations, including declines in deposit growth after monetary policy tightening and its different impact on lending depending on the balance sheet strength of banks as well as the relation of funding costs in interbank markets with liquidity and solvency ratios. |
| Keywords: | banks, credit risk, interbank market, liquidity risk, monetary policy, payments, risk premium, solvency risk |
| JEL: | E10 E44 E52 G21 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1549 |