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on Monetary Economics |
| By: | Miguel Acosta; Andrea Ajello; Michael D. Bauer; Francesca Loria; Silvia Miranda-Agrippino |
| Abstract: | This paper introduces the U.S. Monetary Policy Event-Study Database (USMPD), a novel, public, and regularly updated dataset of financial market data around Federal Open Market Committee (FOMC) policy announcements, press conferences, and minutes releases. Using the rich high-frequency data in the USMPD, we document several new empirical findings. Large monetary policy surprises have made a comeback in recent years, and post-meeting press conferences have become the most important source of policy news. Monetary policy surprises have pronounced negative effects on breakeven inflation based on Treasury yields. Risk assets, including dividend derivatives, also respond strongly and negatively to monetary policy surprises, consistent with conventional channels of monetary transmission. Press conferences have stronger effects than FOMC statements on most asset prices. Finally, the term structure evidence shows peak effects on market-based inflation and dividend expectations at horizons of several years. |
| Keywords: | Federal Reserve, monetary policy surprises, high-frequency event studies |
| JEL: | E43 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12343 |
| By: | Pathak Chalise, Prayash |
| Abstract: | This paper studies the heterogeneity in household-level food price inflation in the United States from 2013 to 2023 using the NielsenIQ Consumer Panel data. We examine how food price inflation impacts households differently based on their demographic characteristics and shopping behavior. Using detailed scanner data on prices paid and quantities purchased, we calculate household-specific inflation rates, revealing substantial variation in inflation experience across households - especially pronounced during periods of high inflation such as the post-pandemic inflation surge. Our analysis also reveals significant inflation inequality across households, with higher rates experienced by low-income, older, single-family, Asian, and Black households. Our estimation indicates that households earning less than $20, 000 experience inflation rates that are between 0.02 to 0.31 percentage points higher than households earning $100, 000 or more. Furthermore, we explore the role of shopping behaviors in mitigating inflation, demonstrating that households can reduce inflation exposure through strategies like increasing shopping frequency, shopping across multiple retailers, and purchasing products on sale/discount, and how such strategies evolved during recent period of elevated inflation. We also examine product substitution behavior and highlight how households shift consumption patterns towards cheaper products during inflationary periods. Overall, our findings underscore the necessity of policy measures that account for this kind of heterogeneity to effectively address the disproportionate burden of inflation across vulnerable groups. |
| Keywords: | Food Security and Poverty |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360870 |
| By: | Roth, Felix |
| Abstract: | The paper finds that the post-pandemic inflation surge and subsequent decline from 2021 to 2024 had no significant impact on public support for the Euro for the EA-19 and for most individual member states of the EA-19. From 2021 to 2024, net public support for the euro remained remarkably stable and reached historically high values across the EA-19. Perceptions of inflation in the national and personal economic situation had no significant effect on public support for the euro during the post-pandemic inflation surge and subsequent decline from 2021 to 2023. These findings contrast with those for the before-crisis and crisis periods, in which inflation and inflation perceptions had a significant negative impact on public support for the euro. Similar to public support for the euro, trust in the institutions that govern the Euro was also not affected by the post-pandemic inflation surge. |
| Keywords: | Inflation, COVID-19, Post-Pandemic Inflation Surge and Decline, Inflation Perception, Public Support for the Euro, Euro Area, Trust in the ECB |
| JEL: | C32 C33 D84 E31 E42 E52 O52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:uhhhdp:21 |
| By: | Sheryl Chen; Tony Wang; Kyle Feinstein |
| Abstract: | We study how a central bank should dynamically set short-term nominal interest rates to stabilize inflation and unemployment when macroeconomic relationships are uncertain and time-varying. We model monetary policy as a sequential decision-making problem where the central bank observes macroeconomic conditions quarterly and chooses interest rate adjustments. Using publically accessible historical Federal Reserve Economic Data (FRED), we construct a linear-Gaussian transition model and implement a discrete-action Markov Decision Process with a quadratic loss reward function. We chose to compare nine different reinforcement learning style approaches against Taylor Rule and naive baselines, including tabular Q-learning variants, SARSA, Actor-Critic, Deep Q-Networks, Bayesian Q-learning with uncertainty quantification, and POMDP formulations with partial observability. Surprisingly, standard tabular Q-learning achieved the best performance (-615.13 +- 309.58 mean return), outperforming both enhanced RL methods and traditional policy rules. Our results suggest that while sophisticated RL techniques show promise for monetary policy applications, simpler approaches may be more robust in this domain, highlighting important challenges in applying modern RL to macroeconomic policy. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.17929 |
| By: | Samuel Martinez; Daniel Ventosa-Santaulària (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | Exchange rate pass-through (ERPT) is a key channel through which external shocks affect domestic inflation in open emerging market economies (EMEs). This paper estimates ERPT for Mexico using local projections with an instrumental-variable strategy to trace the cumulative effects of peso-dollar depreciations on consumer prices. The results indicate a relatively high degree of pass-through–higher than most estimates reported in the existing literature–suggesting that Mexican inflation responds more strongly to exchangerate movements than commonly assumed. Although price subcomponents display the expected heterogeneity (with goods showing the highest sensitivity and services the lowest), the main implication is clear: exchange-rate fluctuations remain a powerful driver of inflation dynamics, underscoring the policy relevance of monitoring currency volatility in open EMEs such as Mexico. |
| Keywords: | Inflation, Exchange rate pass-through, ERPT, EMEs, Mexico, Local projections |
| JEL: | E31 F14 F31 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2536 |
| By: | Stefano Maria Corbellini (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | This paper analyzes the monetary policy trade-off between defending purchasing power of consumers and keeping moderate debt cost for borrowers, in the framework of a heterogeneous agent New Keynesian open economy hit by a foreign energy price shock. Raising the interest rate indeed combats the loss in purchasing power due to the energy shock through a real exchange rate appreciation: however, this comes at the expense of higher interest payments for debtors. The trade-off can be resolved by adopting a milder interest rate policy during the crisis in exchange for a prolonged contraction beyond the energy shock time span. This interest rate smoothing approach allows to still experience a real appreciation today, while spreading the impact on debt costs more evenly over time. This policy counterfactual is analyzed in a quantitative model of the UK economy under the 2022-2023 energy price hike, where the loss of consumers’ purchasing power and the vulnerability of mortgage costs to higher policy rates have been elements of paramount empirical relevance. |
| Keywords: | monetary policy, energy, heterogeneity, inequality, household debt |
| JEL: | D14 D31 E52 G21 G51 Q43 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2025014 |
| By: | Roger Hammersland; Dag Kolsrud (Statistics Norway) |
| Abstract: | Building on a New Keynesian rational expectations framework, we develop a structural empirical model that jointly determines the real exchange rate, inflation, and the nominal interest rate in a small open economy. Employing a full-information system design and estimation approach that avoids imposing unduly restrictive a priori parameter constraints, we identify a forward-looking Phillips curve while addressing simultaneity bias. Our empirical findings reveal persistent exchange rate dynamics that diverge from New Keynesian rational expectations but align with prior evidence, suggesting the presence of multiple equilibria. |
| Keywords: | New Keynesian Phillips curve; structural time series modeling; simultaneous model design and estimation |
| JEL: | C32 C51 E12 E31 F41 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1026 |
| By: | Losada Baños, José Javier |
| Abstract: | Throughout the millennial history of money, various payment instruments have been developed: some designed to facilitate economic transactions and others to preserve accumulated wealth, adapting in each historical period to the conditions and capabilities of the society of their time. In this context, the maturity achieved by the cryptocurrency industry over the last five years, especially in areas such as blockchain, oracle networks, self-custody, multi-chain environments, and decentralized applications —DApps—combined with today's colossal data processing capacity, opens up the possibility of applying these 21st-century technologies to the construction of a new international monetary system. This article explains how to use these telematic tools to achieve this, as well as their implications in the financial and economic arena, including enhanced financial stability and the recognition of the Fundamental Right of People to Safeguard the Wealth. |
| Keywords: | monetary system, Bitcoin, blockchain, self-custody, cryptocurrency, financial stability, Fundamental Right of People to Safeguard the Wealth |
| JEL: | E42 E59 F31 G21 G23 O33 |
| Date: | 2025–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127207 |
| By: | Conesa Martinez, Marina |
| Abstract: | This policy brief explores the role of communication by central banks as they facilitate the operation of green bond markets. It analyses whether the integration of climate considerations into central banks’ communication strategies has had an effect on market behaviour. Summary An estimated US$4.5 trillion in annual investment is needed to meet the Paris Agreement targets and reduce the possibility of a significant drop in global GDP caused by unmitigated climate change. Central banks can play a crucial role in addressing this challenge by incorporating climate-related considerations into their frameworks, including strategic communication. Subject to legal requirements, central banks may also assume a catalytic role in promoting sustainable development. Cross-country evidence suggests that more active messaging from central banks about climate change considerations is positively associated with green bond issuance at the firm level. Green bonds and similar instruments can help channel funding to renewable energy, clean transport and other environmental projects. Overall, analysis of central bank speeches suggests that these communications can serve as a soft tool to bridge the financing gap for a low-carbon economy. By clearly communicating climate-related risks and policies, central banks could reduce uncertainty around their actions, foster confidence among investors and firms, and align market behaviour with long-term sustainability goals, ultimately supporting their objectives such as price and financial stability. Recommendations – central banks could: Regularly report on progress made on climate-related initiatives to strengthen credibility, address concerns about mandate overreach, and strengthen stakeholder trust. Integrate discussion of climate risks and policies into their regular communications wherever relevant, such as monetary policy statements, speeches and reports, to guide market behaviour and foster confidence in sustainable finance. Collaborate with international organisations to standardise taxonomies and verification mechanisms, ensuring credibility and addressing greenwashing. |
| JEL: | F3 G3 N0 |
| Date: | 2025–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130756 |
| By: | Feyertag, Joe |
| Abstract: | Climate change, environmental degradation, and the accelerating transition to a low-carbon economy are reshaping global labour markets. These forces are altering both the demand for and supply of labour, with far-reaching implications for central banks. As institutions that closely monitor labour market dynamics to guide monetary policy, central banks will increasingly need to account for the disruptions caused by environmental pressures. This report addresses a critical gap in current analysis by exploring how environmental risks intersect with central banks’ mandates through the labour market. It aims to equip central banks with the insights needed to integrate these evolving risks into their policy frameworks and operational decisions. |
| JEL: | N0 R14 J01 F3 G3 |
| Date: | 2025–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130735 |
| By: | Eunkyu Seong; Seojeong Lee |
| Abstract: | The Bank of Korea (BoK) regularly publishes the Economic Outlook, offering forecasts for key macroeconomic variables such as GDP growth, inflation, and unemployment rates. This study examines whether the BoK's inflation forecasts exhibit bias, specifically a tendency to align with its inflation target. We extend the Holden and Peel (1990) test to incorporate state-dependency, defining the state of the economy based on whether realized inflation falls below the target at the time of the forecast. Our analysis reveals that the BoK's inflation forecasts are biased under this state-dependent framework. Furthermore, we examine a range of bias correction strategies based on AR(1) and mean error models, including their state-dependent variants. These strategies generally improve forecast accuracy. Among them, the AR(1)-based correction exhibits relatively stable performance, consistently reducing the root mean square error. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.16068 |
| By: | Amado, Lindorf |
| Abstract: | Standard economic models often treat money as a social construct independent of physical laws. This paper proposes a unified thermodynamic theory of value, positing that monetary systems are information protocols evolved to maximize entropy production in dissipative structures (civilizations). By analyzing 10, 000 years of economic history—from the Neolithic era to the Digital Age—we demonstrate a strict linear relationship (R2 = 0:9934) between the Real Cost of Energy (E) and the Granularity of Money (G). We derive the Equation of Value, G / E, where the value of the accounting unit scales directly with the energy cost of labor. This framework resolves historical anomalies such as the collapse of the Roman Denarius and the failure of the 20th-century Gold Standard, interpreting them not as policy errors, but as thermodynamic phase transitions. The theory predicts that the current decline in the marginal cost of energy (via AI and renewables) necessitates a transition to a monetary substrate with near-infinite divisibility and zero friction. |
| Keywords: | Thermodynamics, Monetary Theory, Entropy, Granularity, Econophysics, AI, Gold Standard, Collapse, Deterministic |
| JEL: | B52 C10 E42 N10 O33 |
| Date: | 2025–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127378 |
| By: | Iancu, Aurel (Romanian Academy, National Institute of Economic Research) |
| Abstract: | This article is focusing on the economic literature attempting to solve the problem of the impossible trilemmas of the euro area, by reconciling the relations between the three essential pillars - supranational monetary independence, national fiscal independence and the no bail-out clause applied in the union of states with single currency. The analyses carried out show that the first countries to fall victim to the economic and financial crisis where the least developed with high levels of public debt and which did not respect the nominal convergence criteria. The wide range of measures taken following the crises aimed not only at economic recovery, but also at significant changes in the architecture of the essential pillars and the relations between them by applying a mix of policies to relax these restrictive relations and accompanied by measures to respect financial and fiscal discipline. On the other hand, in order to resolve critical moments of financial balances, including insolvency, special intervention fund and financial facilities were created. It was the transition from the no bail-out clause to the explicit bail-out regime. The last section also reveals the existence of a significant upward trend in measures and reforms which support increasing efficiency of actions and fiscal competences at the EU and member state levels. The text emphasizes the EU's contribution to simplify and modernize the fiscal system of the member states. In the new conditions, fiscal policy should no longer be seen as a state of opposition between the common fiscal policy and the sovereign fiscal policy, but rather as a state of cooperation and support given to the member states under the conditions of the wide application of the principles of subsidiarity and proportionality. |
| Keywords: | impossible trilemma, essential pillars, single currency independence, national fiscal independence, no bail-out clause, explicit bail-out regime, insolvency, compatibility, crisis, mix policies, quantitative easing, financial funds and facilities, principle of subsidiarity |
| JEL: | A12 B41 E32 E42 E63 E52 E58 F02 F6 H2 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ror:wpince:251229 |
| By: | Ling, Xiao; Ray, Sourav; Levy, Daniel |
| Abstract: | Much like small ripples in a stream, which get lost in the larger waves, small changes in retail prices often fly under the radar of public perceptions, while large price changes appear as marketing moves associated with demand and competition. Unnoticed, these could increase consumers’ out-of-pocket expenses. Indeed, retailers could boost their profits by making numerous small price increases or by obfuscating large price increases with numerous small price decreases, thereby bypassing the consumer’s full attention and consideration, and triggering consumer fairness concerns. Yet only a handful of papers study small price changes. Extant results are often based on a single retailer, limited products, short time span, and legacy datasets dating back to the 1980s and 1990s – leaving their current practical relevance questionable. Researchers have also questioned whether the reported observations of small price changes are artifacts of measurement errors driven by data aggregation. In a series of analyses of a large dataset (almost 79 billion weekly price observations from 2006 to 2015, covering 527 products, and about 35, 000 stores across 161 retailers), we find robust evidence of asymmetric pricing in the small (APIS), where small price increases outnumber small price decreases, but no such asymmetry is present in the large. We also document the reverse phenomenon (APIS-R), where small price decreases outnumber small price increases. Our results are robust to several possible measurement issues. Importantly, our findings indicate a greater current relevance and generalizability of such asymmetric pricing practices than the existing literature recognizes. |
| Keywords: | Asymmetric pricing; Dynamic pricing; Rational inattention; Consumer inattention; Price rigidity; Price flexibility; Sticky prices; Rigid prices; Retailing; Small price changes; Small price increases; Small price decreases; inflation |
| JEL: | E31 L11 L16 M21 M31 |
| Date: | 2025–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127108 |
| By: | DiLeo, Monica |
| Abstract: | As central bankers have increasingly considered the impacts of climate change and a net zero transition on their mandates, analysis has focused on the challenges of the technical uncertainty presented by financial and climatic systems. This report builds on previous work by focusing on how uncertainty created by political systems affects central banks. Political uncertainty is not inherently negative. It is often a byproduct of the dynamism inherent in democratic political systems. However, it can generate practical challenges for central banks and create a risk that they will avoid action on certain topics relevant to their mandates. This report offers central bankers a framework for defining different types of political uncertainty and principles to enable them to cope and move forward. |
| JEL: | F3 G3 N0 |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130739 |
| By: | Yuquan Li; Yuexin Xiang; Qin Wang; Tsz Hon Yuen; Andreas Deppeler; Jiangshan Yu |
| Abstract: | Stablecoins have emerged as a rapidly growing digital payment instrument, raising the question of whether blockchain-based settlement can function as a substitute for incumbent card networks in retail payments. This Systematization of Knowledge (SoK) provides a systematic comparison between stablecoin payment arrangements and card networks by situating both within a unified analytical framework. We first map their respective payment infrastructures, participant roles, and transaction lifecycles, highlighting fundamental differences in how authorization, settlement, and recourse are organized. Building on this mapping, we introduce the CLEAR framework, which evaluates retail payment systems across five dimensions: cost, legality, experience, architecture, and reach. Our analysis shows that stablecoins deliver efficient, continuous, and programmable settlement, often compressing rail-level merchant fees and enabling 24/7 value transfer. However, these advantages are accompanied by an inversion of the traditional pricing and risk-allocation structure. Card networks internalize consumer-side frictions through subsidies, standardized liability rules, and post-transaction recourse, thereby supporting mass-market adoption. Stablecoin arrangements, by contrast, externalize transaction fees, error prevention, and dispute resolution to users, intermediaries, and courts, resulting in weaker consumer protection, higher cognitive burden at the point of interaction, and fragmented acceptance. Accordingly, stablecoins exhibit a conditional comparative advantage in closed-loop environments, cross-border corridors, and high-friction payment contexts, but remain structurally disadvantaged as open-loop retail payment instruments. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.00196 |
| By: | FitzGerald, E. V. K.; Mavrotas, G. |
| Keywords: | Financial Economics, International Development, Labor and Human Capital |
| URL: | https://d.repec.org/n?u=RePEc:ags:ilopsa:258925 |