Pablo Cuba-Borda, Albert Queralto, Ricardo Reyes-Heroles, and Mikaël ScaramucciWe study how trade cost shocks influence inflation. Using bilateral trade flows from detailed global input-output data and a gravity framework, we estimate trade cost shocks and their effects on CPI inflation.
We characterize optimal monetary policy under state-dependent pricing. The framework gives rise to nonlinear inflation dynamics: The flexibility of the price level increases after large shocks due to an endogenous rise in the frequency of price changes. In response to large cost-push shocks, optimal policy leverages the lower sacrifice ratio to curb inflation. When faced with total factor productivity shocks, an efficient disturbance, the optimal policy commits to strict price stability. The optimal long-run inflation rate is just above zero.
We characterize optimal monetary policy under state-dependent pricing. The framework gives rise to nonlinear inflation dynamics: The flexibility of the price level increases after large shocks due to an endogenous rise in the frequency of price changes. In response to large cost-push shocks, optimal policy leverages the lower sacrifice ratio to curb inflation. When faced with total factor productivity shocks, an efficient disturbance, the optimal policy commits to strict price stability. The optimal long-run inflation rate is just above zero.
The Bank of England is asking the public to give their views on what theme they would like to see represented in the design of the next series of banknotes – through a consultation launching today (2 July 2025).
Ralf R. Meisenzahl, Friederike Niepmann, and Tim Schmidt-EisenlohrThis paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous changes in euro-area interest rates and stock prices affect U.S.
Giovanni Favara, James Graham, and Geng LiHome-related spending in categories such as furnishings, renovations, and repairs is tied to housing market activity, with significant implications for aggregate expenditure dynamics. We refer to this relationship as the home purchase channel of expenditure.
This paper studies how Treasury market dynamics depend on adjustments to the central bank balance sheet. We introduce a dynamic model of Treasury bonds with traditional and shadow banks. In the model, both Treasury and repo market disruptions arise as a joint consequence of three frictions: (i) balance sheet costs,(ii) intraday reserves requirements, and (iii) imperfect substitutability between repo and bank deposits.
This paper studies how Treasury market dynamics depend on adjustments to the central bank balance sheet. We introduce a dynamic model of Treasury bonds with traditional and shadow banks. In the model, both Treasury and repo market disruptions arise as a joint consequence of three frictions: (i) balance sheet costs,(ii) intraday reserves requirements, and (iii) imperfect substitutability between repo and bank deposits.
This paper investigates the impact of foreign exchange (FX) shocks on income inequality across 31 European countries from 2003 to 2021. Leveraging a unique database of household-level longitudinal data from the European Union Statistics on Income and Living Conditions (EU-SILC) and exchange rate data from the Bank of International Settlements, we investigate how currency devaluations and appreciations influence income distribution.
This paper investigates the impact of foreign exchange (FX) shocks on income inequality across 31 European countries from 2003 to 2021. Leveraging a unique database of household-level longitudinal data from the European Union Statistics on Income and Living Conditions (EU-SILC) and exchange rate data from the Bank of International Settlements, we investigate how currency devaluations and appreciations influence income distribution.
