Central banks

Measuring market-based core inflation expectations

02/14/2024 European Central Bank Central banks

We build a novel term structure model for pricing synthetic euro area core inflation-linked swaps, a hypothetical swap contract indexed to core inflation. Our approach relies on a term structure model of traded headline inflation-linked swap rates, which we assume span core inflation. The model provides estimates of market-based expectations for core inflation, as well as core inflation risk premia, at daily frequency, whereas core inflation expectations from surveys or macroeconomic projections are typically only available monthly or quarterly.

FEDS Paper: Land development and frictions to housing supply over the business cycle

02/13/2024 Federal Reserve Central banks

Hyunseung Oh, Choongryul Yang, Chamna YoonUsing a novel data set of U.S. residential land developments, we document that the average time to develop residential properties—which includes both the time spent preparing land infrastructures and construction—is about three years, consistent with sizable lags in housing investment projects.

Minutes of Money Market Committee meeting – December 2023

02/13/2024 Bank of England Central banks

The Money Markets Committee is a forum for market participants and authorities to discuss the UK unsecured deposits and funding market and securities lending and repo markets.

Managing the transition to central bank digital currency

02/13/2024 European Central Bank Central banks

We develop a two-country DSGE model with financial frictions to study the transition from a steady-state without CBDC to one in which the home country issues a CBDC. The CBDC provides households with a liquid, convenient and storage-cost free means of payments which reduces the market power of banks on deposits. In the steady-state CBDC unambiguously improves welfare without disintermediating the banking sector. But macroeconomic volatility in the transition period to the new steady-state increases for plausible values of the latter.

Demographics, labor market power and the spatial equilibrium

02/12/2024 European Central Bank Central banks

This paper studies how demographics affect aggregate labor market power, the urban wage premium and the spatial concentration of population. I develop a quantitative spatial model in which labor market competitiveness depends on the demographic composition of the local workforce. Using highly disaggregated administrative data from Germany, I find that firms have more labor market power over older workers: The labor supply elasticity decreases from more than 2 to 1 from age 20 to 64.

Gas price shocks and euro area inflation

02/12/2024 European Central Bank Central banks

This paper develops a Bayesian VAR model to identify three structural shocks driving the European gas market: demand, supply and inventory shocks. We document how gas price fluctuations have a heterogeneous pass-through to euro area prices depending on the underlying shock driving them. The pass-through is stronger and more persistent when gas prices are driven by aggregate demand or supply pressures, while inventory shocks have a weaker impact.

IFDP Paper: On the GDP Effects of Severe Physical Hazards

02/09/2024 Federal Reserve Central banks

Martin Bodenstein and Mikaël ScaramucciWe assess the impacts from physical hazards (or severe weather events) on economic activity in a panel of 98 countries using local projection methods. Proxying the strength of an event by the monetary damages it caused, we find severe weather events to reduce the level of GDP. For most events in the EM-DAT data set the effects are small.

Statistical Notice 2024/04

02/09/2024 Bank of England Central banks

Statistical Notices update the definitions and guidance contained in the Banking Statistics Yellow Folder

Households' response to the wealth effects of inflation

02/08/2024 European Central Bank Central banks

We study the redistributive effects of surprise inflation combining administrative bank data with an information provision experiment during an episode of historic inflation. On average, households are well-informed about prevailing inflation and are concerned about its impact on their wealth; yet, while many households know about inflation eroding nominal assets, most are unaware of nominal-debt erosion. Once they receive information on the debt-erosion channel, households view nominal debt more positively and increase estimates of their own real net wealth.

The macroeconomic effects of global supply chain reorientation

02/08/2024 European Central Bank Central banks

Policymakers around the world are encouraging the local production of key inputs to reduce risks from excessive dependencies on foreign suppliers. We analyse the macroeconomic effects of supply chain reorientation through localisation policies, using a global dynamic general equilibrium model. We proxy non-tariff measures, such as the stricter enforcement of regulatory standards, which reduce import quantity but do not directly alter costs and prices.

Central banks

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