Central banks

Anne Lundgaard HansenThis paper proposes a validation framework for LLM-generated measurements when reliable benchmarks are unavailable. Validity is established by testing whether an LLM can reconstruct passages from annotated labels while maintaining semantic consistency with the original text. The framework avoids circular reasoning by establishing testable prerequisite properties that must be met for a validation to be considered successful.

Our new methodology builds an inter-country input-output table that distinguishes green products from the rest, allowing us to assess vulnerabilities in green value chains. In a multi-country, multi-sector model, our table reveals that a decoupling of green supply chains between a US-centric West and a China-centric East could globally cut trade in green products by up to 20%, lower welfare by up to 3% and raise yearly global greenhouse gas emissions by about 50 million tonnes.

Akos Horvath and Benjamin S. KayBuilding on queuing theory, we develop and empirically validate a novel theoretical model of residential mortgage supply. Our model gives insight into how the stochastic arrival and sequential servicing of loan applications affect mortgage origination. The model provides closed-form predictions for lenders’ optimal response to changes in the level and price elasticity of mortgage demand.

Dario Caldara, Haroon Mumtaz, and Molin ZhongWe characterize asymmetric tail risk across over one hundred U.S. macroeconomic and financial variables using a dynamic factor model with stochastic volatility. The model unifies growth-at-risk, inflation-at-risk, and sectoral heterogeneity through common factors whose volatility responds endogenously to shocks, combined with heterogeneous factor loadings.