IFDP Paper: Imperfect Information and Slow Recoveries in the Labor Market

09/25/2025 Federal Reserve Central banks

Anushka MitraThe unemployment rate remains elevated long after recessions, a persistence that standard search-and-matching models cannot explain. I show that noise shocks—expectational errors due to the noise in received signals about aggregate shocks—account for much of this sluggishness. Using a structural VAR, I find that absent noise shocks unemployment would have recovered to its pre-recession level six quarters earlier over 1968–2019.

IFDP Paper: Clean Money, High Costs?

09/25/2025 Federal Reserve Central banks

Viktors StebunovsA cornerstone of the law-and-finance literature is that stronger institutions reduce financial intermediation costs. Using global data on cross-border payment costs, I show this relationship can reverse in heavily regulated sectors. Anti-money laundering risks have larger cost effects in advanced economies with strong enforcement than in developing countries with weak enforcement, despite the former having lower underlying risks.

From selling cars to selling handbags: with the arrival of Luca de Meo at Kering (Gucci, Balenciaga), is luxury becoming a sector like any other?

09/25/2025 The Conversation News & Comments

What do the luxury sector and the automotive sector have in common? Until recently, even asking the question would have seemed incongruous, given the apparent dissimilarity between brands engaged in mass production in search of economies of scale and those based on lavish spending and limited editions. The arrival of Luca de Meo (formerly of Renault) at the head of Kering signals a change for the group founded by French entrepreneur François-Henri Pinault, but also for the entire sector. Is playtime officially over?

Heterogeneity in macroeconomics

09/25/2025 European Central Bank Central banks

How large are the distributional effects of monetary policy in the euro area? Does heterogeneity matter for monetary policy? We answer these questions based on the results of research projects conducted at the ECB under the aegis of a dedicated research task force. A monetary policy easing causes a temporary reduction in consumption inequality; this is the case for both conventional and unconventional monetary policy.

What can newspaper articles reveal about the euro area economy?

09/25/2025 European Central Bank Central banks

This study introduces a novel approach to dictionary-based sentiment analysis that extracts valuable insights from economic newspaper articles in the euro area without requiring article translation. We develop sentiment indices that accurately measure economic, labour, and inflation perceptions in Germany, France, Italy, and Spain using native-language texts. The aggregation of these country-specific sentiments provides a reliable indicator for the euro area as a whole, demonstrating the effectiveness of our approach in several nowcasting and forecasting experiments.

Rational inattention and information provision experiments

09/25/2025 European Central Bank Central banks

In surveys with information provision experiments, researchers can observe how people change beliefs, and sometimes also actions, after having been confronted with information. This article interprets information provision experiments from the perspective of the theory of rational inattention, discussing what survey findings tell us about economic behaviour outside the survey and deriving implications for central bank communication.

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