Good Policy or Good Luck? Why Inflation Fell Without a Recession
A major factor in the decline of inflation is the simple fact that America’s workers were, in general, unable to raise their nominal wages in line with the rise in the cost of living
The Fed and the “Soft Landing” - Policy or Luck?
The biggest factor in accounting for the strength in the economy is the continuing importance of the wealth effect in sustaining consumption by the affluent.
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Inside the Loan Shark Economy
Trust, Risk, and Relationships
What Is a “Fair” Drug Price?
Medicare Needs a Perspective on “Collective and Cumulative Learning” in Inflation Reduction Act Negotiations
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Setting Pharmaceutical Drug Prices: What the Medicare Negotiators Need to Know About Innovation and Financialization
Medicare negotiators need to have a deep understanding - both theoretical and empirical - of the learning processes involved in developing a drug to negotiate a price that is fair.
Consumer demand for central bank digital currency as a means of payment
What factors could drive transactional demand for central bank digital currency (CBDC)? We analyse payment survey data to arrive at a framework for understanding the role of adoption frictions and design strategies in shaping CBDC demand. The results of our analysis show that, while consumers may initially prefer to use more traditional payment methods, a design tailored to their specific needs could significantly increase CBDC uptake. Raising awareness and capitalising on network effects could also boost demand for CBDC.
Different household – different inflation rate
Households differ considerably in terms of the inflation they experience at any point in time. The main reasons for this are that prices (and thus price changes) differ from place to place and that households do not all buy the same products. Households adjust their purchases over time, but not enough to offset these differences.
A diverse investor base impacts the effectiveness of large-scale asset purchases
Large-scale asset purchases can impact the price of securities either directly, when securities are targeted by the central bank, or indirectly through portfolio rebalancing by private investors. We quantify both the direct impact and that of portfolio rebalancing, emphasising the role of investor heterogeneity. We use proprietary security-level data on asset holdings of different investors. We measure the direct impact at security level, finding that it is smaller for securities predominantly held by more price-elastic investors, i.e. funds and banks.
Consumer risk-taking and stock market investment: Insights using the CES’s consumer finance module
Households’ willingness to take on risks has clear implications for the transmission of financial shocks, both in the long run and over the business cycle. This article introduces a newly published research dataset from the ECB’s Consumer Expectations Survey (CES) and summarises insights these data provide into household risk-taking. In particular, it examines how an increase in wealth affects a household’s decision on whether or not to invest in the stock market. The evidence suggests that all but the wealthiest households have a substantial aversion to investing in the stock market.
Unlocking efficiency: optimal monetary policy when capital misallocation matters
Some firms have the capacity to contribute significantly to economic productivity but cannot obtain the necessary capital for investment, which instead flows to less productive firms. While “misallocation of capital” and its detrimental impact on productivity is traditionally beyond the scope of central banks, monetary policy can influence it through firms’ investment decisions. Using a New Keynesian model and granular data on Spanish firms, our results show that expansionary monetary policy reduces capital misallocation.
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