Pub Date : 2025-06-27DOI: 10.1016/j.jmacro.2025.103694
Justin Svec, Daniel L. Tortorice
This paper solves for optimal monetary policy when households face uncertainty about whether the central bank is independent from the political authority. In our model an independent central bank maximizes its own preferences while a dependent central bank maximizes the preferences of the political authority. Households form beliefs regarding the likelihood that the central bank is independent and update these beliefs using Bayes” rule given the observed choice of interest rate. The central bank takes into account how its policy choice influences household beliefs. We find that the central bank suffers losses when it is perceived to be captured, leading the central bank to deviate from traditional optimal policy under rational expectations to demonstrate its independence to the households.
{"title":"Asserting independence: Optimal monetary policy when the central bank and political authority disagree","authors":"Justin Svec, Daniel L. Tortorice","doi":"10.1016/j.jmacro.2025.103694","DOIUrl":"10.1016/j.jmacro.2025.103694","url":null,"abstract":"<div><div>This paper solves for optimal monetary policy when households face uncertainty about whether the central bank is independent from the political authority. In our model an independent central bank maximizes its own preferences while a dependent central bank maximizes the preferences of the political authority. Households form beliefs regarding the likelihood that the central bank is independent and update these beliefs using Bayes” rule given the observed choice of interest rate. The central bank takes into account how its policy choice influences household beliefs. We find that the central bank suffers losses when it is perceived to be captured, leading the central bank to deviate from traditional optimal policy under rational expectations to demonstrate its independence to the households.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103694"},"PeriodicalIF":1.3,"publicationDate":"2025-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144596240","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-09DOI: 10.1016/j.jmacro.2025.103682
Joel Alcedo , Alberto Cavallo , Prachi Mishra , Antonio Spilimbergo
We study online spending shares in 44 economies and 26 industries during the COVID-19 pandemic, using online transaction data from Mastercard. The online shares of total credit card transactions surged during the pandemic during lockdowns, but since returned to pre-pandemic trends in most countries. The differences between countries are strongly correlated with the mobility and fiscal measures. There is little evidence of permanent structural changes in e-commerce spending patterns. Finally, we estimate that COVID-19-related restrictions on in-person spending imposed average welfare costs of 7 percent.
{"title":"Back to trend: COVID effects on E-commerce in 44 countries","authors":"Joel Alcedo , Alberto Cavallo , Prachi Mishra , Antonio Spilimbergo","doi":"10.1016/j.jmacro.2025.103682","DOIUrl":"10.1016/j.jmacro.2025.103682","url":null,"abstract":"<div><div>We study online spending shares in 44 economies and 26 industries during the COVID-19 pandemic, using online transaction data from Mastercard. The online shares of total credit card transactions surged during the pandemic during lockdowns, but since returned to pre-pandemic trends in most countries. The differences between countries are strongly correlated with the mobility and fiscal measures. There is little evidence of permanent structural changes in e-commerce spending patterns. Finally, we estimate that COVID-19-related restrictions on in-person spending imposed average welfare costs of 7 percent.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103682"},"PeriodicalIF":1.3,"publicationDate":"2025-06-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144314227","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-07DOI: 10.1016/j.jmacro.2025.103691
Hanhui Tian , Chenxi Wang , Chengsi Zhang
This paper investigates the transmission of fiscal stimulus under monetary accommodation (MA) in a New Keynesian framework. Our analysis highlights the financial accelerator channel, through which changes in nominal interest rate affect the asset price and consequently the real financing cost of firms. We examine how financial frictions and nominal interest rate dynamics shape the macroeconomic effects of fiscal expansion and compare different MA strategies: accommodative commitment policy and pegged interest rate policy, which capture worldwide practices of MA. Our findings highlight that the effectiveness of MA depends on the duration of fiscal stimulus and the presence of frictional financial intermediation. Additionally, we show that imperfect risk sharing between households and entrepreneurs further enhances the role of financial accelerator channel.
{"title":"The effects of fiscal stimulus under monetary accommodation","authors":"Hanhui Tian , Chenxi Wang , Chengsi Zhang","doi":"10.1016/j.jmacro.2025.103691","DOIUrl":"10.1016/j.jmacro.2025.103691","url":null,"abstract":"<div><div>This paper investigates the transmission of fiscal stimulus under monetary accommodation (MA) in a New Keynesian framework. Our analysis highlights the financial accelerator channel, through which changes in nominal interest rate affect the asset price and consequently the real financing cost of firms. We examine how financial frictions and nominal interest rate dynamics shape the macroeconomic effects of fiscal expansion and compare different MA strategies: accommodative commitment policy and pegged interest rate policy, which capture worldwide practices of MA. Our findings highlight that the effectiveness of MA depends on the duration of fiscal stimulus and the presence of frictional financial intermediation. Additionally, we show that imperfect risk sharing between households and entrepreneurs further enhances the role of financial accelerator channel.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103691"},"PeriodicalIF":1.3,"publicationDate":"2025-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144261775","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-04DOI: 10.1016/j.jmacro.2025.103692
Federico Fiuratti, Desislava Nikolova, Steven Pennings, Marc Schiffbauer
The European Commission’s “NextGenerationEU” COVID-19 recovery package has underscored interest in the size of regional fiscal multipliers in Europe. While the objective of EU funds is generally the long-term transformation and growth of EU economies, several recent papers have estimated large short-term regional multipliers on historical EU structural and investment fund spending. This paper reevaluates the evidence by estimating relative regional short-term multipliers using recent data on EU fund spending at the subnational (NUTS2) level and a leave-one-out predicted disbursement schedule instrument. In contrast with much of the recent literature, we find little evidence of large relative GDP multipliers. While investment responds strongly to EU funds, often increasing euro for euro, we also find suggestive evidence of crowding out of other government consumption.
{"title":"Are regional fiscal multipliers on EU structural and investment fund spending large? A reassessment of the evidence","authors":"Federico Fiuratti, Desislava Nikolova, Steven Pennings, Marc Schiffbauer","doi":"10.1016/j.jmacro.2025.103692","DOIUrl":"10.1016/j.jmacro.2025.103692","url":null,"abstract":"<div><div>The European Commission’s “NextGenerationEU” COVID-19 recovery package has underscored interest in the size of regional fiscal multipliers in Europe. While the objective of EU funds is generally the long-term transformation and growth of EU economies, several recent papers have estimated large short-term regional multipliers on historical EU structural and investment fund spending. This paper reevaluates the evidence by estimating relative regional short-term multipliers using recent data on EU fund spending at the subnational (NUTS2) level and a leave-one-out predicted disbursement schedule instrument. In contrast with much of the recent literature, we find little evidence of large relative GDP multipliers. While investment responds strongly to EU funds, often increasing euro for euro, we also find suggestive evidence of crowding out of other government consumption.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103692"},"PeriodicalIF":1.3,"publicationDate":"2025-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144314226","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-03DOI: 10.1016/j.jmacro.2025.103690
Luis Herrera , Jesús Vázquez
This paper contributes to two strands of business cycle literature — news shocks and bounded rationality — by assessing the empirical importance of TFP news shocks while relaxing the rational expectations assumption. We estimate a medium-scale DSGE model, incorporating financial frictions and TFP news shocks, under two different expectation formation mechanisms: rational expectations (RE) and adaptive learning (AL). The results suggest that AL amplifies the effects of financial market frictions, leading to three key findings. First, AL improves the model’s fit, as shown in the related literature, and better replicates the volatility of several aggregate variables. Second, the AL amplification results in a deflationary response and a more persistent reaction of lending spreads to TFP news shocks. Third, AL increases the importance of pure news shocks (i.e. purely anticipated shocks), amplifying their effects through both expectation and credit channels. Finally, we show that the dynamics generated by the DSGE model under AL align more closely with empirical VAR evidence than those produced by the RE version of the DSGE model.
{"title":"Learning from news","authors":"Luis Herrera , Jesús Vázquez","doi":"10.1016/j.jmacro.2025.103690","DOIUrl":"10.1016/j.jmacro.2025.103690","url":null,"abstract":"<div><div>This paper contributes to two strands of business cycle literature — news shocks and bounded rationality — by assessing the empirical importance of TFP news shocks while relaxing the rational expectations assumption. We estimate a medium-scale DSGE model, incorporating financial frictions and TFP news shocks, under two different expectation formation mechanisms: rational expectations (RE) and adaptive learning (AL). The results suggest that AL amplifies the effects of financial market frictions, leading to three key findings. First, AL improves the model’s fit, as shown in the related literature, and better replicates the volatility of several aggregate variables. Second, the AL amplification results in a deflationary response and a more persistent reaction of lending spreads to TFP news shocks. Third, AL increases the importance of pure news shocks (i.e. purely anticipated shocks), amplifying their effects through both expectation and credit channels. Finally, we show that the dynamics generated by the DSGE model under AL align more closely with empirical VAR evidence than those produced by the RE version of the DSGE model.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103690"},"PeriodicalIF":1.3,"publicationDate":"2025-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144261901","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-22DOI: 10.1016/j.jmacro.2025.103680
Konstantin Boss , Alessandra Testa
We use a spatial data set of US temperatures in a factor-augmented VAR to quantify the contribution of the US economy to fluctuations in temperatures over the past 70 years. Disentangling natural from anthropogenic effects, we find that economic expansions have not only led to warming: technology shocks initially decreased temperatures, whereas investment and labor supply shocks increased them rapidly and persistently. Taken together, these economic shocks explained around 25% of long-term temperature variation in the US. In turn, temperature shocks have induced small contractions in aggregate GDP, but could even be beneficial for the economy, when they predominantly hit the western states.
{"title":"What goes around comes around: The US climate-economic cycle","authors":"Konstantin Boss , Alessandra Testa","doi":"10.1016/j.jmacro.2025.103680","DOIUrl":"10.1016/j.jmacro.2025.103680","url":null,"abstract":"<div><div>We use a spatial data set of US temperatures in a factor-augmented VAR to quantify the contribution of the US economy to fluctuations in temperatures over the past 70 years. Disentangling natural from anthropogenic effects, we find that economic expansions have not only led to warming: technology shocks initially decreased temperatures, whereas investment and labor supply shocks increased them rapidly and persistently. Taken together, these economic shocks explained around 25% of long-term temperature variation in the US. In turn, temperature shocks have induced small contractions in aggregate GDP, but could even be beneficial for the economy, when they predominantly hit the western states.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103680"},"PeriodicalIF":1.3,"publicationDate":"2025-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144170792","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-11DOI: 10.1016/j.jmacro.2025.103681
Alexander Jung
This study revisits the Quantity Theory of Money (QTM) by examining the relationship between excess money growth and inflation over 150 years (1870–2020) in 18 industrialized countries. Utilizing the Jordà-Schularick-Taylor Macrohistory Database and advanced econometric techniques, the research uncovers that the strength of this long-run relationship has varied across time and different monetary regimes: it was weak during the classical gold standard and the recent age of inflation targeting, whereas it was strong after World War I and before the Great Moderation. The money-inflation link has been very reliable in high-inflation regimes but was unreliable in low-inflation environments. The empirical analysis also confirms long and variable lags in the transmission of monetary impulses to inflation, with excess money growth impacting inflation after 2 to 2½ years.
{"title":"The quantity theory of money: An empirical analysis for 1870 - 2020","authors":"Alexander Jung","doi":"10.1016/j.jmacro.2025.103681","DOIUrl":"10.1016/j.jmacro.2025.103681","url":null,"abstract":"<div><div>This study revisits the Quantity Theory of Money (QTM) by examining the relationship between excess money growth and inflation over 150 years (1870–2020) in 18 industrialized countries. Utilizing the Jordà-Schularick-Taylor Macrohistory Database and advanced econometric techniques, the research uncovers that the strength of this long-run relationship has varied across time and different monetary regimes: it was weak during the classical gold standard and the recent age of inflation targeting, whereas it was strong after World War I and before the Great Moderation. The money-inflation link has been very reliable in high-inflation regimes but was unreliable in low-inflation environments. The empirical analysis also confirms long and variable lags in the transmission of monetary impulses to inflation, with excess money growth impacting inflation after 2 to 2½ years.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"85 ","pages":"Article 103681"},"PeriodicalIF":1.3,"publicationDate":"2025-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139555","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-22DOI: 10.1016/j.jmacro.2025.103679
Chetan Dave , Scott J. Dressler , Samreen Malik
Distributions of GDP fluctuations that exhibit fat tails shed doubt on the suitability of Normal distributions in empirical and theoretical business-cycle analyses. We document: (i) fat tails in US output fluctuations are not a pervading characteristic of the entire post-war sample, and appear in subsamples exhibiting declines in cyclical and trend volatility (e.g., the Great Moderation); (ii) a DSGE environment featuring Normal shocks that match the declines in observed cyclical and trend volatility can explain almost all of the fat-tailed characteristics observed in the data, leaving little support for the role of rare, large shocks delivering fat-tailed distributions.
{"title":"Cautionary tales of fat tails","authors":"Chetan Dave , Scott J. Dressler , Samreen Malik","doi":"10.1016/j.jmacro.2025.103679","DOIUrl":"10.1016/j.jmacro.2025.103679","url":null,"abstract":"<div><div>Distributions of GDP fluctuations that exhibit fat tails shed doubt on the suitability of Normal distributions in empirical and theoretical business-cycle analyses. We document: (i) fat tails in US output fluctuations are not a pervading characteristic of the entire post-war sample, and appear in subsamples exhibiting declines in cyclical and trend volatility (e.g., the Great Moderation); (ii) a DSGE environment featuring Normal shocks that match the declines in observed cyclical and trend volatility can explain almost all of the fat-tailed characteristics observed in the data, leaving little support for the role of rare, large shocks delivering fat-tailed distributions.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"84 ","pages":"Article 103679"},"PeriodicalIF":1.3,"publicationDate":"2025-04-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143870120","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-12DOI: 10.1016/j.jmacro.2025.103678
Constantine Angyridis , Arman Mansoorian , Leo Michelis
This paper examines the costs associated with the level and variability of inflation in the context of a general equilibrium () welfare measure which accounts for the optimal adjustments of all the endogenous variables in the model in response to the transfers received by the households. We compare and contrast the welfare costs with the conventional consumption equivalent () measure across three utility functions that have been used routinely in the macroeconomics literature.
{"title":"On the costs of inflation with a general equilibrium welfare measure and alternative utility functions","authors":"Constantine Angyridis , Arman Mansoorian , Leo Michelis","doi":"10.1016/j.jmacro.2025.103678","DOIUrl":"10.1016/j.jmacro.2025.103678","url":null,"abstract":"<div><div>This paper examines the costs associated with the level and variability of inflation in the context of a general equilibrium (<span><math><mrow><mi>G</mi><mi>E</mi></mrow></math></span>) welfare measure which accounts for the optimal adjustments of all the endogenous variables in the model in response to the transfers received by the households. We compare and contrast the <span><math><mrow><mi>G</mi><mi>E</mi></mrow></math></span> welfare costs with the conventional consumption equivalent (<span><math><mrow><mi>C</mi><mi>E</mi></mrow></math></span>) measure across three utility functions that have been used routinely in the macroeconomics literature.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"84 ","pages":"Article 103678"},"PeriodicalIF":1.3,"publicationDate":"2025-04-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143859214","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-05DOI: 10.1016/j.jmacro.2025.103677
Selien De Schryder, Nikolaos Koutounidis, Koen Schoors, Johannes Weytjens
The transmission of the pandemic shock to the macroeconomy through the prism of consumer heterogeneity is the focal point of this paper. Based on a rich bank account and transactions micro dataset, we assess the roles of local COVID-19 severity, government measures against the spread of the virus, and vaccination rates for households’ consumption behavior in Belgium. We find that households living in areas that experienced high COVID-19 positivity rates and more stringent containment measures, decreased their consumption more. The relevance of these effects, however, shifted over the course of the pandemic. Higher local vaccination rates significantly counteracted these negative impacts on household consumption. Furthermore, our study highlights that the impact of these factors on consumption varied distinctly across households with different income, liquid wealth, and age characteristics.
{"title":"Assessing the heterogeneous impact of COVID-19 on consumption using bank transactions","authors":"Selien De Schryder, Nikolaos Koutounidis, Koen Schoors, Johannes Weytjens","doi":"10.1016/j.jmacro.2025.103677","DOIUrl":"10.1016/j.jmacro.2025.103677","url":null,"abstract":"<div><div>The transmission of the pandemic shock to the macroeconomy through the prism of consumer heterogeneity is the focal point of this paper. Based on a rich bank account and transactions micro dataset, we assess the roles of local COVID-19 severity, government measures against the spread of the virus, and vaccination rates for households’ consumption behavior in Belgium. We find that households living in areas that experienced high COVID-19 positivity rates and more stringent containment measures, decreased their consumption more. The relevance of these effects, however, shifted over the course of the pandemic. Higher local vaccination rates significantly counteracted these negative impacts on household consumption. Furthermore, our study highlights that the impact of these factors on consumption varied distinctly across households with different income, liquid wealth, and age characteristics.</div></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"84 ","pages":"Article 103677"},"PeriodicalIF":1.3,"publicationDate":"2025-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143823943","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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