Pub Date : 2026-01-23DOI: 10.1016/j.jmoneco.2026.103900
Kirstin Hubrich , Yves Schüler , Daniel Waggoner
We provide empirical evidence that the amplification of financial shocks through leverage of financial institutions is both time-varying and heterogeneous across types of financial institutions. Using institution-level micro data on market-based leverage, we find that the strength of this amplification varies over time and that deleveraging by global systemically important banks and broker–dealers has significantly more adverse effects on macroeconomic outcomes than deleveraging by depository institutions, particularly within a financial constraint regime. In our framework, this regime is not imposed but emerges endogenously from the state of financial and monetary conditions. To uncover these dynamics, we develop and apply an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities and introduce structural identification techniques to this class of models.
{"title":"Financial shocks and leverage of financial institutions: When do they matter?","authors":"Kirstin Hubrich , Yves Schüler , Daniel Waggoner","doi":"10.1016/j.jmoneco.2026.103900","DOIUrl":"10.1016/j.jmoneco.2026.103900","url":null,"abstract":"<div><div>We provide empirical evidence that the amplification of financial shocks through leverage of financial institutions is both time-varying and heterogeneous across types of financial institutions. Using institution-level micro data on market-based leverage, we find that the strength of this amplification varies over time and that deleveraging by global systemically important banks and broker–dealers has significantly more adverse effects on macroeconomic outcomes than deleveraging by depository institutions, particularly within a financial constraint regime. In our framework, this regime is not imposed but emerges endogenously from the state of financial and monetary conditions. To uncover these dynamics, we develop and apply an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities and introduce structural identification techniques to this class of models.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103900"},"PeriodicalIF":4.1,"publicationDate":"2026-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146078551","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-23DOI: 10.1016/j.jmoneco.2026.103897
Camelia Minoiu , Rebecca Zarutskie , Andrei Zlate
We study the effects of the Main Street Lending Program (MSLP)—a Federal Reserve emergency program which sought to support bank lending to small- and medium-sized businesses by purchasing 95% of eligible loans from banks—on the provision of bank credit to non-financial firms. We show the MSLP increased banks’ willingness to lend outside the program by serving as an “implicit backstop.” Participating banks were more likely to grant new loans, increase loan volumes, and reduce loan spreads, with stronger effects for ex-ante riskier firms and for lower-capital banks. We estimate that every $1 of take-up increased lending by $1.95.
{"title":"Motivating banks to lend? Credit spillover effects of the Main Street Lending Program","authors":"Camelia Minoiu , Rebecca Zarutskie , Andrei Zlate","doi":"10.1016/j.jmoneco.2026.103897","DOIUrl":"10.1016/j.jmoneco.2026.103897","url":null,"abstract":"<div><div>We study the effects of the Main Street Lending Program (MSLP)—a Federal Reserve emergency program which sought to support bank lending to small- and medium-sized businesses by purchasing 95% of eligible loans from banks—on the provision of bank credit to non-financial firms. We show the MSLP increased banks’ willingness to lend outside the program by serving as an “implicit backstop.” Participating banks were more likely to grant new loans, increase loan volumes, and reduce loan spreads, with stronger effects for ex-ante riskier firms and for lower-capital banks. We estimate that every $1 of take-up increased lending by $1.95.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103897"},"PeriodicalIF":4.1,"publicationDate":"2026-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146078549","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Empirical studies have estimated a large range of consumption responses to changes in housing prices. Using a quasi-experiment, we estimate a shock of percent to single-family house prices in the area surrounding an airport in Stockholm after its operations were unexpectedly continued as a result of political bargaining behind closed doors. Using a household data set with information on the locations of primary residences relative to the airport, we find a short-run elasticity with respect to new car purchases of 0.28, corresponding to a one-year marginal propensity for expenditure on cars (car MPX) of 0.09 cents per dollar lost in housing wealth. Households with high loan-to-value ratios and small bank deposits respond the most. A quantitative model aligns with our empirical findings but also suggests that the car MPX could be 0.31 cents when used cars are included; of this, 73 percent is explained by a collateral channel. When nondurables are accounted for, the total marginal propensity to spend is 2.1 cents. In the case of an absolute fall in housing prices, the total response is four times greater.
{"title":"The housing wealth effect: Quasi-experimental evidence","authors":"Jesper Böjeryd , Roine Vestman , Björn Tyrefors , Dany Kessel","doi":"10.1016/j.jmoneco.2026.103892","DOIUrl":"10.1016/j.jmoneco.2026.103892","url":null,"abstract":"<div><div>Empirical studies have estimated a large range of consumption responses to changes in housing prices. Using a quasi-experiment, we estimate a shock of <span><math><mrow><mo>−</mo><mn>19</mn><mo>.</mo><mn>4</mn></mrow></math></span> percent to single-family house prices in the area surrounding an airport in Stockholm after its operations were unexpectedly continued as a result of political bargaining behind closed doors. Using a household data set with information on the locations of primary residences relative to the airport, we find a short-run elasticity with respect to new car purchases of 0.28, corresponding to a one-year marginal propensity for expenditure on cars (car MPX) of 0.09 cents per dollar lost in housing wealth. Households with high loan-to-value ratios and small bank deposits respond the most. A quantitative model aligns with our empirical findings but also suggests that the car MPX could be 0.31 cents when used cars are included; of this, 73 percent is explained by a collateral channel. When nondurables are accounted for, the total marginal propensity to spend is 2.1 cents. In the case of an absolute fall in housing prices, the total response is four times greater.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103892"},"PeriodicalIF":4.1,"publicationDate":"2026-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146078550","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-17DOI: 10.1016/j.jmoneco.2026.103899
Karam Jo, Seula Kim
We study how frictions in learning others’ technology, termed “imperfect technology spillovers,” impact firm innovation strategies and the aggregate economy through changes in innovation composition. We develop an endogenous growth model that generates strategic innovation decisions, where multi-product firms improve their products via own-innovation and enter new product markets through creative destruction under learning frictions. In our model, firms with technological advantages intensify own-innovation as learning frictions enable them to protect their markets from competitors, thereby reducing creative destruction of rivals. This pattern gets more pronounced when learning frictions intensify or competitive pressure rises exogenously. Importantly, the shift in innovation composition reduces aggregate growth, as creative destruction contributes more to growth. Using U.S. administrative firm-level data, we provide regression results supporting the model predictions.
{"title":"Heterogeneous innovations and growth under imperfect technology spillovers","authors":"Karam Jo, Seula Kim","doi":"10.1016/j.jmoneco.2026.103899","DOIUrl":"10.1016/j.jmoneco.2026.103899","url":null,"abstract":"<div><div>We study how frictions in learning others’ technology, termed “imperfect technology spillovers,” impact firm innovation strategies and the aggregate economy through changes in innovation composition. We develop an endogenous growth model that generates strategic innovation decisions, where multi-product firms improve their products via own-innovation and enter new product markets through creative destruction under learning frictions. In our model, firms with technological advantages intensify own-innovation as learning frictions enable them to protect their markets from competitors, thereby reducing creative destruction of rivals. This pattern gets more pronounced when learning frictions intensify or competitive pressure rises exogenously. Importantly, the shift in innovation composition reduces aggregate growth, as creative destruction contributes more to growth. Using U.S. administrative firm-level data, we provide regression results supporting the model predictions.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103899"},"PeriodicalIF":4.1,"publicationDate":"2026-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146038645","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-16DOI: 10.1016/j.jmoneco.2026.103898
Moritz Kuhn , Iourii Manovskii , Xincheng Qiu
Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities across these countries in the spatial differences in unemployment, vacancies, and vacancy filling, job finding, and separation rates. The novel facts on the geography of vacancies and vacancy filling are instrumental in guiding and disciplining the development of a theory of local labor market performance. We find that a spatial version of a Diamond–Mortensen–Pissarides model with endogenous separations and on-the-job search quantitatively accounts for all the documented empirical regularities. The model also quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle.
{"title":"The Geography of job creation and job destruction","authors":"Moritz Kuhn , Iourii Manovskii , Xincheng Qiu","doi":"10.1016/j.jmoneco.2026.103898","DOIUrl":"10.1016/j.jmoneco.2026.103898","url":null,"abstract":"<div><div>Spatial differences in labor market performance are large and highly persistent. Using data from the United States, Germany, and the United Kingdom, we document striking similarities across these countries in the spatial differences in unemployment, vacancies, and vacancy filling, job finding, and separation rates. The novel facts on the geography of vacancies and vacancy filling are instrumental in guiding and disciplining the development of a theory of local labor market performance. We find that a spatial version of a Diamond–Mortensen–Pissarides model with endogenous separations and on-the-job search quantitatively accounts for all the documented empirical regularities. The model also quantitatively rationalizes why differences in job-separation rates have primary importance in inducing differences in unemployment across space while changes in the job-finding rate are the main driver in unemployment fluctuations over the business cycle.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103898"},"PeriodicalIF":4.1,"publicationDate":"2026-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146038753","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-15DOI: 10.1016/j.jmoneco.2026.103895
Christian Bayer , Ralph Luetticke , Maximilian Weiss , Yannik Winkelmann
Modeling continuous choices in heterogeneous agent models as “lotteries” over a discretized state space is standard practice (Young, 2010), but renders the distributional dynamics linear in optimal policies. We present a novel, simple method that captures nonlinearities and solves the distributional dynamics with interpolation instead of integration using the idea of an endogenous grid. Our approach solves for a stationary equilibrium as quickly as the lottery method for a given precision, outperforms it for linear dynamics, and accommodates nonlinear dynamics and aggregate risk. We demonstrate its efficacy by studying a model with aggregate investment risk with a third-order perturbation solution.
{"title":"An endogenous gridpoint method for distributional dynamics","authors":"Christian Bayer , Ralph Luetticke , Maximilian Weiss , Yannik Winkelmann","doi":"10.1016/j.jmoneco.2026.103895","DOIUrl":"10.1016/j.jmoneco.2026.103895","url":null,"abstract":"<div><div>Modeling continuous choices in heterogeneous agent models as “lotteries” over a discretized state space is standard practice (Young, 2010), but renders the distributional dynamics linear in optimal policies. We present a novel, simple method that captures nonlinearities and solves the distributional dynamics with interpolation instead of integration using the idea of an endogenous grid. Our approach solves for a stationary equilibrium as quickly as the lottery method for a given precision, outperforms it for linear dynamics, and accommodates nonlinear dynamics and aggregate risk. We demonstrate its efficacy by studying a model with aggregate investment risk with a third-order perturbation solution.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103895"},"PeriodicalIF":4.1,"publicationDate":"2026-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146038752","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-13DOI: 10.1016/j.jmoneco.2026.103896
Toyoichiro Shirota
This study explores optimal monetary policy in an economy with seasonal wage staggering. The findings reveal that the slope of the Phillips curve and the weights in the welfare loss function systematically differ by quarter. Consequently, optimal policy responses vary depending on the timing of shocks within a calendar year. However, implementing history-dependent policy rules can effectively mitigate much of the welfare deterioration that would otherwise occur when policymakers fail to adopt these quarter-specific optimal policy responses.
{"title":"The timing of shocks matters in optimal monetary policy","authors":"Toyoichiro Shirota","doi":"10.1016/j.jmoneco.2026.103896","DOIUrl":"10.1016/j.jmoneco.2026.103896","url":null,"abstract":"<div><div>This study explores optimal monetary policy in an economy with seasonal wage staggering. The findings reveal that the slope of the Phillips curve and the weights in the welfare loss function systematically differ by quarter. Consequently, optimal policy responses vary depending on the timing of shocks within a calendar year. However, implementing history-dependent policy rules can effectively mitigate much of the welfare deterioration that would otherwise occur when policymakers fail to adopt these quarter-specific optimal policy responses.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103896"},"PeriodicalIF":4.1,"publicationDate":"2026-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145979291","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-03DOI: 10.1016/j.jmoneco.2025.103885
Yuliya Rychalovska , Sergey Slobodyan , Rafael Wouters
This paper proposes a strategy to exploit timely information from survey data to disentangle the effects of persistent and transitory shocks driving the real business cycle in DSGE models. Enhanced identification of fundamental shocks leads to significant improvement in the model’s fit. We also examine how structural models with alternative expectation formation mechanisms can address the limitations in information processing often observed in surveys. Our analysis shows that Rational Expectations model with observed survey data generates predictable forecast errors, inheriting this property from survey expectations. We emphasize an important role of the time-varying propagation mechanism under learning, which reduces the constrains imposed by the complete rationality assumption and allows for more efficient integration of surveys in macro models.
{"title":"Professional survey forecasts and expectations in DSGE models","authors":"Yuliya Rychalovska , Sergey Slobodyan , Rafael Wouters","doi":"10.1016/j.jmoneco.2025.103885","DOIUrl":"10.1016/j.jmoneco.2025.103885","url":null,"abstract":"<div><div>This paper proposes a strategy to exploit timely information from survey data to disentangle the effects of persistent and transitory shocks driving the real business cycle in DSGE models. Enhanced identification of fundamental shocks leads to significant improvement in the model’s fit. We also examine how structural models with alternative expectation formation mechanisms can address the limitations in information processing often observed in surveys. Our analysis shows that Rational Expectations model with observed survey data generates predictable forecast errors, inheriting this property from survey expectations. We emphasize an important role of the time-varying propagation mechanism under learning, which reduces the constrains imposed by the complete rationality assumption and allows for more efficient integration of surveys in macro models.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"158 ","pages":"Article 103885"},"PeriodicalIF":4.1,"publicationDate":"2026-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145898047","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-01DOI: 10.1016/j.jmoneco.2025.103884
Indira Puri , Laura Veldkamp
We combine insights from the medical and artificial intelligence (AI) literatures to propose a novel model, which suggests that the expansion of AI may exacerbate cognitive inequality. Information providers maximize profit by tailoring the complexity of content, offering less cognition-enhancing content to less able customers. While individuals with high cognitive abilities may benefit from this increased within-cognitive-group homogeneity, those with lower cognitive abilities – and even children – may suffer adverse effects. Anecdotal data from political discourse and cognitive skills scores are consistent with the model predictions. The findings introduce a new consideration to the debate on financial literacy and AI regulation.
{"title":"Artificial intelligence and cognitive inequality","authors":"Indira Puri , Laura Veldkamp","doi":"10.1016/j.jmoneco.2025.103884","DOIUrl":"10.1016/j.jmoneco.2025.103884","url":null,"abstract":"<div><div>We combine insights from the medical and artificial intelligence (AI) literatures to propose a novel model, which suggests that the expansion of AI may exacerbate cognitive inequality. Information providers maximize profit by tailoring the complexity of content, offering less cognition-enhancing content to less able customers. While individuals with high cognitive abilities may benefit from this increased within-cognitive-group homogeneity, those with lower cognitive abilities – and even children – may suffer adverse effects. Anecdotal data from political discourse and cognitive skills scores are consistent with the model predictions. The findings introduce a new consideration to the debate on financial literacy and AI regulation.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103884"},"PeriodicalIF":4.1,"publicationDate":"2026-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145883931","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-20DOI: 10.1016/j.jmoneco.2025.103883
Emil Holst Partsch , Ivan Petrella , Emiliano Santoro
Durables’ interest-rate sensitivity and their persistent comovement with nondurable spending are hallmarks of monetary policy transmission. We develop a two-sector HANK model that replicates this pattern—both across spending categories and among households sorted by liquid asset holdings, consistent with empirical evidence. Direct effects of real interest rate changes are quantitatively important in reproducing sectoral expenditure comovement, while infrequent information updating is crucial to match the hump-shaped dynamics of sectoral and aggregate expenditures. Income effects are essential to preventing counterfactual declines in nondurable spending resulting from fiscal interventions specifically aimed at stimulating durable purchases.
{"title":"Consumer durables and monetary policy according to HANK","authors":"Emil Holst Partsch , Ivan Petrella , Emiliano Santoro","doi":"10.1016/j.jmoneco.2025.103883","DOIUrl":"10.1016/j.jmoneco.2025.103883","url":null,"abstract":"<div><div>Durables’ interest-rate sensitivity and their persistent comovement with nondurable spending are hallmarks of monetary policy transmission. We develop a two-sector HANK model that replicates this pattern—both across spending categories and among households sorted by liquid asset holdings, consistent with empirical evidence. Direct effects of real interest rate changes are quantitatively important in reproducing sectoral expenditure comovement, while infrequent information updating is crucial to match the hump-shaped dynamics of sectoral and aggregate expenditures. Income effects are essential to preventing counterfactual declines in nondurable spending resulting from fiscal interventions specifically aimed at stimulating durable purchases.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103883"},"PeriodicalIF":4.1,"publicationDate":"2025-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840015","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"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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