Pub Date : 2025-12-02DOI: 10.1016/j.jmoneco.2025.103876
Enrique Ide, Eduard Talamàs
We analyze how Artificial Intelligence (AI) reshapes global knowledge work in a two-region world where firms organize production hierarchically to use knowledge efficiently: the most knowledgeable individuals specialize in problem-solving, while others perform routine work. Before AI, the Advanced Economy specializes in problem-solving services, whereas the Emerging Economy focuses on routine work. AI converts compute — which is located in the Advanced Economy — into autonomous “AI agents” that perfectly substitute for humans with a given level of knowledge. Basic AI reduces the Advanced Economy’s net exports of problem-solving services, potentially reversing pre-AI trade patterns. In contrast, sophisticated AI expands these exports, reinforcing existing trade patterns. Finally, we show that a global ban on AI autonomy redistributes AI’s gains toward lower-skilled workers, while a regional ban — such as prohibiting autonomy only in the Emerging Economy — offers little benefit to lower-skilled workers and harms the most knowledgeable individuals in that region.
{"title":"The impact of AI on global knowledge work","authors":"Enrique Ide, Eduard Talamàs","doi":"10.1016/j.jmoneco.2025.103876","DOIUrl":"10.1016/j.jmoneco.2025.103876","url":null,"abstract":"<div><div>We analyze how Artificial Intelligence (AI) reshapes global knowledge work in a two-region world where firms organize production hierarchically to use knowledge efficiently: the most knowledgeable individuals specialize in problem-solving, while others perform routine work. Before AI, the Advanced Economy specializes in problem-solving services, whereas the Emerging Economy focuses on routine work. AI converts compute — which is located in the Advanced Economy — into autonomous “AI agents” that perfectly substitute for humans with a given level of knowledge. Basic AI reduces the Advanced Economy’s net exports of problem-solving services, potentially reversing pre-AI trade patterns. In contrast, sophisticated AI expands these exports, reinforcing existing trade patterns. Finally, we show that a global ban on AI autonomy redistributes AI’s gains toward lower-skilled workers, while a regional ban — such as prohibiting autonomy only in the Emerging Economy — offers little benefit to lower-skilled workers and harms the most knowledgeable individuals in that region.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103876"},"PeriodicalIF":4.1,"publicationDate":"2025-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694220","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 : 2025-12-02DOI: 10.1016/j.jmoneco.2025.103875
Jonathan J. Adams , Min Fang , Zheng Liu , Yajie Wang
We document key stylized facts about the time-series trends and cross-sectional distributions of artificial intelligence (AI)-powered pricing and study its implications for firm performance, both on average and in response to monetary policy shocks. We use the online job postings data from Lightcast to measure the adoption of AI pricing. We infer that a firm is adopting AI pricing if it posts a job that requires AI-related skills and contains the keyword “pricing.” At the aggregate level, the share of AI pricing jobs in all pricing jobs has increased more than tenfold since 2010. The rise of AI pricing jobs has been broad-based, spreading across more industries than other types of AI jobs. At the firm level, larger and more productive firms are more likely to adopt AI pricing. Firms that adopted AI pricing experienced faster growth in sales, employment, assets, and markups, and their stock returns are also more responsive to high-frequency monetary policy surprises than non-adopters. We show that these empirical observations can be rationalized by a simple model where a monopolist firm with incomplete information about its demand function invests in AI pricing to acquire information.
{"title":"The rise of AI pricing: Trends, driving forces, and implications for firm performance","authors":"Jonathan J. Adams , Min Fang , Zheng Liu , Yajie Wang","doi":"10.1016/j.jmoneco.2025.103875","DOIUrl":"10.1016/j.jmoneco.2025.103875","url":null,"abstract":"<div><div>We document key stylized facts about the time-series trends and cross-sectional distributions of artificial intelligence (AI)-powered pricing and study its implications for firm performance, both on average and in response to monetary policy shocks. We use the online job postings data from Lightcast to measure the adoption of AI pricing. We infer that a firm is adopting AI pricing if it posts a job that requires AI-related skills and contains the keyword “pricing.” At the aggregate level, the share of AI pricing jobs in all pricing jobs has increased more than tenfold since 2010. The rise of AI pricing jobs has been broad-based, spreading across more industries than other types of AI jobs. At the firm level, larger and more productive firms are more likely to adopt AI pricing. Firms that adopted AI pricing experienced faster growth in sales, employment, assets, and markups, and their stock returns are also more responsive to high-frequency monetary policy surprises than non-adopters. We show that these empirical observations can be rationalized by a simple model where a monopolist firm with incomplete information about its demand function invests in AI pricing to acquire information.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103875"},"PeriodicalIF":4.1,"publicationDate":"2025-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694222","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 : 2025-12-01DOI: 10.1016/j.jmoneco.2025.103874
Chun-Che Chi
This paper studies how the lender structure of external debt affects open economies’ credit conditions via a model with lenders of varying sizes. While atomistic lenders take the collateral price as given, large lenders internalize the pecuniary externality whereby selling foreclosed collateral injects supply and reduces its price. Thus, concentrating external debt in a few large lenders supports a high collateral price during financial downturns, leading borrowers to demand less precautionary savings and overborrow. I document that emerging countries borrow from significantly fewer banks than advanced countries, implying that emerging countries tend to overborrow. This new mechanism complements the existing view of overborrowing due to the pecuniary externality of the borrowers. Under plausible parameterization, the size of the pecuniary externality internalized by lenders is two-thirds of that internalized by borrowers. Finally, allowing lender countries to optimally choose lender structure increases lender concentration, raises debt, and improves borrowers’ welfare.
{"title":"Lender concentration of external debts and sudden stops","authors":"Chun-Che Chi","doi":"10.1016/j.jmoneco.2025.103874","DOIUrl":"10.1016/j.jmoneco.2025.103874","url":null,"abstract":"<div><div>This paper studies how the lender structure of external debt affects open economies’ credit conditions via a model with lenders of varying sizes. While atomistic lenders take the collateral price as given, large lenders internalize the pecuniary externality whereby selling foreclosed collateral injects supply and reduces its price. Thus, concentrating external debt in a few large lenders supports a high collateral price during financial downturns, leading borrowers to demand less precautionary savings and overborrow. I document that emerging countries borrow from significantly fewer banks than advanced countries, implying that emerging countries tend to overborrow. This new mechanism complements the existing view of overborrowing due to the pecuniary externality of the borrowers. Under plausible parameterization, the size of the pecuniary externality internalized by lenders is two-thirds of that internalized by borrowers. Finally, allowing lender countries to optimally choose lender structure increases lender concentration, raises debt, and improves borrowers’ welfare.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103874"},"PeriodicalIF":4.1,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694241","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 : 2025-11-27DOI: 10.1016/j.jmoneco.2025.103873
Minsu Chang , Hanbaek Lee
This paper investigates the fiscal multiplier of infrastructure investment using an estimated heterogeneous-firm general equilibrium model. We theoretically and quantitatively show that the firm-level non-rivalry in infrastructure usage drives a significant discrepancy in the estimated input elasticities between the firm and state levels. Moreover, it microfounds the increasing returns to scale assumption in a representative-agent framework (Baxter and King, 1993). The quantitative findings indicate a fiscal multiplier of approximately 1.15 over a 2-year horizon, suggesting a significantly greater net economic benefit than the representative-agent model prediction. This is due to the low sensitivity of the firm-level investment to the general equilibrium effect, followed by a significantly dampened crowding out.
本文利用估计的异质企业一般均衡模型研究了基础设施投资的财政乘数。我们从理论上和定量上表明,企业在基础设施使用方面的非竞争导致了企业和州之间估计的投入弹性的显著差异。此外,它还在代表-代理框架中微观发现了规模收益递增假设(Baxter and King, 1993)。定量研究结果表明,在2年的时间跨度内,财政乘数约为1.15,这表明净经济效益明显高于代表性代理模型的预测。这是由于企业层面的投资对一般均衡效应的敏感性较低,其次是明显抑制的挤出效应。
{"title":"Bridging micro and macro production functions: The fiscal multiplier of infrastructure investment","authors":"Minsu Chang , Hanbaek Lee","doi":"10.1016/j.jmoneco.2025.103873","DOIUrl":"10.1016/j.jmoneco.2025.103873","url":null,"abstract":"<div><div>This paper investigates the fiscal multiplier of infrastructure investment using an estimated heterogeneous-firm general equilibrium model. We theoretically and quantitatively show that the firm-level non-rivalry in infrastructure usage drives a significant discrepancy in the estimated input elasticities between the firm and state levels. Moreover, it microfounds the increasing returns to scale assumption in a representative-agent framework (Baxter and King, 1993). The quantitative findings indicate a fiscal multiplier of approximately 1.15 over a 2-year horizon, suggesting a significantly greater net economic benefit than the representative-agent model prediction. This is due to the low sensitivity of the firm-level investment to the general equilibrium effect, followed by a significantly dampened crowding out.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103873"},"PeriodicalIF":4.1,"publicationDate":"2025-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694240","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 : 2025-11-24DOI: 10.1016/j.jmoneco.2025.103871
James Bullard , Alex Grimaud , Isabelle Salle , Gauthier Vermandel
We discuss the timing and strength of the Fed’s reaction to the recent inflation surge within an estimated macroeconomic model where long-run inflation expectations are heterogeneous and can lose their anchoring to the target. The resulting inflation scare worsens the real cost of disinflation. We derive a closed-form solution that retains the entire time-varying cross-sectional distribution of subjective inflation beliefs. We estimate the model using Bayesian techniques on both US macroeconomic time series and forecast data from the Survey of Professional Forecasters. Counterfactual simulations show that the timing – rather than the strength – of the policy reaction to the inflation surge is critical to contain the development of an inflation scare and prevent the entrenchment of above-target inflation. We show that the Fed fell behind the curve in 2021 since an earlier tightening could have reduced the inflation peak without triggering a recession. However, further delays would have unanchored inflation expectations, aggravated the inflation scare and strengthened the inflation surge, resulting in larger output losses.
{"title":"Soft landing and inflation scares","authors":"James Bullard , Alex Grimaud , Isabelle Salle , Gauthier Vermandel","doi":"10.1016/j.jmoneco.2025.103871","DOIUrl":"10.1016/j.jmoneco.2025.103871","url":null,"abstract":"<div><div>We discuss the timing and strength of the Fed’s reaction to the recent inflation surge within an estimated macroeconomic model where long-run inflation expectations are heterogeneous and can lose their anchoring to the target. The resulting inflation scare worsens the real cost of disinflation. We derive a closed-form solution that retains the entire time-varying cross-sectional distribution of subjective inflation beliefs. We estimate the model using Bayesian techniques on both US macroeconomic time series and forecast data from the Survey of Professional Forecasters. Counterfactual simulations show that the timing – rather than the strength – of the policy reaction to the inflation surge is critical to contain the development of an inflation scare and prevent the entrenchment of above-target inflation. We show that the Fed fell behind the curve in 2021 since an earlier tightening could have reduced the inflation peak without triggering a recession. However, further delays would have unanchored inflation expectations, aggravated the inflation scare and strengthened the inflation surge, resulting in larger output losses.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103871"},"PeriodicalIF":4.1,"publicationDate":"2025-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145624931","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 : 2025-11-20DOI: 10.1016/j.jmoneco.2025.103870
Serdar Birinci , Miguel Faria-e-Castro , Kurt See
Between 2020 and 2023, the fraction of retirees in the working-age population in the U.S. increased above its pre-pandemic trend. Several explanations have been proposed to rationalize this gap, including increases in net worth, the deterioration of the labor market with higher job separations, the expansion of fiscal transfer programs, and higher mortality risk. We develop an incomplete markets, overlapping generations model with a frictional labor market to quantitatively study the interaction of these factors and decompose their contributions to the rise in retirements. We find that new retirements were concentrated at the bottom of the income distribution, and the most important factors driving the rise in retirements were higher job separations and the expansion of fiscal transfers. We show that our model’s predictions on aggregate labor market moments and cross-sectional moments on retirement patterns across income and wealth distributions are in line with the data.
{"title":"Dissecting the great retirement boom","authors":"Serdar Birinci , Miguel Faria-e-Castro , Kurt See","doi":"10.1016/j.jmoneco.2025.103870","DOIUrl":"10.1016/j.jmoneco.2025.103870","url":null,"abstract":"<div><div>Between 2020 and 2023, the fraction of retirees in the working-age population in the U.S. increased above its pre-pandemic trend. Several explanations have been proposed to rationalize this gap, including increases in net worth, the deterioration of the labor market with higher job separations, the expansion of fiscal transfer programs, and higher mortality risk. We develop an incomplete markets, overlapping generations model with a frictional labor market to quantitatively study the interaction of these factors and decompose their contributions to the rise in retirements. We find that new retirements were concentrated at the bottom of the income distribution, and the most important factors driving the rise in retirements were higher job separations and the expansion of fiscal transfers. We show that our model’s predictions on aggregate labor market moments and cross-sectional moments on retirement patterns across income and wealth distributions are in line with the data.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103870"},"PeriodicalIF":4.1,"publicationDate":"2025-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694221","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 : 2025-11-20DOI: 10.1016/j.jmoneco.2025.103872
Sergio Villalvazo
This paper studies the cross-sectional dimension of Fisher’s debt-deflation mechanism that triggers endogenous Sudden Stop crises — i.e., episodes with large reversals in the current account. Analyzing microdata from Mexico, we show that this dimension has macroeconomic implications that operate via opposing effects. First, an amplifying effect by which households with high leverage fire-sale their assets during crises, increasing downward pressure on asset prices. Second, a dampening effect by which wealthy households with low leverage buy depressed assets, relieving downward pressure on asset prices. As a result, the role of inequality during crises is ambiguous. We conduct a quantitative analysis using a calibrated small open economy, asset-pricing model with heterogeneous agents and aggregate risk to measure the effects of inequality during crises. The model suggests that economies with lower inequality, whether due to reduced idiosyncratic risk or wealth redistribution across agents, experience less severe crises, as observed in the data.
{"title":"Inequality and asset prices during Sudden Stops","authors":"Sergio Villalvazo","doi":"10.1016/j.jmoneco.2025.103872","DOIUrl":"10.1016/j.jmoneco.2025.103872","url":null,"abstract":"<div><div>This paper studies the cross-sectional dimension of Fisher’s debt-deflation mechanism that triggers endogenous Sudden Stop crises — i.e., episodes with large reversals in the current account. Analyzing microdata from Mexico, we show that this dimension has macroeconomic implications that operate via opposing effects. First, an amplifying effect by which households with high leverage fire-sale their assets during crises, increasing downward pressure on asset prices. Second, a dampening effect by which wealthy households with low leverage buy depressed assets, relieving downward pressure on asset prices. As a result, the role of inequality during crises is ambiguous. We conduct a quantitative analysis using a calibrated small open economy, asset-pricing model with heterogeneous agents and aggregate risk to measure the effects of inequality during crises. The model suggests that economies with lower inequality, whether due to reduced idiosyncratic risk or wealth redistribution across agents, experience less severe crises, as observed in the data.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103872"},"PeriodicalIF":4.1,"publicationDate":"2025-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694239","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 : 2025-11-19DOI: 10.1016/j.jmoneco.2025.103869
Javier Bianchi , Louphou Coulibaly
Central banks with flexible exchange rate regimes are often reluctant to let their currency float, a phenomenon known as “fear of floating.” We develop a framework in which a floating exchange rate may exacerbate vulnerability to self-fulfilling financial crises rather than provide the intended insulation against external shocks. A commitment to a crawling peg—where the currency can fluctuate within a predetermined band—can help mitigate the risk of self-fulfilling crises. In contrast to the Mundell–Fleming paradigm, the optimal exchange rate policy entails allowing the exchange rate to float in response to real shocks while maintaining it fixed in response to non-fundamental shocks.
{"title":"A theory of fear of floating","authors":"Javier Bianchi , Louphou Coulibaly","doi":"10.1016/j.jmoneco.2025.103869","DOIUrl":"10.1016/j.jmoneco.2025.103869","url":null,"abstract":"<div><div>Central banks with flexible exchange rate regimes are often reluctant to let their currency float, a phenomenon known as “fear of floating.” We develop a framework in which a floating exchange rate may exacerbate vulnerability to self-fulfilling financial crises rather than provide the intended insulation against external shocks. A commitment to a crawling peg—where the currency can fluctuate within a predetermined band—can help mitigate the risk of self-fulfilling crises. In contrast to the Mundell–Fleming paradigm, the optimal exchange rate policy entails allowing the exchange rate to float in response to real shocks while maintaining it fixed in response to non-fundamental shocks.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103869"},"PeriodicalIF":4.1,"publicationDate":"2025-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694217","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 : 2025-11-14DOI: 10.1016/j.jmoneco.2025.103868
Luca Gemmi , Rosen Valchev
We find empirical evidence that surveys of professional forecasters are biased by strategic incentives. First, we find that individual forecasts overreact to idiosyncratic information but underreact to common information. We show this is consistent with a model of strategic diversification incentives in forecast reporting where forecasters want to optimally “stand out” from the crowd, and thus report forecasts that exaggerate the agents’ true beliefs. Second, we show that no such biases are present in forecasts data that is not subject to strategic incentives. We also test further comparative statics that also confirm the strategic incentive model. Overall, we conclude that strategic reporting biases the inference an econometrician can draw on the true underlying expectations formation process, and the precision and heterogeneity in agents’ information sets, and lastly we show how to correct for this.
{"title":"Biased surveys","authors":"Luca Gemmi , Rosen Valchev","doi":"10.1016/j.jmoneco.2025.103868","DOIUrl":"10.1016/j.jmoneco.2025.103868","url":null,"abstract":"<div><div>We find empirical evidence that surveys of professional forecasters are biased by strategic incentives. First, we find that individual forecasts overreact to idiosyncratic information but underreact to common information. We show this is consistent with a model of strategic diversification incentives in forecast reporting where forecasters want to optimally “stand out” from the crowd, and thus report forecasts that exaggerate the agents’ true beliefs. Second, we show that no such biases are present in forecasts data that is not subject to strategic incentives. We also test further comparative statics that also confirm the strategic incentive model. Overall, we conclude that strategic reporting biases the inference an econometrician can draw on the true underlying expectations formation process, and the precision and heterogeneity in agents’ information sets, and lastly we show how to correct for this.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103868"},"PeriodicalIF":4.1,"publicationDate":"2025-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694216","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 : 2025-11-03DOI: 10.1016/j.jmoneco.2025.103859
Ali Zarifhonarvar
This paper studies the generation of inflation expectations using generative AI in survey experiments, examining diverse agents created with both proprietary and open-source large language models (LLMs). It shows that model architecture significantly impacts expectations, with proprietary models generally exhibiting less disagreement in their responses than open-source alternatives. Some LLMs predict higher inflation than actual rates, aligning with patterns observed in the Survey of Consumer Expectations. Information treatments, particularly forward guidance on inflation, influence LLMs’ inflation expectations, though with varying magnitudes across model types. Customizing prompts with demographic personas induces heterogeneous responses that mirror human survey behaviors, with some biases similar to those documented in household surveys. The paper also demonstrates how central banks could leverage these models as communication policy tools to test messaging strategies before implementation.
{"title":"Generating inflation expectations with large language models","authors":"Ali Zarifhonarvar","doi":"10.1016/j.jmoneco.2025.103859","DOIUrl":"10.1016/j.jmoneco.2025.103859","url":null,"abstract":"<div><div>This paper studies the generation of inflation expectations using generative AI in survey experiments, examining diverse agents created with both proprietary and open-source large language models (LLMs). It shows that model architecture significantly impacts expectations, with proprietary models generally exhibiting less disagreement in their responses than open-source alternatives. Some LLMs predict higher inflation than actual rates, aligning with patterns observed in the Survey of Consumer Expectations. Information treatments, particularly forward guidance on inflation, influence LLMs’ inflation expectations, though with varying magnitudes across model types. Customizing prompts with demographic personas induces heterogeneous responses that mirror human survey behaviors, with some biases similar to those documented in household surveys. The paper also demonstrates how central banks could leverage these models as communication policy tools to test messaging strategies before implementation.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"157 ","pages":"Article 103859"},"PeriodicalIF":4.1,"publicationDate":"2025-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145694219","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}