Pub Date : 2025-12-01Epub Date: 2025-10-17DOI: 10.1016/j.jmoneco.2025.103856
Henrique S. Basso , Omar Rachedi
Leveraging variation in robot adoption across U.S. metropolitan areas, we document that automation reduces the sensitivity of inflation to unemployment. To rationalize this finding, we build a New Keynesian model with search frictions in the labor market where robot adoption flattens the Phillips curve. The key channel is the option value of automation: the threat of automating labor tasks alters effective workers’ bargaining power, muting the wage sensitivity to unemployment. We validate the relevance of this channel in the data by showing that robot adoption reduces the sensitivity of inflation to unemployment relatively more in highly unionized metropolitan areas.
{"title":"Robot adoption and inflation dynamics","authors":"Henrique S. Basso , Omar Rachedi","doi":"10.1016/j.jmoneco.2025.103856","DOIUrl":"10.1016/j.jmoneco.2025.103856","url":null,"abstract":"<div><div>Leveraging variation in robot adoption across U.S. metropolitan areas, we document that automation reduces the sensitivity of inflation to unemployment. To rationalize this finding, we build a New Keynesian model with search frictions in the labor market where robot adoption flattens the Phillips curve. The key channel is the option value of automation: the threat of automating labor tasks alters effective workers’ bargaining power, muting the wage sensitivity to unemployment. We validate the relevance of this channel in the data by showing that robot adoption reduces the sensitivity of inflation to unemployment relatively more in highly unionized metropolitan areas.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"156 ","pages":"Article 103856"},"PeriodicalIF":4.1,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145479066","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 : 2025-11-01Epub Date: 2025-02-12DOI: 10.1016/j.jmoneco.2025.103759
Alexandre N. Kohlhas , Donald Robertson
This paper develops a tractable theory of cautious expectations. We impose the constraint that agents have to estimate the optimal weight on information in an otherwise standard class of linear quadratic economies. Within this framework, we show that expectations optimally feature dampened responses to new and prior information. Our theory has several similarities to models of limited attention. However, our theory is crucially consistent with the broad-based predictability of forecast errors and biased, overreactive expectations that have otherwise called into question attention-based models. We illustrate the consequences of our framework in a standard consumption–savings problem, which shows that cautious expectations can help account for empirical evidence on the marginal propensity to consume and amplify precautionary savings.
{"title":"Cautious expectations","authors":"Alexandre N. Kohlhas , Donald Robertson","doi":"10.1016/j.jmoneco.2025.103759","DOIUrl":"10.1016/j.jmoneco.2025.103759","url":null,"abstract":"<div><div>This paper develops a tractable theory of cautious expectations. We impose the constraint that agents have to estimate the optimal weight on information in an otherwise standard class of linear quadratic economies. Within this framework, we show that expectations optimally feature dampened responses to new and prior information. Our theory has several similarities to models of limited attention. However, our theory is crucially consistent with the broad-based predictability of forecast errors and biased, overreactive expectations that have otherwise called into question attention-based models. We illustrate the consequences of our framework in a standard consumption–savings problem, which shows that cautious expectations can help account for empirical evidence on the marginal propensity to consume and amplify precautionary savings.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103759"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333506","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 : 2025-11-01Epub Date: 2025-09-24DOI: 10.1016/j.jmoneco.2025.103839
Klaus Adam , Pei Kuang , Shihan Xie
We observe a rich set of public information signals available to participants in the Survey of Professional Forecasters (SPF) and decompose individual forecast revisions into those due to public information and a remainder due to residual information. We find that SPF forecasters overreact to residual information at almost all forecast horizons and for almost all forecast variables. In addition, forecasts are overly anchored to prior beliefs for all variables at all forecast horizons. We show analytically that overconfidence in private information qualitatively generates both of these features. It also implies that forecast errors correlate positively with past forecast revisions at the consensus level, but negatively at the individual level, as documented previously in the literature. Estimating Bayesian updating models on SPF data, we show that overconfidence in private information also replicates the observed patterns quantitatively. All estimated models display strong and statistically significant overconfidence in private information.
{"title":"Overconfidence in private information explains biases in professional forecasts","authors":"Klaus Adam , Pei Kuang , Shihan Xie","doi":"10.1016/j.jmoneco.2025.103839","DOIUrl":"10.1016/j.jmoneco.2025.103839","url":null,"abstract":"<div><div>We observe a rich set of public information signals available to participants in the Survey of Professional Forecasters (SPF) and decompose individual forecast revisions into those due to public information and a remainder due to residual information. We find that SPF forecasters overreact to residual information at almost all forecast horizons and for almost all forecast variables. In addition, forecasts are overly anchored to prior beliefs for all variables at all forecast horizons. We show analytically that overconfidence in private information qualitatively generates both of these features. It also implies that forecast errors correlate positively with past forecast revisions at the consensus level, but negatively at the individual level, as documented previously in the literature. Estimating Bayesian updating models on SPF data, we show that overconfidence in private information also replicates the observed patterns quantitatively. All estimated models display strong and statistically significant overconfidence in private information.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103839"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333507","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 : 2025-11-01Epub Date: 2025-09-22DOI: 10.1016/j.jmoneco.2025.103829
Edouard Schaal , Mathieu Taschereau-Dumouchel
We develop a quantitative theory of business cycles with coordination failures. Because of demand complementarities and increasing returns, firms seek to coordinate production and multiple equilibria arise. We use a global game approach to discipline equilibrium selection and show that the unique dynamic equilibrium exhibits multiple steady states. Coordination on high production may fail after a large transitory shock, pushing the economy in a quasi-permanent recession. Our calibrated model rationalizes various features of the 2007–2009 recession and its recovery. Government spending, while generally harmful, can increase welfare when the economy is transitioning between steady states. Other policy instruments are preferable to fix miscoordination.
{"title":"Coordinating business cycles","authors":"Edouard Schaal , Mathieu Taschereau-Dumouchel","doi":"10.1016/j.jmoneco.2025.103829","DOIUrl":"10.1016/j.jmoneco.2025.103829","url":null,"abstract":"<div><div>We develop a quantitative theory of business cycles with coordination failures. Because of demand complementarities and increasing returns, firms seek to coordinate production and multiple equilibria arise. We use a global game approach to discipline equilibrium selection and show that the unique dynamic equilibrium exhibits multiple steady states. Coordination on high production may fail after a large transitory shock, pushing the economy in a quasi-permanent recession. Our calibrated model rationalizes various features of the 2007–2009 recession and its recovery. Government spending, while generally harmful, can increase welfare when the economy is transitioning between steady states. Other policy instruments are preferable to fix miscoordination.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103829"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333508","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 : 2025-11-01Epub Date: 2025-09-29DOI: 10.1016/j.jmoneco.2025.103843
Christian Hellwig , Venky Venkateswaran
We study the propagation of nominal shocks in a dispersed information economy where firms learn from and respond to information generated by their activities in product and factor markets. We show that imperfect information on its own has no effect on equilibrium outcomes, when firms have the flexibility to adjust prices and output instantaneously to changes in their market conditions, an outcome that we term the “Hayekian benchmark”. With sticky prices, however, this irrelevance obtains only if there are no strategic complementarities in pricing and aggregate and idiosyncratic shocks are equally persistent. With complementarities and/or differences in persistence, the interaction of nominal and informational frictions slows down price adjustment, amplifying real effects from nominal shocks (relative to a full information model with only nominal frictions). In a calibrated model, the amplification is most pronounced over the medium to long term. In the short run, market generated information leads to substantial aggregate price adjustment, even though firms may be completely unaware of changes in aggregate conditions.
{"title":"Dispersed information, nominal rigidities and monetary business cycles: A Hayekian perspective","authors":"Christian Hellwig , Venky Venkateswaran","doi":"10.1016/j.jmoneco.2025.103843","DOIUrl":"10.1016/j.jmoneco.2025.103843","url":null,"abstract":"<div><div>We study the propagation of nominal shocks in a dispersed information economy where firms learn from and respond to information generated by their activities in product and factor markets. We show that imperfect information on its own has <em>no</em> effect on equilibrium outcomes, when firms have the flexibility to adjust prices and output instantaneously to changes in their market conditions, an outcome that we term the “Hayekian benchmark”. With sticky prices, however, this irrelevance obtains only if there are no strategic complementarities in pricing and aggregate and idiosyncratic shocks are equally persistent. With complementarities and/or differences in persistence, the interaction of nominal and informational frictions slows down price adjustment, amplifying real effects from nominal shocks (relative to a full information model with only nominal frictions). In a calibrated model, the amplification is most pronounced over the medium to long term. In the short run, market generated information leads to substantial aggregate price adjustment, even though firms may be completely unaware of changes in aggregate conditions.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103843"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333504","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 : 2025-11-01Epub Date: 2025-09-24DOI: 10.1016/j.jmoneco.2025.103828
Sergio Rebelo , Miguel Santana , Pedro Teles
We develop a model in which households make decisions using a dual-process framework. System 1 relies on fast, intuitive heuristics but is prone to error, while System 2 demands cognitive effort but yields more accurate decisions. Monopolistic firms can influence which system households engage through pricing. This strategic influence creates a novel source of price inertia. The model accounts for the “rockets and feathers” phenomenon (prices rise quickly but fall slowly), explains why firms with unexpectedly high demand often avoid price changes, and why hazard functions are downward sloping. Our model implies that price stability is not optimal.
{"title":"Behavioral sticky prices","authors":"Sergio Rebelo , Miguel Santana , Pedro Teles","doi":"10.1016/j.jmoneco.2025.103828","DOIUrl":"10.1016/j.jmoneco.2025.103828","url":null,"abstract":"<div><div>We develop a model in which households make decisions using a dual-process framework. System 1 relies on fast, intuitive heuristics but is prone to error, while System 2 demands cognitive effort but yields more accurate decisions. Monopolistic firms can influence which system households engage through pricing. This strategic influence creates a novel source of price inertia. The model accounts for the “rockets and feathers” phenomenon (prices rise quickly but fall slowly), explains why firms with unexpectedly high demand often avoid price changes, and why hazard functions are downward sloping. Our model implies that price stability is not optimal.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103828"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333505","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 : 2025-11-01Epub Date: 2025-10-08DOI: 10.1016/j.jmoneco.2025.103844
Ryan Chahrour , Kyle Jurado
In macroeconomic models with dispersed information, agents have an incentive to learn from endogenous variables, which themselves depend on the forecasts of others. This paper revisits the model of Townsend (1983) to characterize how this mechanism affects equilibrium dynamics. The first part of the paper simplifies, revises, and extends past results about situations when prices are fully revealing. The second part shows that full revelation does not occur in the original model and proves that the equilibrium state vector is infinite-dimensional. It also provides a new numerical solution procedure for such cases, which operates entirely in the frequency domain.
{"title":"Revisiting the forecasts of others","authors":"Ryan Chahrour , Kyle Jurado","doi":"10.1016/j.jmoneco.2025.103844","DOIUrl":"10.1016/j.jmoneco.2025.103844","url":null,"abstract":"<div><div>In macroeconomic models with dispersed information, agents have an incentive to learn from endogenous variables, which themselves depend on the forecasts of others. This paper revisits the model of Townsend (1983) to characterize how this mechanism affects equilibrium dynamics. The first part of the paper simplifies, revises, and extends past results about situations when prices are fully revealing. The second part shows that full revelation does not occur in the original model and proves that the equilibrium state vector is infinite-dimensional. It also provides a new numerical solution procedure for such cases, which operates entirely in the frequency domain.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103844"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333509","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 : 2025-11-01Epub Date: 2025-09-23DOI: 10.1016/j.jmoneco.2025.103842
Robert M. Townsend
This essay honors the contributions of Robert E. Lucas, Jr., to the most important macro problems where informational frictions are relevant today. The first step focuses on two of Lucas’ papers where information frictions play somewhat different roles, zeroing in on the key elements: money, islands, and imperfect information. Each paper is then linked to associated branches of the literature. The second step argues that new technologies have now emerged which make those key elements all the more crucial in the macroeconomics of today. Monetary policy considerations were forefront in Lucas’ mind, and so that is a recurrent theme throughout this essay.
本文旨在表彰小罗伯特·e·卢卡斯（Robert E. Lucas, Jr.）对当今与信息摩擦相关的最重要宏观问题的贡献。第一步关注Lucas的两篇论文，在这两篇论文中，信息摩擦扮演了不同的角色，并将注意力集中在关键因素上：金钱、孤岛和不完全信息。然后将每篇论文链接到相关的文献分支。第二步认为，现在出现的新技术使这些关键因素在今天的宏观经济学中更加重要。货币政策的考虑在卢卡斯的脑海中是最重要的，所以这是贯穿这篇文章的一个反复出现的主题。
{"title":"“Information frictions in macroeconomics: The legacy of Robert E. Lucas, Jr.”","authors":"Robert M. Townsend","doi":"10.1016/j.jmoneco.2025.103842","DOIUrl":"10.1016/j.jmoneco.2025.103842","url":null,"abstract":"<div><div>This essay honors the contributions of Robert E. Lucas, Jr., to the most important macro problems where informational frictions are relevant today. The first step focuses on two of Lucas’ papers where information frictions play somewhat different roles, zeroing in on the key elements: money, islands, and imperfect information. Each paper is then linked to associated branches of the literature. The second step argues that new technologies have now emerged which make those key elements all the more crucial in the macroeconomics of today. Monetary policy considerations were forefront in Lucas’ mind, and so that is a recurrent theme throughout this essay.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103842"},"PeriodicalIF":4.1,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145333510","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 : 2025-10-01Epub Date: 2025-08-16DOI: 10.1016/j.jmoneco.2025.103822
Poorya Kabir , Eugene Tan , Ia Vardishvili
Higher dispersion of log average revenue product of capital (ARPK) is commonly associated with lower capital allocative efficiency. We show this is a result of the assumption that capital utilization is fixed. However, when capital utilization is endogenous, higher capital allocative efficiency is associated with lower dispersion of log average revenue product of capital services (log difference between revenue and utilized capital), not ARPK. Furthermore, contrary to the standard relationship, increases to capital allocative efficiency is associated with higher ARPK dispersion when such improvements arise from greater utilization flexibility. We provide evidence supporting the mechanism and demonstrate counterfactuals where allocative efficiency gains are accompanied by higher ARPK dispersion. Lastly, we apply our framework to study the impact of a capital market liberalization reform in India. We estimate the reform improved allocative efficiency by 0.04%, but counterfactual analysis neglecting the response of utilization would have concluded efficiency gains of 5.25%.
{"title":"Quantifying the allocative efficiency of capital: The role of capital utilization","authors":"Poorya Kabir , Eugene Tan , Ia Vardishvili","doi":"10.1016/j.jmoneco.2025.103822","DOIUrl":"10.1016/j.jmoneco.2025.103822","url":null,"abstract":"<div><div>Higher dispersion of log average revenue product of capital (ARPK) is commonly associated with lower capital allocative efficiency. We show this is a result of the assumption that capital utilization is fixed. However, when capital utilization is endogenous, higher capital allocative efficiency is associated with lower dispersion of log average revenue product of capital services (log difference between revenue and utilized capital), not ARPK. Furthermore, contrary to the standard relationship, increases to capital allocative efficiency is associated with higher ARPK dispersion when such improvements arise from greater utilization flexibility. We provide evidence supporting the mechanism and demonstrate counterfactuals where allocative efficiency gains are accompanied by higher ARPK dispersion. Lastly, we apply our framework to study the impact of a capital market liberalization reform in India. We estimate the reform improved allocative efficiency by 0.04%, but counterfactual analysis neglecting the response of utilization would have concluded efficiency gains of 5.25%.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103822"},"PeriodicalIF":4.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145098990","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 : 2025-10-01Epub Date: 2025-08-14DOI: 10.1016/j.jmoneco.2025.103823
Daniel Barth, R. Jay Kahn
This paper studies hedge funds’ arbitrage positions in the Treasury cash-futures basis trade, which profits from the disconnect between cash and futures prices. At times, the trade has surpassed $1 trillion in gross exposures. Basis traders consistently account for more than 60% of all hedge fund Treasury positions and 70% of all hedge fund repo. We show how frictions can introduce a positive association between arbitrage quantities and spreads, and how these frictions may propagate stress in the Treasury market during periods of instability such as in March 2020.
{"title":"Hedge funds and the Treasury cash-futures basis trade","authors":"Daniel Barth, R. Jay Kahn","doi":"10.1016/j.jmoneco.2025.103823","DOIUrl":"10.1016/j.jmoneco.2025.103823","url":null,"abstract":"<div><div>This paper studies hedge funds’ arbitrage positions in the Treasury cash-futures basis trade, which profits from the disconnect between cash and futures prices. At times, the trade has surpassed $1 trillion in gross exposures. Basis traders consistently account for more than 60% of all hedge fund Treasury positions and 70% of all hedge fund repo. We show how frictions can introduce a positive association between arbitrage quantities and spreads, and how these frictions may propagate stress in the Treasury market during periods of instability such as in March 2020.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"155 ","pages":"Article 103823"},"PeriodicalIF":4.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145098994","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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