The Unassuming Economist

From a paper by Alberto Americo, Douglas K G Araujo, Johannes Damp, Sjur Nilsen, Daniel Rees, Rafael Schmidt and Christian Schmieder:

“We identify and document key stylised facts of inflation cycles for a large panel of advanced and
emerging market economies. To this end, we propose three complementary inflation cycle concepts: (1)
cycles in inflation levels, reflecting mostly the low- and medium-frequency components of inflation; (2)
cycles in higher-frequency deviation of inflation from its trend; and (3) a categorisation of inflation into
high and low inflation regimes. For each concept, we document key stylised facts within and across
countries and examine how these have evolved over time. We also show that the relationship between
inflation and business cycles matters: entry in a high-inflation regime is associated with a significantly
higher chance of a recession in the following quarters. A cross-country dataset with the inflation cycles is
made publicly available.”

From a paper by Ullrich Heilemann and Roland Schuhr:

“Okun’s misery index (MI), the sum of unemployment rate and inflation rate, is a popular measure of the state of the economy and thus of (macro) ” Economic Discomfort” as well as of government per-formance. We calculate the MI and some augmentations for Germany (until 1990: West Germany) for the period 1951–2021 and test them against a survey-based indicator of government performance (“ZDF-Politbarometer-Index”). The results support Okun’s choice of variables, but reject its augmenta-tion by the growth rate and the deficit ratio. Just as importantly, the effect of unemployment is almost twice as large as that of inflation, and both change considerably over time, as stability tests show. In assessing the performance of governments, MI rankings differ from those of their augmentations. Since the mid-1970s, however, the differences are limited. Barro’s Misery Index, a comparative ap-proach to assessing governments that is an alternative to MI, reaches opposite judgments than MI, but lacks empirical support. The implications for policymakers are both sobering and reassuring: as policy simulations and implied Phillips type trade-offs reveal, the sensitivity of MIs to macroeconomic policy is very low. This may not only hold for Germany given similar international evidence on MIs. The fact that the MI covers the two main macroeconomic objectives, is based on the latest official data, easy to calculate and internationally comparable makes Okun’s Misery Index a useful indicator of Economic Discomfort for Germany as well.”

From a paper by Nicolò Fraccaroli, Vincent Arel-Bundock, and Mark Blyth:

“The 2021 debate over the causes of inflation was dominated by contrasting narratives around the drivers of, and solutions to, rising prices. But how these ideas did or did not penetrate central banks, the politically independent institutions responsible for keeping prices stable, remains unclear. In this paper we investigate how the Bank of England, European Central Bank, and Federal Reserve discussed and deployed specific inflation narratives over time in their attempts to diagnose and treat the inflation of the period. We focus on four narratives that identify the main drivers of inflation in (1) excessive public spending, (2) higher wages in the labour market than warranted by productivity, (3) supply side disruptions to critical markets such as energy, and (4) corporate profit margin expansion. We use a large language model to tag central banks’ speeches with relevant narratives at sentence level, which allows us to quantify how much each central bank discussed each narrative. The results shed new light on how these three central banks interfaced with the recent debate around inflation.”

From a paper by Jordan Kjosevski:

“This study examines the impact of venture capital (VC) investments in artificial intelligence (AI) on unemployment rates across 27 EU member states, distinguishing between old and new EU countries. Utilizing annual data from 2012 to 2023, we explore whether AI investments significantly influence unemployment and how these effects vary between advanced economies and those still developing their digital infrastructure. Employing the two-step system Generalized Method of Moments (GMM), we effectively address endogeneity and the dynamic nature of unemployment, making this method well-suited for our panel dataset covering 27 countries over 12 years. Our findings reveal that AI investments correlate with higher unemployment in old EU countries while positively impacting job creation in new EU member states. Based on these results, we recommend targeted policies to enhance AI adoption, improve digital infrastructure, and promote workforce training, particularly in new member states, to optimize the benefits of AI investments and mitigate potential job displacement.”

From a paper by Remi Jedwab, Brian Blankespoor, Takaaki Masaki, and Carlos Rodríguez-Castelán:

“What are the spillover effects of foreign conflicts on regional economies, and what local factors can help mitigate the impact of such economic shocks? Adopting a difference-in-difference framework leveraging the breakout of the Boko Haram insurgency in Northeastern Nigeria in 2009, we study its effects in neighboring areas in Cameroon, Chad and Niger that were not directly targeted by Boko Haram activities until the mid 2010s. We find strong negative effects on regional economic activities – proxied by reductions in nighttime lights – particularly amongst areas within 200 km from the Boko Haram area. This negative impact is concentrated in urban areas, as trade was impacted and economic uncertainty rose. The rise of Boko Haram also resulted in more agricultural burning. Foreign conflict shocks can thus accentuate pressure on domestic resources. Focusing on the heterogeneity of the impacts, we find smaller resilience effects in those areas with a worse geography, less agricultural development, more limited infrastructure, and weaker markets and institutions. Overall, these findings suggest that conflicts may have larger spillover effects in geographically challenging and/or economically poorer regions, as is the case in various regions of Africa.”