The Unassuming Economist

From a post by Charles Collyns and Michael Klein:

“The price of gold has jumped over 40 percent since the end of 2023, reaching $3,000 per ounce in mid-March 2025. This leap cannot be explained by a sudden increase in the demand for gold as jewelry or for its use in industrial production. Rather, it reflects the shifting demand for the yellow metal as a financial asset. Historically, gold has been held by private investors who see gold as a good way to protect wealth during inflationary periods or when there is substantial economic or political uncertainty as well as by central banks as part of their international reserves. Can shifts in these motivations explain the recent dramatic rise in the gold price?”

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From a new paper by Caner Demir and, Raif Cergibozan:

“In this paper, we present the results of a study examining whether the European Union, where countries act in common on many issues such as monetary policy, abolition of borders and mobilization of labour and capital, also constitutes a union in terms of energy security. From this point of view, whether the energy security risk in the European Union has converged or not is tested by using various analysis methods covering the period 1980–2018 for 17 EU countries. The findings of the study not only reveal whether individual countries converge to the group average but also show whether the group as a whole forms a convergent outlook. The linear unit root analysis indicates that each country is in a stochastic convergence process towards the group average. In addition, time series beta convergence analysis, which takes into account country-specific structural break periods, is applied and the convergent-divergent situation of each country before and after the break is revealed. Following this determination of individual countries, whether the sample as a whole constitutes a convergent process is tested with sigma and panel beta convergence models and it is determined that the 17 countries subject to the analysis form a convergent outlook as a whole. A robustness check is also made via a nonlinear time series analysis and the previous findings are confirmed.”

From a paper by Cheol-Keun Cho and Myunghyun Kim:

“We consider a proxy FAVAR (Factor-Augmented Vector Autoregression) model to analyze the
impact of an oil supply news shock on the Korean economy. To identify an oil supply news shock, we
use the variation in oil futures prices around OPEC production announcements as a proxy. Moreover, we
include a factor that captures the common movement of many Korean macro variables such as various
price indices and investment. The estimation results of the proxy FAVAR model show that an oil supply
news shock increases the real oil price and the US CPI, and decreases world oil production and US GDP.
As for Korean macro variables, GDP and net exports fall and CPI increases in response to the shock.”

From a paper by Puneet Vatsa:

“I use a structural vector autoregression model to analyse the links between oil prices, petrol prices, inflation, inflation perceptions, and inflation expectations in New Zealand. Findings reveal that although inflation expectations are sensitive to shocks to oil prices, petrol prices, and inflation itself, they are considerably more sensitive to inflation perception shocks. Shocks to inflation perceptions explain 54% of the forecast error variance in inflation expectations after one quarter and 37% after 18 months. The results underscore the importance of including inflation perceptions in models seeking to account for inflation expectations and their associations with energy prices.”

From a paper by Guilherme Spinato Morlin, Marco Stamegna, and Simone D’Alessandro:

“The surge in energy prices following the Russian-Ukrainian conflict triggered the most significant inflation in advanced economies in recent decades. Using the Eurogreen model for the Italian economy, we examine the macroeconomic and distributional impacts of rising energy prices alongside two policy measures: wage indexation and a temporary housing rent cap. We compare policy scenarios with a baseline reflecting the observed price shocks. We find that: i) energy price shocks disproportionately affect lower-income individuals due to the larger share of energy goods in their consumption baskets; ii) wage indexation results in higher average real wages compared to the baseline scenario, without triggering inflation acceleration, while temporarily boosting output and employment by supporting aggregate demand; iii) a temporary housing rent cap improves distribution in workers’ favor while reducing inflation; iv) both policies have a more substantial effect for low-skilled workers; and v) best outcomes appear when these policies are jointly implemented.”