The Unassuming Economist

From a paper by Martin T. Bohl, Niklas Humann, and Pierre L. Siklos:

“This survey synthesizes evidence on the bidirectional links between commodity markets and monetary policy. On the commodities-to-policy side, we review how shocks to energy, food, and metals pass through to inflation, inflation expectations, economic activity, and financial stability in state-dependent ways that vary by shock type, exposure, and policy regime. We complement the literature with an analysis of central-bank speeches, showing how officials classify commodity shocks and how these framings map into policy stances. On the policy-to-commodities side, we organize evidence on the transmission of monetary policy to commodity markets via financial, real-economy, and expectations channels, highlighting heterogeneity across policy instruments, commodities, and central banks. We emphasize how financialization tightens cross-asset linkages, raises leverage and margin sensitivity, and amplifies discount-rate and risk-taking mechanisms. Overall, commodities are best treated as policy sensitive state variables, not exogenous disturbances, with implications for policy design, central bank communication, and international monetary spillovers.”

From a paper by Sune Karlsson and Pär Österholm:

“In this paper, we analyse whether two key macroeconomic relationships in Australia – Okun’s law
and the Phillips curve – have been stable over time. This is done by estimating hybrid time-varying
parameter Bayesian VAR models using quarterly data from 1978 to 2024. Model comparison based
on marginal likelihoods indicates that Okun’s law has been stable, whereas the Phillips curve has
not. Using the preferred specification of the BVAR for the unemployment rate and inflation, we
also calculate trend values for both variables. The model’s trend unemployment rate at the end of
the sample is approximately five percent; estimated trend inflation at the same point in time is close
to the Reserve Bank of Australia’s inflation target.”

From a paper by Barbara Livorová and Adam Geršl:

“This paper contributes to studying the impacts of monetary policy on labour income inequality in the euro area using subnational regional data on compensation per employee. The dataset covers 932 NUTS3 regions from 16 countries over the period 2000 – 2022 at a yearly frequency. Using sub-sample analysis combined with local projections, the results show that monetary policy rate changes have heterogeneous effects on the growth of real compensation per employee (deflated by the GDP deflator) at both the bottom and upper ends of the regional distribution within individual countries. From the whole euro area perspective, monetary policy tightening has a heterogeneous effect on labour incomes between regions – in times of monetary policy easing, shortening the gap between average low- and high-income regions.”

From a paper by Ajay Chhibber:

“Contrary to common perception India is not a low inflation country. India’s inflation has in periods deviated significantly from world inflation despite increasing trade and financial integration with the rest of the world. In recent years India’s inflation rate has exceeded inflation even in Latin America and has consistently been higher that East Asian inflation. Past studies of India’s inflation follow either a Philips Curve or a structuralist approach which use a fixed mark-up cost push model. In our model we combine the two approaches with a variable markup model where instead of the output gap, which is insignificant, we postulate that excess money balances determine excess demand in the system and affect inflation through the markup. This allows our model to capture the effects of monetary policy as well as cost push factors such as real wages, relative food prices, and oil prices in understanding the dynamics of inflation in India. We find no convincing evidence that inflation targeting affects inflation or expectations but suggest keeping it as a framework for better functioning of the Monetary Policy Committee.”

From a paper by Javier Bilbao-Ubillos and Ana-Isabel Fernández-Sainz:

“In line with the orientation of EU economic policy, the Spanish government has favoured a strategy of internal devaluation as a way of adjusting price levels within the currency union and offsetting the fall in competitiveness accumulated over time, as evidenced by the persistent trade deficit. The results of comparative empirical studies indicate that the internal wage devaluation applied in Spain as a crisis exit strategy (in the form of labour reforms and, in general, measures to contain labour costs) does not seem to have attained the desired goals in terms of reducing the relative prices of exports and consolidating a model of growth based on external demand. Indeed, the estimates drawn up show that tailwinds – the depreciation of the euro as a result of the measures taken by the ECB, greater economic activity by trading partners and the fall in the price of oil – exercised a decisive influence in the trends followed by the prices of exports and the balance of trade during the period of crisis management in Spain.”