The Unassuming Economist

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 Pietro Bomprezzi, Silvia Marchesi, and Rima Turk-Ariss:

“This paper investigates the dynamic aggregate response of firm investments to the approval of an IMF arrangement, distinguishing between General Resource Account (GRA) and Poverty Reduction and Growth Trust (PRGT). Using a stacked difference-in-differences estimator and leveraging firm-level characteristics, we find that firms relying more on external finance, those more exposed to uncertainty, or those with domestic ownership tend to increase investments significantly following a GRA agreement. In contrast, the effect is much more limited in the case of PRGT financed programs. The results contribute to the growing literature on the channels through which IMF programs influence the real economy, offering nuanced insights into how these interventions shape private sector dynamics and broader economic development.”

From a paper by Kirsten Sehnbruch, Rafael Carranza Navarrete, and Dante Contreras Guajardo:

“One of the most complex policy issues that developing countries will face as a result of the employment crisis caused by the Covid crisis is the question of how they can better protect the unemployed. However, the analysis of unemployment insurance (UI) in developing economies with large informal sectors is in its infancy, with few papers providing solid empirical evidence. This paper therefore makes several contributions: first, it applies Chetty’s 2008 landmark work on UI to a transition economy (Chile) and shows that the moral hazard effects expected by policy makers, who designed the system are minimal, while liquidity effects were entirely neglected. Second, it demonstrates that it is not enough merely to quantify effects such as moral hazard, but to understand their causes as unemployment generated by moral hazard or liquidity constraints has different welfare implications and should therefore result in different policies. By means of an RDD, this paper analyses the Chilean UI system using a large sample of administrative data, which allows for an extremely precise analysis of how the system works, thus providing invaluable empirical lessons for other countries.”

From a paper by Andrea Ariu:

“This paper analyzes the growth of trade in Business Services with a particular focus on Ghana. This country experienced the fastest and most important increase in Business Services exports recorded in recent years. This spectacular growth has led Ghana to export as much as a developed country and improved its economy. The main factor underneath this growth is the improved capacity to export Business Services, which is likely to be accounted by an impressive inflow of foreign companies attracted by the economic and political conditions, together as the establishment of the secretariat of the African Continental Free Trade Area. These results are not specific to Ghana. In other African and non-African countries supply-side determinants show to be the main propellant of Business Services trade growth.”