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Journal Article
Inflation: Drivers and Dynamics | 2019 CEBRA Annual Meeting Session Summary
The relationship between the Phillips curve and inflation has become weaker over time, producing questions regarding how policymakers might connect inflation to the rest of the economy. Presentations given during the “Inflation: Drivers and Dynamics” session of the Central Bank Research Association’s annual meeting focused on the intersection of monetary policy and inflation dynamics to examine the ways in which policy might impact inflation and related expectations and processes. This Economic Commentary summarizes the papers presented during this session.
Working Paper
Reviews of Foreign Central Banks' Monetary Policy Frameworks: Approaches, Issues, and Outcomes
We examine the experience of conducting reviews of monetary policy frameworks in the major advanced foreign economies since the Federal Open Market Committee's 2019–20 review. We find that periodic reviews are becoming the norm and have often been motivated by similar developments and challenges as those facing the Federal Reserve. In some cases, reviews were opportunities to alter numerical inflation objectives or clarify how policymakers balance fostering price stability and supporting employment and activity. In addition, foreign reviews emphasized the need for policy flexibility in ...
Discussion Paper
Inflation's Shared DNA: Regional and Global Factors in Post-Pandemic Core Inflation
The COVID-19 pandemic recovery created inflationary pressures globally. These effects, however, were felt differently across countries and regions.
Discussion Paper
Accumulated Savings During the Pandemic: An International Comparison with Historical Perspective
The COVID-19 pandemic gave rise to unprecedented global economic conditions. Due to a mix of government-imposed restrictions and voluntary personal decisions, mobility levels collapsed in March 2020 and subsequently closely tracked the successive waves of the pandemic.
Discussion Paper
An update on Excess Savings in Selected Advanced Economies
In a previous FEDS Note, de Soyres, Moore, and Ortiz (2023), we conducted a comparison of household excess savings across advanced and emerging economies over different historical episodes. In that analysis, we found that the stock of excess savings accumulated during the pandemic in the U.S. was exhausted by 2023Q1, while other advanced economies were not expected to deplete their excess reserve until late in 2023.
Working Paper
Core Inflation in the Advanced Economies: A Regional Perspective
We explore differences in the dynamics of core inflation between Europe and North America using a Bayesian time series filter that decomposes the level of core inflation in the major advanced economies into regional, global, and country-specific components. We find a prominent role for both regional and global factors. Historically, the two regional components have at times diverged. Using reduced-form regressions, we examine the economic drivers behind the changes in our estimated global and regional components of U.S. core inflation, focusing on the post-pandemic inflation surge and ...
Working Paper
Retail inventories and inflation dynamics: The price margin channel
Using industry-level panel data and plausibly exogenous variation in supply conditions, we estimate the elasticity of retail price margins with respect to inventories along the retailer's optimal pricing curve. We find that this elasticity is negative and statistically significant, implying that lower finished-good inventories lead to higher price margins. We assess the implications of this channel for inflation dynamics within a New Keynesian Phillips curve (NKPC) framework that links inventories to retailers' markup behavior. Incorporating the inventory-sales ratio into the NKPC markedly ...
Working Paper
Spread Too Thin: The Impact of Lean Inventories
Widespread adoption of just-in-time (JIT) production has reduced inventory holdings. This paper finds that JIT creates a trade-off between firm profitability and vulnerability to large shocks. Empirically, JIT adopters experience higher sales and less volatility while also exhibiting heightened cyclicality and sensitivity to natural disasters. I explain these facts in a structurally estimated general equilibrium model where firms can adopt JIT. Relative to a no-JIT economy, the estimated model implies a 1.3% increase in firm value. At the same time, an unanticipated shock results in a roughly ...
Working Paper
Household Excess Savings and the Transmission of Monetary Policy
Household savings rose above trend in many developed countries after the onset of COVID-19. Given its link to aggregate consumption, the presence of these "excess savings" has raised questions about their implications for the transmission of monetary policy. Using a panel of euro-area economies and high-frequency monetary policy shocks, we document that household excess savings dampen the effects of monetary policy on economic activity and inflation, especially during the pandemic period. To rationalize our empirical findings, we build a New Keynesian model in which households use savings to ...