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Author:Matschke, Johannes 

Working Paper
Macroprudential Policy Interlinkages

Emerging markets are concerned about sudden stops in international capital flows, which may lead to severe recessions associated with vicious spirals of currency depreciations and tightening borrowing constraints. A common prescription is to impose macroprudential policies, including prudential capital controls, to limit international borrowing especially in foreign currency. This paper analyzes the supportive role of macroprudential policies geared toward the domestic financial market, suggesting that emerging markets should resort to a wide mix of policies, even when the domestic financial ...
Research Working Paper , Paper RWP 21-10

Journal Article
China's Post-COVID Recovery: Implications and Risks

China removed most of its COVID-19 restrictions in November 2022 following a year of weak growth. Despite initial uncertainty about sustained COVID-19 outbreaks, the Chinese economy has begun to rebound, driven by domestic consumption. The rebound is likely to boost global growth.
Economic Bulletin

Journal Article
To Reach the Fed’s Inflation Target, Interest Rates May Have to Remain Restrictive for Some Time

The Federal Reserve has raised the federal funds rate by 500 basis points since March 2022. But how tight is the current policy stance? We account for the federal funds rate, inflation expectations, and the natural rate of interest and find that monetary policy has only been restrictive since 2023:Q1. We find that to bring inflation down to 2 percent, the Federal Reserve may have to keep the federal funds rate in restrictive territory for some time.
Economic Bulletin

Working Paper
The Missing Tail Risk in Option Prices

This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts, and find two methods that yield accurate distributional forecasts. We then propose another statistic to examine the relative accuracy over the entire distribution range. Our results indicate more oil price realizations in the left tail than predicted. We argue that this finding points to a persistent behavioral forecasting bias and a ...
Research Working Paper , Paper RWP 23-02

Working Paper
The Missing Tail Risk in Option Prices

This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts, and find two methods that yield accurate distributional forecasts. We then propose another statistic to examine the relative accuracy over the entire distribution range. Our results indicate more oil price realizations in the left tail than predicted. We argue that this finding points to a persistent behavioral forecasting bias and a ...
Research Working Paper , Paper RWP 23-02

Journal Article
Recent Appreciation in the U.S. Dollar Unlikely to Have Large Effect on Domestic Inflation

The U.S. dollar has appreciated more than 8.5 percent since May 2021, raising questions about potential effects on domestic inflation. If imports are billed in foreign currencies, then a strong dollar could reduce import prices and therefore domestic inflation. However, U.S. imports are almost entirely invoiced in U.S. dollars, dampening this effect. We find that the recent appreciation in the U.S. dollar has a negligible effect on domestic inflation as measured by the core price index for personal consumption expenditures.
Economic Bulletin , Issue August 17, 2022 , Pages 4

Journal Article
Price Pressures for U.S. Exporters and a Strong Dollar Have Increased Inflation in Foreign Countries

As the higher demand for imported goods during the pandemic has moderated, U.S. export prices have become an important factor in determining inflationary pressures from the United States. As of 2022:Q2, export prices increased by 11.8 percent annualized, far exceeding the historical average of 3.75 percent. Further, 58 percent of the increase in export prices can be attributed to the recent appreciation of the U.S. dollar, while the remaining 42 percent can be attributed to price pressures for U.S. exporters.
Economic Bulletin , Issue August 31, 2022 , Pages 4

Journal Article
Labor Markets Are Tight, but Conditions Vary across States

A record 4.4 million employees quit their jobs in September 2021, and many businesses are struggling to fill open positions. Although at a national level the labor market appears historically tight, we show that labor market tightness differs widely across states. Most states have tighter labor markets than before the pandemic, but others have struggled to recover.
Economic Bulletin , Issue Dec 22, 2021 , Pages 4

Working Paper
Downward Wage Rigidities and Recession Dynamics in Advanced and Emerging Economies*

Downward wage rigidity limits the downward adjustment of wages, especially during recessions. Although macroeconomic models generally suggest that wage rigidity exacerbates employment losses and generates asymmetric business cycles, direct empirical evidence is scarce. In this paper, we construct a data set covering 53countries, including both emerging markets and advanced economies, to measure and compare downward real wage rigidities across countries. We find that wage rigidities are widespread, but overall higher in emerging markets. We provide empirical evidence that countries with higher ...
Research Working Paper , Paper RWP 22-10

Working Paper
National Interests, Spillovers and Macroprudential Coordination

This paper presents a simple two-region banking model of liquidity mismatch to study the strategic interactions between national regulators. I show that banks hold insufficient liquidity, which has repercussions for other banks in an international financial market. The model justifies coordinated prudential liquidity regulation due to an international fire-sale externality. However, I theoretically and empirically argue that domestically oriented regulators from jurisdictions with a smaller banking sector do not internalize the global benefits of regulation and therefore do not adhere to ...
Research Working Paper , Paper RWP 21-13

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