Highly recommended!
“Financial Repression in the XXIst Century” by Ricardo Reis.
“Large stocks of public and external debt tempt policymakers to extract resources from their creditors. This article characterizes three broad forms of financial repression that serve this purpose. The first consists of direct taxation of the financial sector through levies on financial transactions, banks’ income, or pension-fund assets. The second is a sudden and sufficiently persistent devaluation of the currency. The third raises the demand for the non-monetary services provided by different types of government liabilities while keeping their supply scarce, thereby creating yield discounts. Reviewing historical experience, including recent years, the article concludes that each of these revenue sources can occasionally be large, but that policies designed to exploit them often fail. Financial repression is an alluring but ultimately illusory temptation: yielding to it typically generates substantial efficiency losses while producing only limited revenue.”
Super interesting food for thought!
“Supply Chain Uncertainty, Energy Prices, and Inflation” by Alfonso Merendino and Tommaso Monacelli.
“…we show that higher supply chain uncertainty increases the sensitivity and persistence of inflation to transitory energy shocks, and relate these findings to the 2021–23 inflation episode. Our findings call for a reconsideration of the so-called “look-through” approach of monetary policy to supply shocks.”
Super interesting!
“Heaven or Earth? The Evolving Role of Global Shocks for Domestic Monetary Policy” by Kristin Forbes, Jongrim Ha, and M. Ayhan Kose.
“Business cycles are increasingly driven by global shocks, rather than the domestic demand shocks prominent in earlier decades, posing challenges for central banks seeking to meet domestic mandates and communicate their policy decisions. This paper analyzes the evolving influence and characteristics of global and domestic shocks in advanced economies from 1970-2024 using a new FAVAR model that decomposes movements in interest rates, inflation, and output growth into four global shocks (demand, supply, oil, and monetary policy) and three domestic shocks (demand, supply, and monetary policy). We find that the role of global shocks has increased sharply over time and that their characteristics differ from those of domestic shocks across multiple dimensions. Compared to domestic shocks, global shocks have a larger supply component, higher variance, more persistent effects on inflation, and are more asymmetric (contributing more to tightening than to easing phases of monetary policy). As global supply shocks have become more prominent, central banks have also been less willing to “look through” their effects on inflation than for comparable domestic shocks. The distinct characteristics and rising influence of global shocks-particularly global supply shocks-have significant implications for modeling monetary policy and designing central bank frameworks.”
Food for thought!
“The Labor Market Impact of Occupation-Specific Technical Change: Inspecting the Mechanisms” by Fenella Carpena and Simon Galle.
“…we shed light on the aggregate and distributional effects of occupation-specific advances in AI: wages in administrative services grow the least, ripple effects on less exposed occupations are substantial, AI modestly compresses the returns to education, and, on average, disproportionately benefits lower-income groups.”
Highly recommended!
“What if Labor Becomes Unnecessary?” Round Table with David Autor, Anton Korinek, and Natasha Sarin (hosted by David Leonhardt).
David Autor: “The most widely discussed findings document a slower pace of hiring of young workers in occupations that seem exposed to A.I., such as computer programming and customer support. But the hiring downturn starts in the spring of 2022, before the release of ChatGPT in November of 2022. The timing is a puzzle.”
Impressive! Will it end well?
Big Tech to Spend $650 Billion This Year as AI Race Intensifies (Bloomberg)
