Central banks

Agostino Capponi and Jin-Wook ChangThis paper investigates how settlement speed affects financial stability in payment networks, accounting for netting benefits, liquidity costs, and counterparty risks. Faster settlement reduces crisis likelihood but amplifies crisis severity. The net welfare effect depends on network topology and proximity to default threshold points—settlement times at which the number of defaulting agents changes discontinuously.

Edmund Crawley and William L. GamberWe estimate how much household spending responds directly to changes in interest rates. We develop a Bayesian procedure that uses the empirical impulse responses to macroeconomic shocks to discipline the consumer block of a HANK model. The procedure can be applied shock-by-shock or pooled jointly.

Matthieu Bussière, Johanna Gilbert, and Olesya GrishchenkoUsing data on euro-area household inflation forecasts from the European Commission Consumer Survey, we show that households' perceptions of recent price changes play a key role in the formation of their inflation expectations. Such a relationship remains robust when we account for specific inflation components, household characteristics, and macroeconomic conditions, even though the perceptions-expectations relationship is heterogeneous across countries.

Edmund Crawley, William Goodwin, Margaret M. Jacobson, and Fabian WinklerIn recent decades, an empirically estimated double-inertial rule fits the path of changes in the federal funds rate better than a standard inertial Taylor rule. Inertial Taylor rules aim to capture monetary policy gradualism via slow adjustments in the level of the policy rate.