We compile a unique dataset linking micro price data underlying the official Swedish producer price index with administrative firm level data and provide new evidence on the inflationary effects of global supply chain shocks. For identification, we interact exogenous shocks to global supply chains, obtained through a VAR model, with firm-specific import shares. Shocks to global supply chains lead to a significant and persistent increase in producer prices with a peak response after two years. Importantly, average responses mask heterogeneous responses across firms. Relatively larger firms, firms with lower labor costs and a higher market share raise prices more strongly.

German government debt is considered a safe asset in times of turbulence. We estimate the impact of changes in the risk appetite of global investors on weekly investment fund flows into the German sovereign bond market. Our key contribution is to allow the impact of such shocks to depend on the extent of disagreement about the path of fiscal policy, which we measure from the texts of all speeches delivered in the German Bundestag. An increase in global risk causes strong inflows into German government bonds if the coalition government is united, but only small and short-lived inflows if disagreement within the government is high. In contrast, disagreement between the government and the opposition has no moderating effect on fund inflows. We also find that the dependence of safe-haven flows on the prevailing level of fiscal disagreement is higher for actively managed funds and for funds domiciled abroad.

We study the effect of time-varying disagreement of professional forecasters on the transmission of monetary policy in Korea, which has transitioned from an emerging to an advanced economy. We find that high levels of disagreement interfere with the transmission of monetary policy and, hence, weaken monetary policy effects. However, under low levels of disagreement, a monetary policy shock elicits textbook-like responses of inflation, expected inflation, and real activity. The findings are consistent with the view that disagreement affects the role of the signaling channel of monetary transmission relative to the conventional transmission channel. We also show that the dependance of the transmission on the level of disagreement remains intact even after controlling for time-varying monetary policy uncertainty and considering the shifts in the Bank of Korea's inflation target type.

Monetary policy changes in the U.S. have important cross-border effects on small open economies. Since 2022, the Fed has tightened monetary policy considerably, yet it appears that spillovers on the rest of the world are smaller than in the past. We investigate this idea by analyzing the international propagation of Fed policy using a panel of advanced and emerging economies since 1994. We distinguish the current tightening cycle from previous ones and find that international spillovers from the 2022/3 U.S. monetary tightening episode are more benign than the historical average. We estimate smooth-transition local projections in which spillovers depend on the state of the U.S. business cycle. We find that if domestic demand in the U.S. is weak, international spillovers are large. However, spillovers are absent if demand in the U.S. remains strong. Hence, a “soft landing“ of the U.S. economy makes a difference for the magnitude of international spillovers from U.S. monetary policy to the rest of the world.

This paper studies the impact of dissent in the ECB's Governing Council on uncertainty surrounding households' inflation expectations. We conduct a randomized controlled using the Bundesbank Online Panel Households. Participants are provided with alternative information treatments concerning the vote in the Council, e.g. unanimity and dissent, are asked to submit probabilistic inflation expectations. The results show that the vote informative. Households revise their subjective inflation forecast after receiving information about the vote. Information about unanimity or dissent causes a wider individual distribution of future inflation for those households that were relatively certain before the treatment. For remaining 60% of households, this information reduces uncertainty. Information about dissent increases uncertainty more than information about a unanimous vote, though the difference not statistically significant. A unanimous vote unambiguously reduces inflation uncertainty households with anchored inflation expectations.

We assemble a data set of more than eight million German Twitter posts related to the war in Ukraine. Based on state-of-the-art methods of text analysis, we construct a daily index of uncertainty about the war as perceived by German Twitter. We then estimate a VAR model with daily financial and macroeconomic data and identify an exogenous uncertainty shock. The increase in uncertainty has strong effects on financial markets and causes a significant decline in economic activity as well as an increase in expected inflation. We find the effects of uncertainty to be particularly strong in the first months of the war.

Fiscal policy is made in parliaments. We go to the roots of changes of fiscal policy in Germany and use a novel data set on all parliamentary speeches in the Bundestag from 1960 to 2021. We propose an embedding-based approach, which allows the representation of words and documents in a shared vector space, in order to measure fiscal policy-related sentiment in parliamentary debates at a scale from contractionary to expansionary. We also distinguish between sentiment related to exogenous and endogenous fiscal policy. We put fiscal sentiment into a series of recursively-identified vector autoregressive models to show that a change in fiscal sentiment causes a shift in government spending and has significant effects on the macroeconomy. The results support the notion that the debate in parliament contains information for the identification of government spending shocks.

We estimate the effect of global supply chain disruptions on inflation for a panel of 28 European countries. Adverse shocks have a stronger and more persistent effect than favorable shocks.

This paper studies the demand for information about monetary policy, while the literature on central bank transparency and communication typically studies the supply of information by the central bank or the reception of the information provided. We use a new data set on the number of views of the Federal Reserve's website to measure the demand for information. We show that exogenous news about the state of the economy as re flected in U.S. macroeconomic news surprises raise the demand for information about monetary policy. Surprises trigger an increase in the number of views of the policy-relevant sections of the website, but not the other sections. Hence, market participants do not only revise their policy expectations after a surprise, but actively acquire new information. We also show that attention to the Fed matters: a high number of views on the day before the news release weakens the high-frequency response of interest rates to macroeconomic surprises.

Policymakers imposed constraints on public life to contain the Covid-19 pandemic. At the same time, fiscal, monetary and macroprudential policies implemented a large range of expansionary measures to limit the economic consequences of the pandemic and stimulate recovery. In this paper, we assess the response of the equity market as a high-frequency indicator of economic activity to containment and stabilization policies for 29 European economies. We construct indicators of containment and stabilization policies and estimate a range of panel VAR models. The main results are threefold. First, we find that stock markets are highly responsive to containment and stabilization policies. We show that domestic fiscal policy, macroprudential policy as well as monetary policy support the recovery as reflected in the stock market. Second, expansionary fiscal policy conducted at the European level reduces rather raises stock prices. Third, we estimate the model over subsamples and show that the counter-intuitive stock market response to EU policies is driven by the responses in medium- and high-debt countries. These countries' stock markets are also particularly susceptible to monetary policy announcements.

Lockdowns imposed to fight the Covid-19 pandemic have cross-border effects. In this paper, we estimate the empirical magnitude of lockdown spillovers in a set of panel local projections. We use daily indicators of economic activity such as stock returns, effective exchange rates, NO2 emissions, mobility and maritime container trade. Lockdown shocks originating in the most important trading partners have a strong and significant adverse effect on economic activity in the home economy. For stock prices and exports, the spillovers can even be larger than the effect of domestic lockdown shocks. The results are robust with respect to alternative country weights used to construct foreign shocks, i.e. weights based on foreign direct investment or the connectedness through value chains. We find that lockdown spillovers have been particularly strong during the first wave of the pandemic. Countries with a higher export share are particularly exposed to lockdown spillovers.

Remittance inflows are driven by macroeconomic conditions in the home and the host economies, respectively. In this paper, we study the effect of US monetary policy on remittance flows into economies in Latin American and the Caribbean. The role of Fed policy for remittances has not yet been studied. We estimate a series of panel local projections for remittance inflows into eight countries. A surprise change in US monetary conditions has a strong and highly significant negative effect on inflows. Our finding remains robust if we change the sample period or include additional variables. Hence, our paper establishes a remittance-channel through which the Fed affects the business cycle abroad.

This paper estimates the macroeconomic effects of global supply chain shocks for the euro area. Our empirical model combines business cycle variables with data from international container trade. Using a novel identification scheme, we augment conventional sign restrictions on the impulse responses by narrative information about three episodes: the Tohoku earthquake in 2011, the Suez Canal obstruction in 2021, and the Shanghai backlog in 2022. We show that a global supply chain shock causes a drop in euro area real economic activity and a strong increase in consumer prices. Over a horizon of one year, the global supply chain shock explains about 30% of inflation dynamics. We also use regional data on supply chain pressure to isolate shocks originating in China. Our results show that disruptions originating in China are an important driver for unexpected movements in industrial production, while disruptions originating outside China are particularly important for consumer prices.

Abstract We collect more than eight million German-language tweets on the war in Ukraine and use a machine learning approach to construct a daily index of uncertainty about the war. In an empirical model, we show that fluctuations in uncertainty have strong effects on financial markets and real economic activity in Germany.

In this paper, we study the impact of the coronavirus disease 2019 pandemic in estimated panel vector autoregression models for 92 countries. The large cross-section of countries allows us to shed light on the heterogeneity of the responses of stock markets and nitrogen dioxide emissions as high-frequency measures of economic activity. We quantify the effect of the number of infections and four dimensions of policy measures: (1) containment and closure, (2) movement restrictions, (3) economic support, and (4) adjustments of health systems. Our main findings show that a surprise increase in the number of infections triggers a drop in our two measures of economic activity. Propping up economic support measures, in contrast, raises stock returns and emissions and, thus, contributes to the economic recovery. We also document vast differences in the responses across subsets of countries and between the first and the second wave of infections.