{"title":"A plucking model of business cycles","authors":"Stéphane Dupraz , Emi Nakamura , Jón Steinsson","doi":"10.1016/j.jmoneco.2025.103766","DOIUrl":"10.1016/j.jmoneco.2025.103766","url":null,"abstract":"<div><div>In standard models, economic activity fluctuates symmetrically around a “natural rate” and stabilization policies can dampen these fluctuations but do not affect the average level of activity. An alternative view – labeled the “plucking model” by Milton Friedman – is that economic fluctuations are drops below the economy’s full potential ceiling. We show that the dynamics of the unemployment rate in the US display a striking asymmetry that strongly favors the plucking model: increases in unemployment are followed by decreases of similar amplitude, while the amplitude of a decrease does not predict the amplitude of the following increase. In addition, business cycles last seven years on average and unemployment rises much faster during recessions than it falls during expansions. We augment a standard labor search model with downward nominal wage rigidity and show how it can fit the plucking property.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"152 ","pages":"Article 103766"},"PeriodicalIF":4.3,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144070667","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Policy transition risk, carbon premiums, and asset prices","authors":"Christoph Hambel , Frederick van der Ploeg","doi":"10.1016/j.jmoneco.2025.103780","DOIUrl":"10.1016/j.jmoneco.2025.103780","url":null,"abstract":"<div><div>We analyze the effects of policy transition risk on asset pricing and the green transition using a global two-sector, macro-finance model of climate and the economy. Policy transition risk results from probabilistic changes between three policy states: no, modest, and ambitious carbon pricing. We show that policy transition risk leads to carbon premiums (i.e. higher expected returns on brown than on green assets), especially if the economy is still quite carbon-intensive and close to the temperature cap, and thus accelerate the green transition. Increased transition risk leads to more precautionary saving and falls in the risk-free rate. We offer extensions to deal with physical risks (temperature-related risk of climate disasters and climate tipping), technology transition risk, and more realistic policy tipping with endogenous transition probabilities.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"152 ","pages":"Article 103780"},"PeriodicalIF":4.3,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144070590","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Automation and the rise of superstar firms","authors":"Hamid Firooz , Zheng Liu , Yajie Wang","doi":"10.1016/j.jmoneco.2025.103733","DOIUrl":"10.1016/j.jmoneco.2025.103733","url":null,"abstract":"<div><div>We provide empirical evidence suggesting that the rise of superstar firms is linked to automation. We explain this empirical link in a general equilibrium framework with heterogeneous firms and variable markups. Firms can operate a labor-only technology or, by paying a per-period fixed cost, an automation technology that uses both workers and robots. The fixed costs lead to an economy-of-scale effect of automation, such that larger and more productive firms are more likely to automate. Automation boosts labor productivity, allowing those large firms to expand further, raising industry concentration. Since robots substitute for workers, increased automation raises sales concentration more than employment concentration, consistent with empirical evidence. Under our calibration, a modest robot subsidy mitigates markup distortions and improves welfare by stimulating automation investment, bringing aggregate output closer to the efficient level.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103733"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783470","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Marcelo Pedroni , Swapnil Singh , Christian A. Stoltenberg
{"title":"Advance information and consumption insurance: Evidence and structural estimation","authors":"Marcelo Pedroni , Swapnil Singh , Christian A. Stoltenberg","doi":"10.1016/j.jmoneco.2025.103748","DOIUrl":"10.1016/j.jmoneco.2025.103748","url":null,"abstract":"<div><div>We show that households’ private information on future income can be identified from the correlation between consumption growth and future income growth <em>conditional</em> on current income growth. Employing PSID data, we find that this conditional correlation is positive and significant. We use this evidence to structurally estimate a standard incomplete markets model and discover that US households possess enough advance information to reduce their income forecast errors by 15%. This significantly affects the measurement of consumption insurance. With advance information, 25% more income shocks pass through to consumption on average, and more than twice as much for the 5% asset poorest. Without advance information, the marginal benefits of public insurance are underestimated by an order of magnitude for some of the poorest wealth quantiles.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103748"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783571","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Natural gas and the macroeconomy: Not all energy shocks are alike","authors":"Piergiorgio Alessandri, Andrea Gazzani","doi":"10.1016/j.jmoneco.2025.103749","DOIUrl":"10.1016/j.jmoneco.2025.103749","url":null,"abstract":"<div><div>How do shocks to the supply of natural gas affect output and inflation? To answer this question, we construct an instrument using daily news on the European gas market and employ it within a VAR model of the euro area. We find that negative supply shocks have sizable stagflationary effects and accounted for nearly 50 percent of the increase in core prices observed between 2021 and 2023. The propagation to core prices appears to be larger compared to oil shocks, suggesting that the structural differences between the two markets matter from an aggregate perspective.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103749"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783476","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Foreign exchange interventions in the New-Keynesian model: Policy, transmission, and welfare","authors":"Yossi Yakhin","doi":"10.1016/j.jmoneco.2025.103763","DOIUrl":"10.1016/j.jmoneco.2025.103763","url":null,"abstract":"<div><div>The paper introduces foreign exchange interventions (FXIs) into an otherwise standard New-Keynesian small open economy model. It solves for the optimal FXI policy, suggests an implementable policy rule, and studies the transmission mechanism of FXIs. Relying on the portfolio balance channel, deviations from the uncovered interest rate parity (UIP) reflect financial inefficiencies. A policy rule that seeks to stabilize the UIP premium moves the economy toward its optimal allocation, regardless of the type of shocks it faces. Augmenting the rule with foreign reserves smoothing further improves welfare. The paper discusses the conditions under which strict targeting of the UIP premium is optimal. FXIs are transmitted by affecting the UIP premium. Purchasing foreign reserves increases the premium, thereby raising the effective return home agents face and depreciating the domestic currency. Consequently, domestic demand contracts and export expands. The results are robust to a variety of modeling alternatives for the financial sector.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103763"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Announcements, expectations, and stock returns with asymmetric information","authors":"Leyla Jianyu Han","doi":"10.1016/j.jmoneco.2025.103751","DOIUrl":"10.1016/j.jmoneco.2025.103751","url":null,"abstract":"<div><div>Revisions of consensus macroeconomic and earnings forecasts positively predict announcement-day forecast errors, whereas stock market returns during forecast revision periods negatively predict announcement-day returns. A dynamic noisy rational expectations model with periodic announcements quantitatively accounts for these findings. Under asymmetric information, informed investors’ forecast revisions positively predict forecast errors of the uninformed, causing average beliefs to underreact to new information and positively predict belief errors. Additionally, stock prices are partially driven by noise. Noise impact accumulates into stock prices during revision periods but gets corrected upon announcements. Therefore, revision period price changes negatively predict announcement-day returns.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103751"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783478","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Sinking ships: Liquidity constraints and return predictability in recessions","authors":"Artur Doshchyn","doi":"10.1016/j.jmoneco.2025.103746","DOIUrl":"10.1016/j.jmoneco.2025.103746","url":null,"abstract":"<div><div>Using the context of the dry-bulk shipping industry, I document that future returns on real assets are strongly predictable and negatively related to current asset prices, earnings, and investment during recessions. However, there is no such relationship outside recessions. This evidence points to significant liquidity constraints faced by firms during downturns, resulting in cash-in-the-market pricing of capital and rising expected returns for buyers. It is puzzling, however, why firms would not exploit opportunities to buy assets cheaply in recessions, e.g. by pre-arranging credit lines. I build and estimate a model of a competitive industry with credit frictions that can quantitatively account for return predictability during downturns, even though firms can use state-contingent contracts to preserve liquidity for when they need it most. Firms’ relative impatience limits their risk management, meaning that even well-capitalized firms can become constrained following adverse shocks. This results in significant asymmetric amplification of shocks in equilibrium.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103746"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783474","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"CBDC and the operational framework of monetary policy","authors":"Jorge Abad , Galo Nuño , Carlos Thomas","doi":"10.1016/j.jmoneco.2025.103762","DOIUrl":"10.1016/j.jmoneco.2025.103762","url":null,"abstract":"<div><div>We analyze the impact of central bank digital currency (CBDC) on the operational framework of monetary policy and the macroeconomy. We develop a New-Keynesian model with a frictional interbank market, central bank deposit and lending facilities, and household preferences for different liquid assets, calibrated to the euro area. CBDC adoption implies a contraction in bank deposits, which is absorbed by a fall in reserves and, if large enough, increased recourse to central bank credit. The resulting changes in the operational framework (from ‘floor’ to ‘corridor’, and then to ‘ceiling’) thus shape the impact of CBDC on credit, investment and output.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103762"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783479","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Barthélémy Bonadio , Zhen Huo , Andrei A. Levchenko , Nitya Pandalai-Nayar
{"title":"Globalization, structural change and international comovement","authors":"Barthélémy Bonadio , Zhen Huo , Andrei A. Levchenko , Nitya Pandalai-Nayar","doi":"10.1016/j.jmoneco.2025.103745","DOIUrl":"10.1016/j.jmoneco.2025.103745","url":null,"abstract":"<div><div>We study the roles of globalization and structural change in the evolution of international GDP comovement over the period 1978–2007. In this period, trade integration between advanced economies increased rapidly while average GDP correlations remained stable. Structural change – reallocation of economic activity towards services – is important in resolving this apparent puzzle. Business cycle shocks in the service sector are less internationally correlated than in manufacturing, and thus structural change lowers GDP comovement by increasing the GDP share of less correlated sectors. Globalization – reductions in trade costs – exerts two opposing effects on international comovement. While greater trade linkages increase international transmission of shocks, globalization also induces structural change towards services. We quantify these effects in a multi-country, multi-sector model of international production and trade. The two opposing effects of globalization on comovement largely cancel each other out, limiting the net contribution of globalization to increasing international comovement.</div></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":"151 ","pages":"Article 103745"},"PeriodicalIF":4.3,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143783473","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}