We show an equivalence result in the standard representative agent New Keynesian model after demand, wage markup and correlated price markup and TFP shocks: assuming sticky prices and flexible wages yields identical allocations for GDP, consumption, labor, inflation and interest rates to the opposite case- flexible prices and sticky wages. This equivalence result arises if the price and wage Phillips curves' slopes are identical and generalizes to any pair of price and wage Phillips curve slopes such that their sum and product are identical. Nevertheless, the cyclical implications for profits and wages are substantially different. We discuss how the equivalence breaks when these factor-distributional implications matter for aggregate allocations, e.g. in New Keynesian models with heterogeneous agents, endogenous firm entry, and non-constant returns to scale in production. Lastly, we point to an econometric identification problem raised by our equivalence result and discuss possible solutions thereof.

This study employs synthetic control methods to estimate the effect of the Iberian exception mechanism on wholesale electricity prices and consumer inflation, for both Spain and Portugal. We find that the intervention led to an average reduction of approximately 40% in the spot price of electricity between July 2022 and June 2023 in both Spain and Portugal. Regarding overall inflation, we observe notable differences between the two countries. In Spain, the intervention has an immediate effect, and results in an average decrease of 3.5 percentage points over the twelve months under consideration. In Portugal, however, the impact is small and generally close to zero. Different electricity market structures in each country are a plausible explanation.

This paper examines the macroeconomic and distributional effects of the European Union’s transition to Net Zero emissions through a gradually increasing carbon tax. I develop a New Keynesian Environmental DSGE model with two household types and distinct energy and non-energy sectors. Five alternative uses of carbon tax revenues are considered: equal transfers to households, targeted transfers to Hand-to-Mouth households, subsidies to green energy firms, and reductions in labor and capital income taxes. In the absence of technological progress, the carbon tax policy induces a persistent increase in energy prices and a reduction in GDP, investment, and consumption. Headline inflation falls below zero in the medium run, reflecting weaker aggregate demand. Distributional outcomes vary significantly depending on the implemented revenue recycling scheme: targeted transfers are the most progressive but entail larger macroeconomic costs, while subsidies and tax cuts mitigate output and investment losses but are less effective in narrowing the consumption gap. A limited foresight scenario, in which agents learn about policy targets sequentially, generates more volatile adjustment paths and temporary inflationary spikes around announcements, but long-run outcomes remain close to the baseline.

We provide evidence for a psychological component of inflation concerns. Higher inflation concerns relate in a positive and significant way to respondents’ reported levels of concerns about their financial situation. Results hold when controlling for income and financial constraints.

This paper investigates the relationship between heterogeneity in sectoral price stickiness and the response of the economy to aggregate real shocks. We show that sectoral heterogeneity reduces inflation persistence for a constant average duration of price spells, and that inflation persistence can fall despite duration increases associated with increases in heterogeneity. We also find that sectoral heterogeneity reduces the persistence and volatility of interest rate and output gap for a constant price spells duration, while the qualitative impact on inflation volatility tends to be positive. A relevant policy implication is that neglecting price stickiness heterogeneity can impair the economic dynamics assessment.

We investigate how global banks’ macroeconomic expectations for borrower countries influence their credit supply. Utilizing granular data on varying expectations among banks lending to the same firm at the same time, combined with an instrumental variable approach, we find that more optimistic GDP growth expectations for a borrower country are strongly linked to increased credit supply. Specifically, a one standard deviation increase in a lender’s GDP growth expectation for the borrower’s country corresponds to an increase of 8.46 percentage points in the loan share, equivalent to approximately 0.75 standard deviations of the loan share and $75.35 million in loan amount. In contrast, global banks’ short-term inflation expectations do not show a significant impact on their credit supply.

*** Steigende Sozialabgaben und Inflation fressen Gehaltsplus der Beschäftigten bei Bund und Kommunen auf *** Die Tarifvertragsparteien des Öffentlichen Dienstes von Bund und Kommunen haben sich am vergangenen Wochenende auf einen neuen Tariflohnabschluss mit einer Laufzeit von 27 Monaten geeinigt: Demnach steigen im April 2025 die Löhne um 3,0%, jedoch mindestens um 110 Euro je Monat. Im Mai 2026 gibt es dann nochmals eine Tariflohnerhöhung um 2,8% sowie eine Erhöhung der Jahressonderzahlung und ab 2027 einen zusätzlichen Urlaubstag.