Dear friends of the International and Monetary Economics Network
Our network is growing rapidly. If you’d like to share this newsletter, new readers can subscribe HERE. You can also follow us on LinkedIn and other social media channels. Overall, we now reach more than 50,000 subscribers and followers. You can also join a growing number of active members on Substack. We will further expand our activities and contributions to debates on international economics, monetary policy, and related topics. We are always open to collaborations. Please feel free to contact us.
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In our webinars and in-person events, members of the network or guests are invited to present. If you’re interested, please contact us or fill out this form. We welcome high-quality presentations by senior and junior economists from academic, finance, or policy-oriented backgrounds. High-quality projects that present bold new ideas are always welcome.
Webinar: Asset Purchase Programs and the Exchange Rate (Sinem Toraman, European Stability Mechanism)
- April 1, 12:00 – 13:00 Central European Summer Time
- Online via Zoom, link will be sent
- Link to the paper
REGISTRATION HERE
Sinem Yagmur Toraman is an Economist in the Chief Economist Department at the European Stability Mechanism (ESM) in Luxembourg. She has previously presented this paper at various institutions and conferences, including the Federal Reserve Board of Governors, Johns Hopkins University, the IAAE Annual Conference, and the European Stability Mechanism.
In our recent interview with her, she told us: „The key finding of the paper is that financial-stability QE operates differently from conventional monetary-policy QE. I show that asset purchase programs in emerging markets can appreciate the exchange rate by reducing sovereign credit risk. This is important because it suggests that these policies can help EMs to stabilize exchange rates during periods of distress, without necessarily implementing foreign exchange intervention.“The full interview can be read HERE.
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Public Lecture: AI and the Future of Macro Analysis (Thomas Wille)
- May 6, 2026, 18:30 – 19:30
- University of Bern, Main Building, Room HS 220, Hochschulstrasse 4, Bern
- In German
Registration HERE
Tasks such as data collection, cleaning, and pattern detection are increasingly automated, allowing economists to process larger datasets and identify signals much faster. However, AI does not replace macroeconomists. It changes their role. While machines excel at processing data, humans remain essential for interpretation, judgment, and scenario design. The traditional workflow of data → analysis → interpretation is evolving into a Human + AI research process. The macroeconomist of the future becomes less a data processor and more a decision architect.
Thomas Wille is a highly experienced finance professional with a career including roles such as Chief Investment Officer at Copernicus Wealth Management, Senior Investment Strategist at LGT, and lecturer at the Lucerne University of Applied Sciences. Recently, he has been focusing on artificial intelligence and its impact on finance and macro analysis, and has delivered various speeches at conferences and seminars (including at the Finanz und Wirtschaft Forum).
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Chris Sims passed away in March. A giant of macroeconomics left us. He won the Nobel Memorial Prize in Economic Sciences in 2011 together with Thomas Sargent.
These two obituaries are highly recommended:
„Chris Sims’ contribution to economics“ by Francesco Bianchi, Marco Del Negro, Giorgio Primiceri, and Frank Schorfheide.
Christopher Sims, revolutionary macroeconomist, Nobel laureate and generous mentor, dies at 83 by Rebekah Schroeder (Princeton University).
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As expected, five major central banks in our focus (Fed, ECB, SNB, BoE, and BoJ) held rates steady in March. This was in line with the IMEN survey consensus from the first weeks of March.
SNB President Schlegel said, according to swissinfo: “Negative interest rates pose a significant challenge for many economic actors,” he said. “Furthermore, the transmission of negative interest rates is not exactly the same. That said, if necessary, we are always prepared to use this instrument again to fulfill our mandate.”
Jay Powell (Chair of the Federal Reserve) on the high degree of uncertainty over the Iran war (according to the Financial Times): “The thing I really want to emphasise is that nobody knows,” he said. “The economic effects could be bigger, they could be smaller, they could be much smaller or much bigger. We just don’t know.”
According to Bloomberg, ECB President Christine Lagarde said: „The European Central Bank is well placed to deal with growing dangers from the war in Iran“
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The war in the Middle East made the macroeconomic outlook highly uncertain. In our Global Economy Flash – March 2026, we briefly outline our perspective on the global macroeconomy. The IMEN forecast for global GDP growth in 2025 has been lowered to 2.9 percent. In an alternative scenario with oil prices persistently above $100 per barrel, GDP growth would only be 2.6 percent. In 2025, the world economy has shown resilience amid headwinds, but the dampening effects of high oil prices, supply chain stress, geopolitical uncertainty, and potential food shortages are considerable. We also stress that „inflation in the United States has been elevated for several years, which could structurally raise inflation expectations.“ Even before the war, some economists warned us about the risk of higher inflation in the United States. For instance, Peter Orszag (Lazard) and Adam Posen (PIIE) argued: „We think it is more likely that inflation will surprise to the upside—potentially exceeding 4 percent by the end of 2026.“
Our recent poll within the IMEN network about the future direction of oil prices reflects the significant degree of uncertainty we currently face. You can join us on Substack to receive invitations to participate in these polls.
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How strong is the U.S. economy?
Several nowcasts currently point to solid economic growth in the first quarter of 2026. Downside risks are mounting, in particular for the second quarter of 2026. Inflation remains elevated, and inflationary pressures are expected to increase further due to recent developments in oil markets, at least in the short run. The following three nowcasts are currently clustered in a narrow range of 1.9-2.1 percent.
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Interesting presentation by Philip Lane at the ‚ECB and Its Watchers‘ Conference. It provided a transparent overview with various scenarios for oil prices, inflation, and economic growth. It is sometimes argued that in uncertain times like these, economic forecasts are pointless. Those who expect forecasts to always come true will certainly feel that way. One could simply capitulate in the face of uncertainty and stop making forecasts altogether. But instead of giving up, we can try to manage that uncertainty. Thinking in scenarios helps—as do the wisdom of the crowd and the exchange between different economic analysts. In the end, this provides a bit more clarity and allows us to better navigate the uncertainty.
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IMEN Treasure Trove – What Caught Our Eye (Selection): Import tariffs and monetary policy, AI and the macroeconomy, the cost of closing the Strait of Hormuz, central bank digital currencies, and much more…
Highly relevant!
„The Cost of Closing the Strait of Hormuz: Energy Bottlenecks and Global Food Security“ by Julian Hinz, Hendrik Mahlkow, Robin Sogalla, and Gerald Willmann.
„In March 2026, the Strait of Hormuz is closed. The shutdown blocks roughly one-fifth of the world’s oil and one-quarter of its liquefied natural gas, triggering severe welfare losses in energy-dependent developing countries worldwide. Standard trade models underestimate the impact because they miss the bottleneck mechanism: energy disruptions cascade through chemicals and fertilizer production into food prices, amplifying losses for the world’s poorest countries. Developing countries that depend on imported energy and fertilizers—particularly in South Asia, sub-Saharan Africa, and the Middle East—face the steepest food price increases and welfare losses. The aggregate global costs are moderate, but the burden falls disproportionately on the world’s poorest: the USA loses just −0.07%, while countries in South Asia and Africa face losses 10–20 times larger. A prolonged closure allows some market adjustment, but structural damage persists—and the timing during peak Northern hemisphere planting season compounds the food security risk.“
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Very valuable!
Gianluca Benigno (University of Lausanne, the Central Banks‘ Watcher) wrote insightful blog posts on the current oil shock:
A Compounding Oil Shock: Why This Shock Is Different, Why Intervention Cannot Work, How a Physical Shortage Becomes a Financial Event, and What It Means for Monetary Policy
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Wow, really cool!
„BISTRO: a general purpose oracle for macroeconomic time series“ by Batuhan Koyuncu, Byeungchun Kwon, Marco Jacopo Lombardi, Fernando Perez-Cruz, and Hyun Song Shin.
„This article introduces the BIS Time-series Regression Oracle (BISTRO), a general purpose time series model for macroeconomic forecasting. Building on the transformer architecture underlying LLMs, BISTRO is fine-tuned on the large repository of macroeconomic data maintained at the BIS. We put the model through its paces by assessing how well it forecasts the 2021 inflation surge. In contrast to standard benchmarks, which mechanically project a reversion to the mean, BISTRO correctly anticipates the persistence of the inflation wave. This highlights its ability to adapt to unfamiliar patterns in the data. Thus, BISTRO holds promise for producing reliable baseline forecasts and for scenario analysis.“
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Highly relevant!
„Import Tariffs and the Systematic Response of Monetary Policy“ by Alessandro Franconi and Lucas Hack.
„We estimate the macroeconomic effects of U.S. imports tariff shocks using several tariff measurement and identification approaches. Tariff shocks reduce output but increase consumer prices. Monetary policy partially accommodates these shocks with a policy easing. To quantify the dependence on systematic monetary policy, we use empirically identified monetary policy shocks to construct counterfactuals that are robust against model misspecification and the Lucas critique. When monetary policy strictly stabilizes inflation, the output contraction at the trough is 36% larger than in the baseline. In contrast, strict output stabilization implies a peak inflation effect that almost doubles, compared to the baseline.“
In a conversation with IMEN, Alessandro Franconi mentions that one important „finding is that the Federal Reserve has historically responded to tariff shocks with partial monetary accommodation. This easing cushions the output decline but contributes to inflationary pressure. What I find particularly interesting is that this partial accommodation turns out to be consistent with what the recent theoretical optimal policy literature prescribes for supply shocks (Bergin and Corsetti, 2023; Bianchi and Coulibaly, 2025; Monacelli, 2025).“
The full interview can be read HERE.
We thank the Banque de France for helping arrange this conversation and for our fruitful collaboration.
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Highly recommended!
We often share posts from the Economic Research Banque de France LinkedIn page. This page regularly offers a wide range of highly valuable content.
“Only published in English, Economic Research Banque de France is the Banque de France’s LinkedIn channel dedicated to sharing economic analyses produced by the Banque de France economists and research staff. It offers a wide range of contents: working papers, calls for papers, visiting scholar and doctoral scholarship programmes, seminar and conferences and, more broadly, updated information on the full breadth of Banque de France research activities. The page features dynamic content, including video interviews with researchers, photos and videos from conferences and events on various topics (monetary policy, macroeconomics, financial stability, etc.). If you are interested in submitting to a conference, or wish to read a new publication in detail, learn more about researchers’ careers, or apply for our doctoral fellowship, follow the Economic Research Banque de France LinkedIn page. “
The Banque de France celebrated International Women’s Rights Day on March 3, 2026. Deputy Governor Agnès Bénassy-Quéré renewed the initiative she launched three years ago by organizing an exchange with the Banque de France’s women economists and statisticians. The following picture was provided by the Banque de France (picture by Leslie Rosenzweig):
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Highly recommended!
“Central Bank Digital Currency and Monetary Architecture” by Dirk Niepelt.
“We review the macroeconomic literature on retail central bank digital currency (CBDC), organizing the discussion around a CBDC-irrelevance result. We identify both fundamental and policy-related sources of relevance, or departures from neutrality. Bank disintermediation—the crowding out of deposits—does not, by itself, constitute such a source. We argue that the literature has primarily focused on policy-related sources of non-neutrality, often without making this focus explicit. From a macroeconomic perspective, CBDC is, at its core, a matter of monetary architecture, and political economy considerations are central to understanding CBDC policy design.”
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Highly relevant!
„Monetary Policy without Commitment“ by Hassan Afrouzi, Marina Halac, Kenneth Rogoff, and Pierre Yared.
„We have studied the implications of central bank lack of commitment for long-run inflation and transition dynamics. Starting from a given steady state, we examined how the economy responds to an unanticipated permanent shock that increases the labor wedge or decreases the elasticity of substitution across varieties. While a central bank with the ability to commit to a policy could keep inflation unchanged, this is not incentive compatible absent commitment. The private sector anticipates central bank accommodation following the shock, and inflation overshoots before declining to a permanently higher level. We showed that overshooting is persistent, and the welfare loss from lack of commitment relative to inflation targeting is quantitatively large. Our model and results can be useful in interpreting the inflationary spike that has befallen advanced economies in the aftermath of the COVID-19 pandemic.“
American Economic Review (forthcoming)
Working paper
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These two events are highly recommended!
Point Zero Forum (June 23-25)
Now in its 5th edition, the Global Finance & Technology Network’s (GFTN) annual global policy gathering, the Point Zero Forum brings together over 2,000 policymakers, central bankers, regulators, and industry leaders in Zurich for three days of dialogue at the intersection of finance, technology, and policy, where those shaping the rules and those implementing them meet to build what comes next.
Registration HERE
Finance Forum Zürich (September 22): „Der zentrale Treffpunkt der Schweizer Finanzbranche bringt erneut mehrere hundert Entscheidungsträger zusammen, um aktuelle Chancen und Herausforderungen für den Finanzplatz zu diskutieren.“
Registration HERE
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Highly relevant papers on the Federal Reserve’s balance sheet!
„The payment system puts a floor on the Fed’s balance sheet“ by Darrell Duffie.
„Even though the quantity of reserve balances has grown by a factor of roughly 200 since 2007, the Fed is now increasing the supply of reserves to keep pace with the increasing demands of the payment system. Under post-GFC liquidity regulations, the Fed has found that it cannot fully rely on GSIBs with temporary needs for extra balances to use the Fed’s on-demand liquidity, including daylight overdrafts, the Discount Window, and Standing Repo Operations. If the Fed were to significantly reduce the size of its balance sheet, the supply of reserve balances would need to be reduced by about the same amount. If this were to be attempted with no changes in the Fed’s operating framework and liquidity regulations, the disruption of monetary policy transmission could be severe. In extreme cases, a liquidity crunch could threaten financial stability.“
„A User’s Guide to Reducing the Federal Reserve’s Balance Sheet“ by Alyssa G. Anderson, Alessandro Barbarino, Anthony M. Diercks, and Stephen Miran.
„For the avoidance of doubt: 1) This catalog presents and analyzes a variety of options for reducing the Federal Reserve’s balance sheet. Nothing here is an endorsement of any specific policy option; this is a menu of options. Combined, we estimate these options open the door to balance sheet reduction of $1.2 to $2.1 trillion within the Fed’s current ample reserves framework. While we do not advocate for or against a return to a scarce reserves regime, further reductions would be possible with a return to scarce reserves. 2) The process of materially shrinking the balance sheet would require a great deal of implementation and rulemaking work in advance and would take time, at least a year and quite possibly several, before the Fed can begin shrinking its balance sheet. If undertaken, there are good reasons for moving slowly and gingerly, and to take steps to ensure financial markets are able to absorb the reissue of securities that roll off the Federal Reserve’s balance sheet.“
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Oil, geopolitics, and the world economy: It’s high time to have another look at interesting books like this one:
„Trading and Price Discovery for Crude Oils: Growth and Development of International Oil Markets“ by Adi Imsirovic.
„This is a book about the international oil market. It takes a historical perspective on how the market emerged, developed, and became what it is today―the biggest commodity market in the world. It is mature and complex, but far from perfect. Throughout most of its 150-year history, the oil market has been monopolised by companies and governments. For only a fraction of that, oil traded in a relatively free market.“
„Modern international oil markets function because of oil benchmarks such as Brent, WTI and Dubai. This book showcases:
• How oil traders played a prominent role in development of the industry
• How policies of consuming nations helped oil cartels
• Why and how the US price of oil was negative
• How AI has changed the way markets operate and the way in which the markets are likely to change in future“
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Highly relevant!
„The Macroeconomic Consequences of Undermining Central Bank Independence: Evidence from Governor Transitions“ by Marijn A. Bolhuis, Rui Mano, and Hedda Thorell.
„This paper studies the macroeconomic consequences of undermining central bank independence through politically motivated transitions of central bank governors. Leveraging a new panel dataset covering 132 central bank governor transitions in 28 advanced and emerging market economies since 2000, we document the timing, frequency, and political drivers of these leadership changes. Tenures of governors with politically motivated appointments are associated with higher and more volatile inflation, realized and expected. …At the same time, GDP growth increases in the aftermath of such transitions, consistent with an expansionary short-run macroeconomic impulse. These effects are more pronounced when the incoming governor professes unorthodox views on monetary policy, suggesting that political interference in central bank leadership induces a temporary growth–inflation trade-off.“
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Really cool!
Dynare 7.0 is released
Among other improvements, there is a new „framework for solving and simulating models featuring rich heterogeneity (which includes HANK models).“————————————————
Super interesting and entertaining!
Im Podcast «Angebot & nachgefragt» vom Verband Schweizer Regionalbanken (VSRB) diskutieren der Kreativpartner Aron Herz und Geldökonom Fabio Canetg über die aktuellsten Wirtschaftsthemen der Schweiz.
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Really cool!
„Global Trade Alert is now available for Claude users. You can ask questions about trade policy in plain language and get verified, source-cited answers drawn directly from our database.“
————————————————In case you missed this Macro Bite:
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We are always open to collaborations. Please feel free to contact us.
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