Highly recommended!
“Liquidity Traps: A Unified Theory of the Great Depression and the Great Recession“ by Gauti B. Eggertsson and Sergei K. Egiev.
“This review of liquidity traps unifies three landmark economic downturns—the US Great Depression, the Great Recession, and Japan’s Long Recession—into a single analytical framework. We examine various forces that drive natural interest rates negative: temporarily (such as banking crises and debt overhangs) or permanently (such as demographic shifts and inequality). When policy rates hit the zero lower bound, conventional monetary tools lose traction. Under a standard monetary policy regime, counterintuitive paradoxes emerge: Greater price flexibility deepens recessions, and positive supply shocks become contractionary. We show how policy effects—including the size of fiscal multipliers, forward guidance, and these paradoxes—depend critically on the monetary-fiscal regime and on central bank credibility.”
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Great news!
Florin Bilbiie is working on a book project! Heterogeneous Agent Macroeconomics: A Tractable New Keynesian Framework (forthcoming MIT Press).
“The book develops a tractable NK framework that incorporates economically meaningful heterogeneity—liquidity constraints, income and wealth inequality, risk, precautionary saving, and distributional policy channels—while remaining analytically transparent and suitable for graduate teaching. It is intended as a bridge between the classical NK model and modern HANK approaches.” Draft chapters are available HERE
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Highly relevant! “The rise of non-bank financial institutions: implications for monetary policy“ by Ryan Niladri Banerjee, Boris Hofmann, Ding Xuan Ng, and Gabor Pinter.
“Non-bank financial institutions (NBFIs) have grown significantly in recent years, mainly driven by the growth of investment funds, including hedge funds. These changes reflect the role of bond markets, which have expanded on the back of surging government debt. The rise of NBFIs adds uncertainty to monetary policy transmission, as there could be dampening and amplifying effects. Investment funds appear to strengthen transmission while at the same time making it less stable.”
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Highly relevant! There is a revised version of “The Granular Origins of Inflation“ by Santiago Alvarez-Blaser, Raphael Auer, Sarah M. Lein, and Andrei A. Levchenko.
“This paper uses barcode-level price data for 16 advanced and emerging market countries over the period 2005–2022 to investigate the role of individual firms and product categories in aggregate inflation. We decompose inflation into the component due to macroeconomic shocks and the granular residuals capturing the impact of individual firms and product categories, respectively. …In the cross-section of countries, granular residuals are less important in economies with less concentrated market shares and higher inflation, such as emerging markets. Granular forces also contributed to the post-COVID inflation surge, with the firm-level component explaining roughly one-third of the 2021–2022 inflation in advanced economies. Finally, granularities are associated with a more sluggish response of inflation to monetary policy shocks, suggesting that market concentration can influence monetary non-neutrality.”
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Very valuable!
“Macro Moves: Festive Season, Unsteady Markets: Clear insights on the market moves defining the close of 2025” by Macrobond.
“This was a year that refused to sit still – a year of economic surprises, market whiplash, shifting narratives and sudden changes in sentiment. And its final month, December, is proving just as important as everything that came before it.”
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Thought-provoking (irrespective of whether you agree)!
“Will AI Improve Undergraduate Economics Education?“ by Matthew E. Kahn.
“For decades, undergraduate economics educators have followed a well-worn playbook featuring textbooks, lectures and problem sets. Students have passively listened, taken notes and studied for exams. AI disrupts this educational process. Some students are using this tool as a substitute for their own precious time. What is our best response? This paper provides a prospective analysis of how to restructure every phase of the undergraduate economics experience to improve the major and better prepare students for their uncertain future.”
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Very valuable!
2026 European Macroeconomic Report
“The euro area and the European Union are navigating an increasingly complex international landscape. …This new European Macroeconomic Report (EMR) analyses these challenges, and it provides a comprehensive overview on these aspects. By providing solid analysis it aims to inform strategic policy choices to strengthen the euro area and EU’s resilience in the face of a rapidly evolving global order.”
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Highly relevant!
World Bank International Debt Report 2025
“A paradox is playing out in developing economies. On the bright side, inflation is abating. The oppressive interest rates of the last five years have begun to ease, which implies that the crushing debt service burdens of the last few years might start to shrink. For the right price, foreign bond investors are willing to provide financing again, enabling many countries to stave off default. For most countries, however, these are small consolations—not enough to overcome the grave setbacks of this decade. As this report documents, the upheavals of the early 2020s produced a financial riptide like no other: between 2022 and 2024, about US$741 billion more flowed out of developing economies in debt repayments and interest than flowed into them in the form of new financing. It was the largest debt-related outflow in more than 50 years. The human toll has been steep: among the 22 most highly indebted countries, one out of every two people today cannot afford the minimum daily diet necessary for lasting health.”
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In the third quarter of 2025, the Swiss economy contracted by 0.5 percent. Reversals following the tariff-induced front-loading effects and the relatively strong exports to the USA contributed to this. But the significantly higher US tariffs from August onwards and the uncertainties also played a role. The provisional easing of the tariff dispute between Switzerland and the USA has slightly brightened the economic outlook. We have raised our forecast a little and expect the economy to expand by 1.1 percent in 2026 (up from 0.9 percent, our full forecast will be published later). Above all, the external economic environment remains challenging, which somewhat dampens growth prospects. Nevertheless, the Swiss economy is holding up fairly solidly overall.
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The Austrian economy still lacks momentum. The Konjunkturradar of the Austrian Economic Chambers provides a good overview.
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“The German economy remains without momentum for now because the only moderately growing global economy is meeting homegrown investment backlogs and other neglected reforms,” summarizes Guido Baldi. “It is all the more important now that the federal government’s investment packages and reform efforts bear fruit soon and, in addition to the short-term stimulus effect, lay the groundwork for structurally higher growth rates.”
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As always, the OECD Economic Outlook is a must-read!
Resilient Growth but with Increasing Fragilities
“The global economy has been resilient this year, despite concerns about a sharper slowdown in the wake of higher trade barriers and significant policy uncertainty. Activity has held up thanks to front-loading of production and trade, strong AI-related investment, and supportive fiscal and monetary policies. Yet, global trade growth moderated in the second quarter of this year, and we expect higher tariffs to gradually feed through to higher prices, reducing growth in household consumption and business investment. Labour markets are still relatively tight, but are showing signs of easing, as job openings have fallen back to their pre-pandemic levels of 2019. Our projections point to a moderation of global GDP growth, from 3.3% in 2024, to 3.2% in 2025 and 2.9% in 2026, followed by a small rebound to 3.1% in 2027. Inflation is expected to gradually return to target in most major economies by mid-2027.”
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