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This paper analyzes the inflation forecast errors over the period 2021Q1-2022Q3 using forecasts of core and headline inflation from the International Monetary Fund World Economic Outlook for a large group of advanced and emerging market economies. The findings reveal evidence of forecast bias that worsened initially then subsided towards the end of the sample. There is also evidence of forecast oversmoothing indicating rigidity in forecast revision in the face of incoming information. Focusing on core inflation forecast errors in 2021, four factors provide a potential ex post explanation: a stronger-than-anticipated demand recovery; demand-induced pressures on supply chains; the demand shift from services to goods at the onset of the pandemic; and labor market tightness. Ex ante, we find that the size of the COVID-19 fiscal stimulus packages announced by different governments in 2020 correlates positively with core inflation forecast errors in advanced economies. This result hints at potential forecast inefficiency, but we caution that it hinges on the outcomes of a few, albeit large, economies.

Communicable diseases --- Covid-19 --- Currency crises --- Deflation --- Demand and Supply of Labor: General --- Diseases: Contagious --- Economic & financial crises & disasters --- Economic Forecasting --- Economic forecasting --- Economics of specific sectors --- Economics --- Economics: General --- Fiscal Policy --- Fiscal policy --- Fiscal stimulus --- Forecasting and Other Model Applications --- Forecasting --- Health Behavior --- Health --- Income economics --- Infectious & contagious diseases --- Inflation --- Informal sector --- Labor market --- Labor markets --- Labor --- Labour --- Macroeconomics --- Price Level --- Prices --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation

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Economic policy uncertainty affects decisions of households, businesses, policy makers and Financial intermediaries. We first examine the impact of economic policy uncertainty on aggregate bank credit growth. Then we analyze commercial bank entity level data to gauge the effects of policy uncertainty on Financial intermediaries' lending. We exploit the cross-sectional heterogeneity to back out indirect evidence of its effects on businesses and households. We ask (i) whether, conditional on standard macroeconomic controls, economic policy uncertainty affected bank level credit growth, and (ii) whether there is variation in the impact related to banks' balance sheet conditions; that is, whether the effects are attributable to loan demand or, if impact varies with bank level financial constraints, loan supply. We find that policy uncertainty has a significant negative effect on bank credit growth. Since this impact varies meaningfully with some bank characteristics - particularly the overall capital-to-assets ratio and bank asset liquidity-loan supply factors at least partially (and significantly) help determine the influence of policy uncertainty. Because other studies have found important macroeconomic effects of bank lending growth on the macroeconomy, our findings are consistent with the possibility that high economic policy uncertainty may have slowed the U.S. economic recovery from the Great Recession by restraining overall credit growth through the bank lending channel.

Zonder onderwerpscode: economie

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We assess the supply-side effects on European Union (EU) economic activity if Russian gas imports were to suddenly cease. Unlike other studies, we account for the global scope of the liquefied natural gas (LNG) market. In the absence of frictions, an open-economy, multi-sector general equilibrium model suggests that the adverse economic impact on the EU shrinks five-fold if integration with the global LNG market is considered. While greater integration provides a buffer for the EU through trade, the flip side is that other LNG importers (such as Japan, South Korea, and Pakistan) see adverse effects from higher prices.

Macroeconomics --- Economics: General --- Industries: Energy --- Economic Theory --- Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data) --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Energy: General --- Hydrocarbon Resources --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Energy: Demand and Supply --- Macroeconomics: Consumption --- Saving --- Wealth --- Economic & financial crises & disasters --- Economics of specific sectors --- Petroleum, oil & gas industries --- Economic theory & philosophy --- Natural gas sector --- Economic sectors --- Supply shocks --- Economic theory --- Demand elasticity --- Fuel prices --- Consumption --- National accounts --- Currency crises --- Informal sector --- Economics --- Gas industry --- Supply and demand --- Elasticity --- Russian Federation

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We assess the supply-side effects on European Union (EU) economic activity if Russian gas imports were to suddenly cease. Unlike other studies, we account for the global scope of the liquefied natural gas (LNG) market. In the absence of frictions, an open-economy, multi-sector general equilibrium model suggests that the adverse economic impact on the EU shrinks five-fold if integration with the global LNG market is considered. While greater integration provides a buffer for the EU through trade, the flip side is that other LNG importers (such as Japan, South Korea, and Pakistan) see adverse effects from higher prices.

Russian Federation --- Macroeconomics --- Economics: General --- Industries: Energy --- Economic Theory --- Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data) --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Energy: General --- Hydrocarbon Resources --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Energy: Demand and Supply --- Macroeconomics: Consumption --- Saving --- Wealth --- Economic & financial crises & disasters --- Economics of specific sectors --- Petroleum, oil & gas industries --- Economic theory & philosophy --- Natural gas sector --- Economic sectors --- Supply shocks --- Economic theory --- Demand elasticity --- Fuel prices --- Consumption --- National accounts --- Currency crises --- Informal sector --- Economics --- Gas industry --- Supply and demand --- Elasticity

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Countercyclical capital buffers (CCyBs) are an old idea recently resurrected. CCyBs compel banks at the core of financial systems to accumulate capital during expansions so that they are better able to sustain operations during downturns. To gauge the potential impact of modern CCyBs, we compare the behavior of large and highly-connected commercial banks during booms before the Great Depression and Great Recession. Before the former, core banks did not expect bailouts and were subject to regulations that incentivized capital accumulation during booms. Before the later, core banks expected bailouts and kept capital levels close to regulatory minima. Our analysis indicates that the pre-Depression regulatory regime induced money-center banks to build capital buffers between 3% and 5% of total assets during economic expansions, which is up to double the maximum modern CCyB. These buffers enabled those banks to continue operations without government assistance during severe crises. This historical analogy indicates that modern countercyclical buffers may achieve their immediate goals of protecting core banks during crises but raises questions about whether they will contribute to overall financial stability.