AI Economics Research Podcast

This episode delves into a Federal Reserve research paper that develops a new model of Ponzi schemes, focusing on how these frauds operate under asymmetric information. We explain in plain English how scheme operators build trust and reputation over time, the conditions under which these frauds can persist, and what interventions are most effective in preventing them. Want to discuss this or other...

This episode unpacks a Federal Reserve working paper that reveals why economists get vastly different estimates of the Marginal Propensity to Consume (MPC) – how much people spend from an unexpected windfall – depending on how survey questions are phrased. Using a randomized survey experiment, researchers show that subtle differences between 'direct' and 'filtered' questions dramatically alter rep...

This episode explains a Bank of England research paper that challenges whether the Consumer Price Index (CPI) is always the best guide for monetary policy, arguing that expenditure weights and stabilization weights can diverge. It unpacks how differentiating between "discretionary" and "necessity" inflation components can lead to better welfare outcomes, especially for the euro area, by aligning p...

This episode breaks down a recent Federal Reserve research paper exploring who earns economics PhDs in the U.S. and the structural factors shaping access and success in the field. We delve into why U.S.-born students, particularly those from underrepresented backgrounds, face barriers and what pipeline programs and mentorship models can do to expand opportunities in advanced economics research car...

Dive into a new Bank of England research paper that unpacks how UK homeowners reacted to the September 2022 mini-budget's interest rate shock. This episode explains in plain English why many borrowers opted for shorter, pricier two-year fixed-rate mortgages, prioritizing flexibility and potential equity extraction over longer-term rate insurance. Join us to understand the complex decisions behind...

This episode delves into a Bank of England research paper exploring how monetary policy's effects on innovation and productivity can be surprisingly persistent. We break down findings showing that firms without access to cash flow-based borrowing—lending against earnings rather than physical collateral—cut R&D significantly more after interest rate hikes, leading to lasting impacts on economic out...

This episode delves into a new Federal Reserve Bank of New York research paper introducing "ordinal complementarity," a robust way to understand how inputs interact in production processes. We'll explain why this definition offers stronger, more reliable policy implications, particularly for social planner problems and the empirical study of cognitive skill formation in children. Read the full pap...

This episode unpacks a recent Bank of England research paper, "Productivity and Inflation Dynamics," explaining in plain English why higher productivity doesn't always guarantee lower inflation. We delve into how the timing of demand and supply responses, alongside central bank policy, determines whether productivity growth fuels or dampens price pressures. Send your feedback or questions to feedb...

This episode dives into a new Bank of England staff working paper exploring how cloud outsourcing is impacting competition in the UK banking sector. We break down how banks' use of Cloud Service Providers (CSPs) affects their costs, deposit growth, and the competitive landscape, particularly for smaller institutions, and how this interacts with capital requirements. Learn how this technological sh...

This episode breaks down a new Bank of England research paper on how monetary policy impacts the housing sector. It explores why rising interest rates cause house prices to fall while rents remain stable for extended periods, and reveals the crucial role of individual landlords' behavior in this transmission. For more details, read the paper at https://www.bankofengland.co.uk/-/media/boe/files/wor...

This episode breaks down a recent paper from the FEDERAL RESERVE BANK OF ST. LOUIS that reveals how job switching—known as employer-to-employer (EE) transitions—significantly influences inflation and impacts optimal monetary policy decisions. We explore why central banks need to consider job mobility alongside unemployment rates to accurately forecast price changes and set interest rates, with exa...

This episode explores a fascinating research paper from the Federal Reserve Bank of New York, diving into the critical difference between programmable payments and programmable money. As central banks worldwide explore digital currencies, understanding this distinction is vital to ensure new monetary systems don't compromise the fundamental qualities of "good" money like uniformity and fungibility...

This episode unpacks a Bank of England staff working paper by Jamie Lenney and Biagio Rosso, exploring how economic models can better reflect real-world human behavior. We dive into a new flexible approach that moves beyond traditional rational expectations, allowing for agents to overreact or underreact to economic conditions and news. Learn how incorporating these 'behavioural expectations' sign...

This episode dives into a Bank of England research paper by Eric Tong and Rennae Cherry, titled "Central bank communications that reach the public." We explore how central bank messages, as encountered through news media, actually shape households' inflation expectations, challenging the traditional view that central bank communication rarely reaches the public. Learn why measuring communication a...

This episode breaks down a new Bank of England research paper that explores how rapid innovation in digital payments and new private digital monies challenge the idea that all money should trade at par—a concept known as "monetary singleness." Discover when small deviations from par are efficient and why central bank reserves and cash are crucial for financial stability in an evolving digital land...

This episode dives into a Federal Reserve Bank of New York Staff Report that uses big data from foot traffic to uncover hidden demand shocks affecting businesses in New York City. We explore how retail, service, and health establishments experience highly varied and unpredictable changes in customer demand, challenging traditional economic assumptions. Hear the plain English explanation of this cu...

This episode dives into a new Bank of England research paper exploring whether Large Language Models like GPT-3.5 Turbo can form inflation perceptions and expectations similar to human households. Using a clever quasi-experimental design, the study compares LLM outputs to survey data, revealing how AI responds to economic signals and its surprising sensitivity to food inflation. Discover the impli...

This episode breaks down a recent Federal Reserve Bank of St. Louis research paper, offering a strategic economic analysis of narcoterrorism in plain English. We explore how terrorist groups extort drug farmers for funding, how developed nations use crop destruction as a counterterrorism tool, and the complex interplay of drug markets, terror financing, and international policy. For questions or d...

This episode breaks down a research paper from the Federal Reserve Bank of St. Louis, exploring whether different measures of the money supply are useful for forecasting US inflation. Using advanced non-linear techniques, the authors find limited support for monetary aggregates as reliable inflation predictors in the early to mid-2000s. Dive into the specifics of this intriguing macroeconomic stud...

This episode dives into a Federal Reserve Bank of St. Louis research paper asking a crucial question: Do monetary aggregates actually help forecast inflation? We break down the paper's novel approach using neural networks and kernel regression to evaluate money's predictive power for US inflation in the early 2000s, explaining the findings in plain English. For more details, find the original pape...

This episode dives into a Federal Reserve Bank of St. Louis research paper that examines how to make economic forecasts more accurate, particularly in an environment of structural change. We break down how combining "recursive" (using all available data) and "rolling" (using only recent data) forecasting methods can significantly improve prediction quality. Learn about this innovative strategy and...

This episode delves into an OECD research paper that challenges conventional wisdom on forecasting recessions. We explore how a "wisdom of crowds" approach, averaging predictions from multiple simple models, can be as effective as advanced machine learning techniques like Random Forests for predicting economic downturns in OECD countries. Do you have thoughts on the best forecasting methods? Share...

This episode explains a Bank of England Staff Working Paper, "Non-standard errors," by Albert J Menkveld et al., exploring how variations in researcher choices introduce significant "non-standard errors" into scientific findings. We break down their study of 164 teams testing hypotheses on the same data, revealing these errors are substantial, decrease with peer feedback, and are often underestima...

This episode dives into a Federal Reserve Bank of New York Staff Report that explores a critical challenge in information disclosure: how to ensure a sender, like a bank regulator, can truly commit to a disclosure rule without manipulating signals after the fact. We'll break down how the paper introduces 'Receiver-Private Certified Bayesian Persuasion,' revealing why cryptography, specifically sec...

This episode breaks down a new Bank of England research paper that explores how economic cycles, like recessions, impact the stability of earnings for UK households. It reveals that during downturns, negative income shocks become more frequent, even if the overall spread of income changes remains similar, and introduces a new model to track these crucial dynamics for policymakers. Tune in to under...