From Deviations to Shortfalls: The Effects of the FOMC's New Employment Objective

By Brent Bundick and Nicolas Petrosky-Nadeau

American Economic Journal: Macroeconomics, January 2026

We analyze the effects of a monetary policy that stabilizes "shortfalls" rather than "deviations" of employment from its maximum level. A shortfalls-stabilization rule leads to expectations of more accommodative policy in expansions, raising average infla...

Uncertainty and the Economy: The Evolving Distributions of Aggregate Supply and Demand Shocks

By Geert Bekaert, Eric Engstrom, and Andrey Ermolov

American Economic Journal: Macroeconomics, January 2026

We estimate the time-varying distribution of aggregate supply (AS) and aggregate demand (AD) shocks. We distinguish between traditional Gaussian uncertainty and "bad" uncertainty, associated with negative skewness. The Great Moderation is driven by a redu...

Trade, Value Added, and Productivity Linkages: A Quantitative Analysis

By François de Soyres and Alexandre Gaillard

American Economic Journal: Macroeconomics, January 2026

Traditional international real business cycle (IRBC) models produce a weak relationship between trade and cross-country real GDP (RGDP) correlations (corrRGDP), contradicting empirical findings. We reassess this quantitative puzzle in a many-country model...

Expert Opinion and Compensation: Evidence from a Musical Competition

By Victor A. Ginsburgh and Jan C. van Ours

American Economic Review, March 2003

Accounting for Wealth Concentration in the United States

By Bariş Kaymak, David Leung, and Markus Poschke

American Economic Journal: Macroeconomics, January 2026

We assess the empirical relevance of different macroeconomic modeling approaches to wealth concentration, using the joint distribution of earnings, capital income, and net worth in combination with an OLG model of household heterogeneity. We find large ea...

IT and Urban Polarization

By Jan Eeckhout, Christoph Hedtrich, and Roberto Pinheiro

American Economic Journal: Macroeconomics, January 2026

We show that differential IT investment across cities has been a key driver of job and wage polarization since the 1990s. Using a novel dataset, we establish two stylized facts: IT investment is highest in firms in large and expensive cities, and the decl...

Anatomy of the Greek Depression with Firm-Level Data: The Importance of Demand Shocks

By Stelios Giannoulakis and Plutarchos Sakellaris

American Economic Journal: Macroeconomics, January 2026

During the Greek Depression, which saw a 22 percent decline in output, young firms and small firms experienced significantly steeper declines in sales growth compared to their mature and larger counterparts. This disparity was largely driven by adverse de...

The Effects of Biased Labor Market Expectations on Consumption, Wealth Inequality, and Welfare

By Almut Balleer, Georg Duernecker, Susanne Forstner, and Johannes Goensch

American Economic Journal: Macroeconomics, January 2026

We analyze US survey data and document a substantial optimistic bias of households in their expectations about future labor market transitions. We find that low-skilled individuals tend to be strongly overoptimistic, whereas high-skilled individuals have ...

Parallel Digital Currencies and Sticky Prices

By Harald Uhlig and Taojun Xie

American Economic Journal: Macroeconomics, January 2026

The rise of digital currencies may result in domestic parallel currencies. Their exchange rate shocks present new challenges for monetary policy. We analyze these issues in a New Keynesian framework. Firms set prices in one of the currencies. A one-time a...

Bank Risk-Taking, Credit Allocation, and Monetary Policy Transmission: Evidence from China

By Xiaoming Li, Zheng Liu, Yuchao Peng, and Zhiwei Xu

American Economic Journal: Macroeconomics, January 2026

Using confidential loan-level data, we examine how Basel III influenced the responses of bank risk-taking to monetary policy shocks in China. We use a difference-in-differences (DID) approach, exploiting disparities in lending behavior between high- and l...

Good Company: Economic Policy after Shareholder Primacy by Lenore Palladino

By Ryan Bubb

Journal of Economic Literature

What is Newsworthy? Theory and Evidence

By Luis Armona, Matthew Gentzkow, Emir Kamenica, and Jesse M. Shapiro

American Economic Review: Insights

We introduce a model in which a benevolent news outlet decides whether to report the realization of a state to a consumer, who pays a cost to receive it. A simple statistical rule, called a proper scoring rule, describes when the outlet should be more ...

Front Matter

American Economic Review, January 2026

The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility

By Raj Chetty, John N. Friedman, Nathaniel Hendren, Maggie R. Jones, and Sonya R. Porter

American Economic Review, January 2026

We construct a public atlas of mean outcomes in adulthood by childhood census tract. Outcomes vary sharply across neighborhoods: For children whose parents earn $27,000, the standard deviation of mean household income in adulthood is $10,420 across tracts...

Choosing the Wrong Calling Plan? Ignorance and Learning

By Eugenio J. Miravete

American Economic Review, March 2003

Across-Country Wage Compression in Multinationals

By Jonas Hjort, Xuan Li, and Heather Sarsons

American Economic Review, January 2026

Many employers link wages at establishments outside of the home region to the level at headquarters. We show this using new data on 1,200 multinationals' establishments across the world and linked employee-level data on their establishments in Brazil. Hea...

Risk Preferences and Field Behavior: The Relevance of Higher-Order Risk Preferences

By Sebastian O. Schneider and Matthias Sutter

American Economic Review, January 2026

Using new methods, we measure the intensities of higher-order risk preferences (prudence and temperance) in an incentivized experiment with 658 adolescents. Aligned with theory, we find that higher-order risk preferences are strongly related to field beha...

Optimal Taxation and Market Power

By Jan Eeckhout, Chunyang Fu, Wenjian Li, and Xi Weng

American Economic Review, January 2026

Should optimal income taxation change when firms have market power? We analyze how the planner can optimally tax labor income of workers and profits of entrepreneurs. We derive optimal tax rates that depend on markups and identify four distinct components...

Monetary Cooperation during Global Inflation Surges

By Luca Fornaro and Federica Romei

American Economic Review, January 2026

We study optimal monetary policy during times of global scarcity of tradable goods. The optimal monetary response entails a surge in inflation, which helps rebalance production toward the tradable sector. While the inflation costs are fully borne domestic...

Monotonicity among Judges: Evidence from Judicial Panels and Consequences for Judge IV Designs

By Henrik Sigstad

American Economic Review, January 2026

Judge IV designs rely on monotonicity—each judge being weakly stricter than more lenient judges in all cases. I measure monotonicity in judicial panels in five different settings and find that it is violated in up to 50 percent of nonunanimous cases. Th...