https://hdl.handle.net/10419/318129 2026-10-23T00:23:19Z https://hdl.handle.net/10419/341603 Title: Imperfect information, composition of demand shocks, and the flattening of the Phillips curve Authors: Okuda, Tatsushi; Tsuruga, Tomohiro; Zanetti, Francesco Abstract: We study why inflation responds differently to economic activity over time. Using survey data covering the universe of Japanese firms, we show that firms are unable to perfectly distinguish aggregate from sector-specific demand changes, leading to positively correlated expectations about these two components. We develop a model with imperfect information that reproduces this pattern and predicts that higher relative volatility of sector-specific demand reduces the sensitivity of inflation to changes in aggregate demand, thus flattening the Phillips curve. Testing this prediction with Japanese data from 1976 to 2022, we find that increases in the volatility of sectoral demand shocks explain significant changes in the Phillips curve slope over the sample period. Our results provide a novel explanation for the flattening of the Phillips curve: the composition of shocks - not just their magnitude - critically affects the sensitivity of inflation to aggregate demand. 2026-01-01T00:00:00Z https://hdl.handle.net/10419/341604 Title: State dependence of monetary policy during global supply chain disruptions Authors: Bai, Xiwen; Fernández-Villaverde, Jesús; Li, Yiliang; Zanetti, Francesco Abstract: We study how global supply chain disruptions affect monetary policy transmission. Post-pandemic evidence indicates surging transportation costs, goods-market imbalances, and rising prices. We develop a model in which logistical bottlenecks (upstream slack coexisting with downstream shortages) steepen the aggregate supply curve. This convexity amplifies price responses to monetary policy while dampening output effects. Threshold VAR and Local Projection estimates are consistent with this mechanism: during disruptions, contractionary policy reduces prices more at smaller output cost, easing the stabilization trade-off. 2026-01-01T00:00:00Z https://hdl.handle.net/10419/341602 Title: The effects of geopolitical oil price shocks Authors: Verduzco-Bustos, Guillermo; Zanetti, Francesco Abstract: We develop a novel instrumental variable to identify geopolitical oil price shocks arising around significant geopolitical tensions and examine their transmission to the global oil market, key U.S. macroeconomic aggregates, and cross-border spillover effects on other commodity markets, output, and inflation. Geopolitical oil price shocks resemble severe oil supply shocks, leading to production declines and a much sharper increase in oil prices than conventional shocks. They are coupled with heightened uncertainty and induce a distinct inventory response: an initial shortterm decline followed by long-term accumulation, reflecting market participants' concerns about future economic and oil market conditions. The cross-border spillover effects are significant for oil-intensive commodities, and are stronger for output and inflation in oil-importing economies and for countries with low energy inventories and high energy dependency on foreign supply. 2026-01-01T00:00:00Z https://hdl.handle.net/10419/318187 Title: Credit Market Tightness and Zombie Firms: Theory and Evidence Authors: Hamano, Masashige; Schnattinger, Philip; Shintani, Mototsugu; Uesugi, Iichiro; Zanetti, Francesco Abstract: We develop a simple model of financial intermediation with search and matching frictions between banks and firms. The model links credit market tightness -encapsulating the abundance of credit- to the search and opportunity costs of credit intermediation. Search costs generate lending to unprofitable firms (i.e., zombies) and the opportunity costs of searching exert countervailing forces on the incentives for banks and firms to participate in zombie lending, generating an inverted U-shaped relationship between credit market tightness and the share of zombie lending. High bargaining power of firms decreases the opportunity cost of firms foregoing credit relationships, reduces the share of zombie firms and increases the efficacy of capital injections to reduce zombie lending. Using data for 31 industries in Japan over the period 2000-2019, we test and corroborate our theoretical predictions by constructing theory-consistent measures of credit market tightness and bargaining power. Consistent with our theory, the findings reveal that capital injections are more effective in industries with higher credit market tightness and greater bargaining power of firms. 2025-01-01T00:00:00Z