The Research Roundup
October 2026 · 8 papers on markets, policy and the world economy
|
This issue's summaries and tags are machine-generated from titles and abstracts and were reviewed by Mustafa Harun Sendur on 4 November 2026; corrections are marked on each paper. |
|
DM Bank of Canada Staff Working Papers · October 2026 · Working paper
By Christian Bustamante, Xing Guo, Lu Han, Soyoung Lee, Gaelan MacKenzie, Mariel Yacolca Maguiña, Jacob Short
In plain words
The paper builds a framework to quantify how tariffs on imported goods affect consumer prices directly and through production networks. Using Canada's input-output matrix and firm-level import data, it finds that most of the price response comes from higher intermediate input costs, and estimates the consumption price effects of Canada's 2025 counter-tariffs.
Key takeaways
- Tariffs on machinery and equipment and transport equipment have the largest effects on final prices.
- About two-thirds of the total price response stems from higher intermediate input costs passing through domestic supply chains.
- The authors estimate consumption price increases of 1.56 and 0.72 percentage points for the two phases of Canada's 2025 counter-tariffs.
- A hypothetical CUSMA breakdown reverting to MFN tariffs would raise final-good prices by 0.64 percentage points.
Why it matters
Policymakers and market participants can gauge how tariff adjustments and trade-policy shifts may feed through supply chains to affect consumer price inflation in Canada and potentially influence monetary policy considerations.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model called the 2025 counter-tariffs "proposed"; the abstract treats them as Canada's 2025 counter-tariffs and gives estimates for their two phases.
Market focus: Developed markets. The abstract explicitly references Canada and U.S.-imported goods, tying the analysis to a specific advanced economy. “Using Canada's input-output matrix and administrative firm-good import data for the universe of Canadian firms”
|
|
Transversal IMF Working Papers · 23 October 2026 · Working paper
By Danila Smirnov
In plain words
The paper identifies U.S. Treasury auction-related bond supply shocks and uses them as instruments to trace effects on foreign yields and output. A shock raising the U.S. 10-year yield by 10 basis points lifts foreign 10-year yields by about 7 basis points and reduces industrial production in the U.S. and abroad by roughly 0.4 percent.
Key takeaways
- A 10-bp U.S. 10-year yield increase raises foreign 10-year yields by about 7 bps within days.
- U.S. industrial production falls up to 0.4 percent eight months after the shock.
- Foreign industrial production falls by a comparable 0.4 percent, with a more persistent profile.
- Moving from the 25th to the 75th percentile of foreign investor participation deepens the industrial production decline by 0.5 percentage points.
Why it matters
The findings show how U.S. Treasury supply decisions can quickly affect global bond markets and real activity, informing policymakers about cross-border transmission of monetary-policy-like shocks.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model left the 0.5 percentage points unattached to what was compared ("higher foreign investor participation"). The abstract compares the 25th with the 75th percentile.
Market focus: Transversal. The abstract discusses spillovers to both advanced economies and emerging markets, spanning multiple regions. “U.S. bond supply as a key driver of global financial conditions”
|
|
DM Federal Reserve Bank of Philadelphia · 16 October 2026 · Working paper
By Roc Armenter
In plain words
The paper finds that Treasury cash-management changes since the COVID pandemic raised the Federal Reserve's balance sheet by as much as 2 percentage points of nominal GDP. A simple time-series model that allows for debt-ceiling episodes finds that changes in the Treasury General Account since COVID are mostly driven by higher target balances.
Key takeaways
- Treasury cash-management changes since COVID raised the Fed's balance sheet by as much as 2 percentage points of nominal GDP.
- Once debt-ceiling extraordinary measures are accounted for, Treasury General Account changes since COVID are mostly driven by higher target balances.
- Effective Fed sterilization would require timely and accurate information at high frequencies.
Why it matters
Understanding the size of balance-sheet expansion and the data needs for sterilization helps policymakers gauge monetary-policy capacity and fiscal-monetary interactions.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model attributed the balance-sheet expansion to higher target balances. The abstract attributes the changes in the Treasury General Account to them.
Market focus: Developed markets. The abstract references the U.S. Treasury and the Federal Reserve, both U.S. institutions. “the Fed’s balance sheet by as much as 2 percentage points of nominal GDP”
|
|
DM European Central Bank Working Papers · 14 October 2026 · Working paper
In plain words
The paper builds a macro model of heterogeneous banks and finds that differences in interest-rate risk exposure matter for monetary transmission only when bank solvency concerns become relevant. Calibrated to the euro area, the lending elasticity to monetary policy is one-third larger in fixed-rate than in variable-rate economies, and tightening raises bank failure rates in fixed-rate systems but lowers them in variable-rate systems.
Key takeaways
- The lending elasticity to monetary policy is one-third larger in fixed-rate than in variable-rate economies.
- Rising policy rates compress net interest margins of fixed-rate banks, eroding capital and triggering sharper deleveraging.
- Tightening raises bank failure rates in fixed-rate systems but lowers them in variable-rate systems.
- Idiosyncratic default risk pushes a substantial share of banks toward the solvency threshold, making heterogeneity important.
Why it matters
Policymakers and market participants should note that monetary tightening can affect bank stability differently depending on the prevalence of fixed-rate lending, influencing both credit supply and systemic risk.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model compared the elasticity of fixed-rate banks with variable-rate banks. The abstract compares fixed-rate with variable-rate economies (banking systems). The owner asked at review for the comparison with variable-rate economies to be explicit.
Market focus: Developed markets. The abstract calibrates the model to the euro area, an advanced economy region. “Calibrating the model to the euro area”
|
|
Transversal Banco de España · October 2026 · Working paper
By Santiago Alvarez-Blaser
In plain words
The paper uses product-level web-scraped data from over 60,000 restaurants and supermarkets in 18 countries to study how inflation relates to price dispersion. It finds a significant positive correlation in both sectors that does not flatten much at higher inflation.
Key takeaways
- Across countries, annualised inflation of 10% rather than 0% is associated with approximately 46% higher price dispersion in supermarkets and 73% higher dispersion in restaurants.
- The association is positive in all inflation environments and differs between supermarkets and restaurants.
- It does not flatten much at higher inflation, which standard menu-cost models do not generate.
Why it matters
Understanding how inflation is associated with price dispersion helps policymakers gauge hidden costs of inflation and informs businesses about pricing stability across sectors.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model wrote that a "10% rise in annualized inflation raises price dispersion by about 46%". The abstract reports a correlation, and compares inflation of 0% with 10% (a difference in levels), not a 10% rise.
Market focus: Transversal. The sample spans 18 countries of both groups, advanced economies such as Spain, Italy and Portugal alongside emerging and developing ones such as Kenya, Ukraine and Uganda, so no single group dominates. “The countries included in the analysis are, in the order shown in the table: Armenia, Côte d’Ivoire, Spain, Georgia, Ghana, Croatia, Italy, Kenya, Kyrgyzstan, Kazakhstan, Morocco, Poland, Portugal, Romania, Slovenia, Tunisia, Ukraine and Uganda.” Tag note: Rationale revised (tag unchanged) after a check against the paper by Mustafa Harun Sendur; reviewed by a human.
|
|
DM NBER Working Papers · October 2026 · Working paper
By Rosanne Altshuler, Lysle Boller, Kevin A. Roberts, Juan Carlos Suárez Serrato
In plain words
The paper uses newly linked IRS data to study how US multinationals use tax-planning structures that exploit mismatches between US and foreign tax laws. In 2016 these structures accounted for 36% of foreign profits despite being adopted by only 18% of firms, and an estimated structural model implies substantial heterogeneity in adoption costs and benefits.
Key takeaways
- In 2016, tax-planning structures accounted for 36% of foreign profits despite being adopted by only 18% of firms.
- The structural model is estimated using adoption patterns and changes in foreign effective tax rates, domestic and foreign investment, and global R&D following adoption.
- The model implies substantial heterogeneity in the costs and benefits of adopting these structures.
- According to the model, restricting tax planning creates tradeoffs between tax revenue and economic activity that are amplified by global R&D linkages.
Why it matters
Understanding the scale and effects of U.S. multinational tax planning helps policymakers gauge revenue impacts and economic consequences of tightening tax rules.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model said the structures "generated" 36% of foreign profits where the abstract says they accounted for that share, and wrote that the model "shows" and "reveals" what the abstract says it implies.
Market focus: Developed markets. The abstract references US multinationals and IRS data, naming the United States economy. “US multinationals use tax-planning structures”
|
|
DM Review of Economic Studies · 7 October 2026 · Journal article
By Laurent Cavenaile, Murat Alp Celik, Xu Tian
In plain words
The paper develops an oligopolistic general-equilibrium Schumpeterian growth model in which an endogenous number of large “superstar” firms compete with a competitive fringe of small firms and choose their innovation strategies. The model is consistent with US macroeconomic trends since the 1970s and, once estimated, it finds that the static welfare loss from a higher average markup is overshadowed by the dynamic welfare gains from increased innovation, and that increasing innovation costs are the primary determinant of lacklustre productivity growth.
Key takeaways
- The model is consistent with US trends since the 1970s: rising markups, market concentration, profits and R&D spending, and falling business dynamism, productivity growth and labour share.
- In the estimated model, the increase in the average markup causes a significant static welfare loss, which is overshadowed by the dynamic welfare gains from increased innovation.
- In the estimated model, the increasing costs of innovation are found to be the primary determinant of lacklustre productivity growth: ideas are getting harder to find.
- Large “superstar” firms compete à la Cournot alongside a competitive fringe, and the number of large firms in each industry is determined endogenously.
Why it matters
Understanding how competition and innovation jointly shape markups and industry concentration helps policymakers assess the impact of market power on productivity and labor outcomes.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model's write-up described only the model's set-up and its match with US trends, and left out the findings the abstract reports from estimating it (the static welfare loss from higher markups is overshadowed by dynamic gains from innovation; rising innovation costs are the primary determinant of weak productivity growth).
Market focus: Developed markets. The abstract references macroeconomic trends observed in the US. “consistent with the macroeconomic trends observed in the US since the 1970s”
|
|
EM IMF Working Papers · 2 October 2026 · Working paper
By Marijn A. Bolhuis, Tobias Krahnke, Mr. Papa M N'Diaye
In plain words
The paper constructs foreign credit supply shocks from creditor-specific changes in lending and examines 134 developing economies over 1970-2023. Such shocks lead to higher public investment and external debt but, on average, no sustained gain in output or productivity, and are accompanied by real exchange-rate appreciation and weaker external balances. The benefits depend on institutional quality.
Key takeaways
- Foreign credit supply shocks lead to persistent increases in public investment and external indebtedness.
- On average, easier external borrowing brings no sustained improvement in output or productivity.
- It is accompanied by real exchange-rate appreciation and weaker external balances.
- Countries with stronger institutions show more favourable productivity and output responses to additional borrowing.
Why it matters
Policymakers and market participants should note that external public borrowing may not automatically enhance growth and can affect exchange rates and external balances, especially in countries with weaker institutions.
Wording note: Summary and takeaways were corrected against the abstract by Claude (AI assistant); reviewed by a human. The model wrote that the shocks "cause" appreciation and weaker balances and that institutions "enable" growth. The abstract says "accompanied by" and that the benefits "depend on" institutional quality.
Market focus: Emerging markets. The paper studies 134 developing economies, which fall within this project's EM/developing category (the IMF's emerging market and developing economies). “data covering 134 developing economies over 1970-2023” Tag note: Rationale revised (tag unchanged) after a check against the paper by Mustafa Harun Sendur; reviewed by a human.
|
|
|