The Research Roundup: October 2026

(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.)

1. [DM] The Production Network Amplification of Retaliatory Tariffs
   Bank of Canada Staff Working Papers · October 2026 · Working paper
   https://ideas.repec.org/p/bca/bocawp/26-35.html
   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.
   - 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.

2. [Transversal] Global Spillovers from U.S. Bond Supply Shocks
   IMF Working Papers · 23 October 2026 · Working paper
   https://ideas.repec.org/p/imf/imfwpa/2026-229.html
   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.
   - 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.

3. [DM] The Treasury General Account and the Fed’s Balance Sheet
   Federal Reserve Bank of Philadelphia · 16 October 2026 · Working paper
   https://ideas.repec.org/p/fip/fedpwp/103953.html
   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.
   - 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.

4. [DM] The heterogeneous bank lending channel of monetary policy
   European Central Bank Working Papers · 14 October 2026 · Working paper
   https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3299~01776adb36.en.pdf
   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.
   - 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.

5. [Transversal] Inflation and Price Dispersion: New Cross-Sectoral and International Evidence
   Banco de España · October 2026 · Working paper
   https://ideas.repec.org/p/bde/wpaper/2638e.html
   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.
   - 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.

6. [DM] Tax Planning and Multinational Behavior
   NBER Working Papers · October 2026 · Working paper
   https://ideas.repec.org/p/nbr/nberwo/35874.html
   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.
   - 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.

7. [DM] Are Markups Too High? Competition, Strategic Innovation, and Industry Dynamics
   Review of Economic Studies · 7 October 2026 · Journal article
   https://doi.org/10.1093/restud/rdag110
   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.
   - 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.

8. [EM] Does Foreign Borrowing Lift Growth?
   IMF Working Papers · 2 October 2026 · Working paper
   https://ideas.repec.org/p/imf/imfwpa/2026-216.html
   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.
   - 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.

These 8 papers were selected from 234 screened across 30 sources (top economics journals, central banks, the IMF, the BIS and research networks).
Journal of Political Economy: 6 paper(s) were left out because no abstract was available.
Browse every paper and past issue: https://mhsendur-research-roundup.pages.dev/