Bank of England: Why Imperfect Expectations Improve Our Economic Models (Explained)

Bank of England: Why Imperfect Expectations Improve Our Economic Models (Explained)

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' significantly improves the empirical fit of macroeconomic models, especially when forecasting inflation. We welcome your thoughts at feedback@econpod.org, and you can find the full paper at https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2026/a-flexible-deviation-from-fire-in-the-sequence-space.pdf. This episode explains a real academic paper in plain English for a general audience. Source paper: A flexible deviation from FIRE in the Jamie Lenney and Biagio Rosso - Bank of England Keywords: Macroeconomics, Behavioural economics, Inflation, Monetary policy, Economic forecasting, Rational expectations

Bank of England: How Central Bank Communication Shapes Public Inflation Expectations (Explained)

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 as the public experiences it is crucial for understanding its impact on financial stability and macroeconomics, and share your thoughts at feedback@econpod.org. Find the full paper at https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2026/central-bank-communications-that-reach-the-public.pdf This episode explains a real academic paper in plain English for a general audience. Source paper: Central bank communications that Eric Tong and Rennae Cherry - Bank of England Keywords: central banking, inflation expectations, macroeconomics, financial stability, monetary policy, public communication, textual analysis, economic forecasting, media influence

Bank of England: Digital Money, Private Issuers, and Preserving "Monetary Singleness" (Explained)

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 landscape. Read the full paper at https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2026/a-model-of-monetary-singleness.pdf, and share your thoughts at feedback@econpod.org. This episode explains a real academic paper in plain English for a general audience. Source paper: A model of monetary singleness - Bank of England Keywords: Monetary Singleness, Digital Money, Central Banking, Financial Stability, Payment Systems, Cash

Federal Reserve Bank of New York Staff Reports: Federal Reserve Bank of New York: Decoding Demand Shocks in Retail & Services with Foot Traffic Data (Explained)

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 cutting-edge research and share your thoughts at feedback@econpod.org. This episode explains a real academic paper in plain English for a general audience. Source paper: NO. 1191 Shocks from Foot Traffic Marina Azzimonti | David Wiczer | Yang Xuan - Federal Reserve Bank of New York Staff Reports https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1191.pdf?sc_lang=en Keywords: Foot Traffic, Demand Shocks, Retail Economics, Service Sector, Big Data, Economic Forecasting

Bank of England: Do AI Models Share Our Inflation Attitudes? (Explained)

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 implications for economic forecasting and social science research, and share your thoughts at feedback@econpod.org. Find the full paper here: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2026/inflation-attitudes-of-large-language-models.pdf This episode explains a real academic paper in plain English for a general audience. Source paper: Inflation attitudes of large Nikoleta Anesti, Edward Hill and Andreas Joseph - Bank of England Keywords: inflation, large language models, AI, economic forecasting, central banking, macroeconomics