New Investment Study Results from Federal Reserve Bank of Cleveland Described (Supply Shocks, Employment Gap, and Monetary Policy): Investment

2025 AUG 04 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Research findings on Investment are discussed in a new report. According to news originating from Cleveland, Ohio, by NewsRx correspondents, research stated, “How should monetary policy respond to supply shocks in terms of inflation and employment stabilization? We introduce labor force entry and exit in an otherwise standard model with staggered price-and wage-setting to include employment in the model.”

Our news journalists obtained a quote from the research from the Federal Reserve Bank of Cleveland, “A welfare-maximizing policy features wage growth stabilization with variation in the employment gap and inflation. Under staggered price-and wage-setting, the real wage adjustments to shocks entail a welfare cost, and variation in the employment gap contributes to reducing the welfare cost.”

According to the news editors, the research concluded: “Therefore, leaning against the employment gap induces substantial welfare losses for supply shocks compared to the welfare-maximizing policy.”

This research has been peer-reviewed.

For more information on this research see: Supply Shocks, Employment Gap, and Monetary Policy. European Economic Review, 2025;177. European Economic Review can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; European Economic Review - http://www.journals.elsevier.com/european-economic-review/)

The news correspondents report that additional information may be obtained from Willem Van Zandweghe, Federal Reserve Bank of Cleveland, Dept. of Research, Pob 6387, Cleveland, OH 44101, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.euroecorev.2025.105049. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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