Daily Paper Digest

The Journal of Finance, EarlyView.

We investigate optimal monetary and macroprudential policies in an open economy with aggregate demand externalities and an occasionally binding zero lower bound constraint. Our analysis highlights that the optimal policy balances output stabilization and capital flow management. When macroprudential policy is available, monetary policy stabilizes the output gap. By contrast, when macroprudential policy is not available, monetary policy is used prudentially. However, contrary to a widespread view, raising the interest rate is not necessarily the optimal prudential policy. Finally, we show that international spillovers operate through the world real rate, but macroprudential policies provide insulation from the adverse effects of foreign policies.

How can misinformation on social media be countered in the age of AI-generated content? This column uses an experiment conducted during the 2024 US presidential campaign involving 10,000 users of X to demonstrate that nudging users to think before sharing content can outperform fact-checking interventions in reducing misinformation. The experiment also reveals that users often struggle to distinguish true from false news, and that interventions are substantially more effective when users are exposed to ‘uncontroversial’ true news that they can reliably distinguish from false content. These findings suggest that fighting misinformation is not only about slowing the spread of falsehoods but also about ensuring the supply and visibility of credible information.