Banque Nationale De Belgique Sa · EURONEXT:BNB
Banque Nationale De Belgique Sa — National Bank of Belgium — Technical Presentation (October 2025)
66 slides from Banque Nationale De Belgique Sa's technical presentation, Oct 16, 2025
Slide 1: The unequal effects of trend inflation
The unequal effects of trend inflation Evi Pappa1 Sebastian Rast2 Alejandro Vicondoa3 1 Universidad Carlos III de Madrid and CEPR 2 De Nederlandsche Bank 3 Pontificia Universidad Católica de Chile National Bank of Belgium (NBB) October 16, 2025 Any views expressed in this presentation and in these s
Slide 2: Motivation
Motivation • High inflation over the last few years in many advanced economies after many years of low and stable inflation. • Some of the changes in inflation are rather transitory while others more persistent. • How do persistent shifts in inflation affect the macroeconomy? • Are the effects of tr
Slide 3: This Paper
This Paper 1. Identifies innovations to trend inflation in US data using trend-cycle model of PCE inflation. 2. Relates these innovations to structural shocks and extracts shock component that shift trend inflation via a PCA. → Focus: monetary and corporate tax shocks that shift trend inflation. 3.
Slide 4: Channels
Channels Assess the role of different channels in explaining differential consumption responses: • Earnings heterogeneity channels (Heathcote et al., 2010; Gornemann et al., 2016; Auclert, 2019). • Wealth heterogeneity channels: • revaluation channel (Doepke and Schneider, 2006; Garriga et al., 2017
Slide 5: Main Findings
Main Findings • Aggregate effects of trend inflation: • Increase in nominal interest rates, inflation, and inflation expectations. • Permanent monetary shocks boost economic activity, especially in the short-term. • Corporate tax shocks lead to sustained declines in economic activity, consumption, a
Slide 6: Related Literature
Related Literature • Aggregate effects of permanent monetary/inflation target shocks: De Michelis and Iacoviello (2016), Uribe (2022), Schmitt-Grohe and Uribe (2022), Mumtaz and Theodoridis (2023). • Heterogeneous effects of transitory nominal shocks: Heathcote et al. (2010), Gornemann et al. (2016)
Slide 7: Outline
Outline 1. Identifying Trend Inflation Innovations 2. Extracting Structural Shocks Driving Trend Inflation 3. Aggregate effects 4. Heterogeneous Effects 5. Channels of Redistributive Effects of Trend Inflation 7
Slide 8: Estimation of Trend Inflation
Estimation of Trend Inflation • Trend inflation is estimated using a univariate unobserved-components stochastic volatility outlier-adjusted (UCSVO) model by Stock and Watson (2016). • Inflation has a transitory and permanent stochastic trend component (τt ): πt = τt + εt • Observable: US PCE headli
Slide 9: Identification of Trend Inflation Innovations
Identification of Trend Inflation Innovations • Trend Inflation follows a random walk ⇒ innovations to the trend are defined as: τt = τt−1 + σ∆τ,t ητ,t εt = σεt st ηε,t ∆ln(σε2t ) = γε νε,t 2 ∆ln(σ∆ τ,t ) = γ∆ ν∆τ,t where (ηε , ητ , νε , ν∆τ ) are iid ∼ N (0, I4 ), and st is an i.i.d. random variabl
Slide 10: Estimated Trend Inflation Series
Estimated Trend Inflation Series 1.5 10 1 5 0.5 0 0 -0.5 Headline PCE inflation -1 -5 Trend estimate (posterior mean) -1.5 1960 1970 1980 1990 2000 2010 1985 1990 1995 2000 2005 2010 2015 Figure Trend and Headline PCE Inflation (Left) and Trend Inflation Innovations (Right) Histogram Main Events Alt
Slide 11: Correlation with Structural Shocks
Correlation with Structural Shocks Figure Serial Correlation with Series of Structural Shocks ⇒ Focus on permanent monetary and corporate income tax shocks that shift trend inflation. 11
Slide 12: Outline
Outline 1. Identifying Trend Inflation Innovations 2. Extracting Structural Shocks Driving Trend Inflation 3. Aggregate Effects 4. Heterogeneous Effects 5. Channels of Redistributive Effects of Trend Inflation 12
Slide 13: Extracting Structural Shocks Driving Trend Inflation
Extracting Structural Shocks Driving Trend Inflation • Objective: Identify the component of the structural shocks that comoves positively with trend inflation using principal components analysis (PCA). • Methodology: 1. Recover the innovations to trend inflation that are not explained by permanent m
Slide 14: Outline
Outline 1. Identifying Trend Inflation Innovations 2. Extracting Structural Shocks Driving Trend Inflation 3. Aggregate Effects 4. Heterogeneous Effects 5. Channels of Redistributive Effects of Trend Inflation 14
Slide 15: Empirical Specification
Empirical Specification Estimate dynamic effects via Local Projections (Jorda, 2005): yt+h − yt−1 = αh + βh eTI,z t + γh Xt + ut+h where: • 0≤ h ≤ 20 quarters ahead. • yt+h − yt−1 : cumulative (log) change in variable of interest (GDP, 10Y Yield, PCE Inflation, ...). • eTI,z t : identified trend-inf
Slide 16: Aggregate Effects of Permanent MP Trend Shock
Aggregate Effects of Permanent MP Trend Shock PCE inflation PCE core inflation GDP Consumption Percentage deviation Percentage deviation 0.4 Percentage points Percentage points 0.2 0.5 0.5 0.2 0.1 0 0 0 -0.5 0 -0.5 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarters Quarte
Slide 17: Aggregate Effects of Corporate Tax Trend Shock
Aggregate Effects of Corporate Tax Trend Shock PCE inflation PCE core inflation GDP Consumption Percentage deviation Percentage deviation 0.4 0.5 Percentage points Percentage points 0.2 0 0.2 0.1 0 -0.5 0 -1 0 -0.5 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarters Quarte
Slide 18: Outline
Outline 1. Identifying Trend Inflation Innovations 2. Extracting Structural Shocks Driving Trend Inflation 3. Aggregate Effects 4. Heterogeneous Effects 5. Channels of Redistributive Effects of Trend Inflation 18
Slide 19: Household level data
Household level data Consumer Expenditure Survey (CEX) • Monthly rotating panel of US households (up to four interviews → limited panel dimension). • Focus on household expenditures but also questions on income and partly assets/liabilities. • Rich set of demographic characteristics including housin
Slide 20: Pseudo-panel: Average Quarterly Characteristics
Pseudo-panel: Average Quarterly Characteristics Renter Mortgagor Owner Total consumption 2986 3819 3633 Durable consumption 313 523 398 Nondurable & service consumption 2674 3303 3223 Mortgage payments 541 Rental payments 533 Total net income (annual) 12890 19091 15192 Gross labor income (annual) 81
Slide 21: Estimating Heterogeneous Effects
Estimating Heterogeneous Effects Estimate dynamic effects via Local Projections (Jorda, 2005): yi,t+h − yi,t−1 = αi,h + βi,h eTI,z t + γi,h Xi,t + ui,t+h where: • 0≤ h ≤20 quarters and i = indicates the different household groups. Baseline grouping: household tenure status, i.e. i∈(renter, mortgagor
Slide 22: Consumption Response by Housing Tenure Group
Consumption Response by Housing Tenure Group Monetary shock Corporate tax shock 1 1 0.5 0.5 % % 0 0 -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands and markers show
Slide 23: Role of other dimensions of heterogeneity?
Role of other dimensions of heterogeneity? Main result: Heterogeneous effects by housing tenure status → Renters’ consumption relatively more adversely affected. What about alternative dimensions of heterogeneity? 1. Age → some evidence for heterogeneity IRFs by age IRFs by interacted subgroups 23
Slide 24: Role of other dimensions of heterogeneity?
Role of other dimensions of heterogeneity? Main result: Heterogeneous effects by housing tenure status → Renters’ consumption relatively more adversely affected. What about alternative dimensions of heterogeneity? 1. Age → some evidence for heterogeneity IRFs by age IRFs by interacted subgroups • Ad
Slide 25: Role of other dimensions of heterogeneity?
Role of other dimensions of heterogeneity? Main result: Heterogeneous effects by housing tenure status → Renters’ consumption relatively more adversely affected. What about alternative dimensions of heterogeneity? 1. Age → some evidence for heterogeneity IRFs by age IRFs by interacted subgroups • Ad
Slide 26: Role of other dimensions of heterogeneity?
Role of other dimensions of heterogeneity? Main result: Heterogeneous effects by housing tenure status → Renters’ consumption relatively more adversely affected. What about alternative dimensions of heterogeneity? 1. Age → some evidence for heterogeneity IRFs by age IRFs by interacted subgroups • Ad
Slide 27: Role of other dimensions of heterogeneity?
Role of other dimensions of heterogeneity? Main result: Heterogeneous effects by housing tenure status → Renters’ consumption relatively more adversely affected. What about alternative dimensions of heterogeneity? 1. Age → some evidence for heterogeneity IRFs by age IRFs by interacted subgroups • Ad
Slide 28: Outline
Outline 1. Identifying Trend Inflation Innovations 2. Extracting Structural Shocks Driving Trend Inflation 3. Aggregate Effects 4. Heterogeneous Effects 5. Channels of Redistributive Effects of Trend Inflation 24
Slide 29: What can Explain the Differential Response of Consumption?
What can Explain the Differential Response of Consumption? Potential channels: 1. Earnings heterogeneity 2. Wealth heterogeneity and financial/liquidity constraints: 2.1 Revaluation channel (Doepke and Schneider, 2006) → As inflation increases real value of existing asset holdings and liabilities go
Slide 30: Earnings Heterogeneity: Total Income and Labor Income
1. Earnings Heterogeneity: Total Income and Labor Income Monetary shock Corporate tax shock Total net income (%) 2 2 % 0 0 -2 -2 0 5 10 15 20 0 5 10 15 20 Quarters Quarters 2 Labor income (%) 2 0 % 0 -2 -4 -2 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are
Slide 31: What can Explain the Differential Response of Consumption?
What can Explain the Differential Response of Consumption? Potential channels: 1. Earnings heterogeneity ✓ 2. Wealth heterogeneity and financial/liquidity constraints: 2.1 Revaluation channel (Doepke and Schneider, 2006) → As inflation increases real value of existing asset holdings and liabilities
Slide 32: Wealth Heterogeneity Channel: Balance sheet data (DFA)
2. Wealth Heterogeneity Channel: Balance sheet data (DFA) Monetary shock Corporate tax shock Total assets (%) 4 5 2 0 % 0 -5 -2 -10 0 5 10 15 20 0 5 10 15 20 Quarters Quarters 4 5 Total liabilities (%) 2 0 % 0 -5 -2 -10 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Note. Solid lines are point estimate
Slide 33: What can Explain the Differential Response of Consumption?
What can Explain the Differential Response of Consumption? Potential channels: 1. Earnings heterogeneity ✓ 2. Wealth heterogeneity and financial/liquidity constraints: 2.1 Revaluation channel (Doepke and Schneider, 2006) ✓ → As inflation increases real value of existing asset holdings and liabilitie
Slide 34: Wealth Heterogeneity Channel: Asset Prices
2. Wealth Heterogeneity Channel: Asset Prices I. Monetary shock Property Prices Stock Prices Housing Rents Percentage deviation Percentage deviation Percentage deviation 1 4 0 2 -5 0 -10 0 -1 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarters II. Corporate tax shock Property Prices St
Slide 35: Wealth Heterogeneity Channel: Balance sheet data (DFA)
2. Wealth Heterogeneity Channel: Balance sheet data (DFA) Monetary shock Corporate tax shock Real estate assets (%) 6 5 4 0 % 2 -5 0 -10 -2 -15 0 5 10 15 20 0 5 10 15 20 Quarters Quarters 5 5 Corporate equities (%) 0 0 -5 % -5 -10 -10 -15 -15 -20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Note. Sol
Slide 36: Wealth heterogeneity: Rental and mortgage payments
2. Wealth heterogeneity: Rental and mortgage payments Monetary shock Rental payments Mortgage payments (interest rate) Mortgage payments (principal) 2 2 2 % % 0 0 0 -2 -2 -2 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarters Rental payments Mortgage payments (interest rate) Mortgage p
Slide 37: What can Explain the Differential Response of Consumption?
What can Explain the Differential Response of Consumption? Potential channels: 1. Earnings heterogeneity ✓ 2. Wealth heterogeneity and financial/liquidity constraints: 2.1 Revaluation channel (Doepke and Schneider, 2006) ✓ → As inflation increases real value of existing asset holdings and liabilitie
Slide 38: Conclusions
Conclusions • Effects of persistent changes in inflation are highly unequal, driven by income, wealth, and type of asset holdings. • Housing tenure status as most relevant dimension for heterogeneous consumption effects: renters relatively more adversely affected than homeowners. • Earnings heteroge
Slide 39: Thank you!
Thank you! 35
Slide 40: Appendix
Appendix 36
Slide 41: Identification of Trend Inflation Innovations
Identification of Trend Inflation Innovations • Regress the identified series on past values of macro-financial factors (See Forni and Gambetti, 2014). Shift in Trend Inflation (ητ,t ) 1 Ft−1 −0.11 (0.130) 2 Ft−1 −0.12 (0.236) 3 Ft−1 −0.17 (0.155) 4 Ft−1 −0.01 (0.219) 5 Ft−1 0.10 (0.189) 6 Ft−1 0.34
Slide 42: Trend Inflation Innovation - Histogram
Trend Inflation Innovation - Histogram back 38
Slide 43: Trend Inflation Innovation - Autocorrelogram
Trend Inflation Innovation - Autocorrelogram back 39
Slide 44: Main Events in US Trend Inflation Innovations
Main Events in US Trend Inflation Innovations Date Value of the Series Description 1985:Q1 1.11 “The information reviewed at this meeting suggests that real GNP is currently expanding at a slower pace than in the fourth quarter, with an increased share of domestic spending apparently being met out o
Slide 45: Alternative trend - Fisher, Melosi and Rast (2025)
Alternative trend - Fisher, Melosi and Rast (2025) Inflation follows: πt = τt + εt + σω ωt τt = τt−1 + σ∆τ,t ητ,t εt = φt εt−1 + σεt ηε,t ∆ln(σε2t ) = γε νε,t 2 ∆ln(σ∆ τ,t ) = γ∆ ν∆τ,t where (ηε , ητ , νε , ν∆τ , ω) are iid ∼ N (0, I5 ). back 41
Slide 46: Alternative Trend - Fisher, Melosi and Rast (2025)
Alternative Trend - Fisher, Melosi and Rast (2025) 12 10 SW trend 10 FMR trend 5 8 6 0 4 Headline PCE inflation 2 -5 FMR trend estimate 0 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010 back 42
Slide 47: Alternative trend - consumption responses
Alternative trend - Fisher, Melosi and Rast (2025)- consumption responses Corporate tax shock 1 0.5 % 0 -0.5 -1 0 2 4 6 8 10 12 14 16 18 20 Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands and markers show significanc
Slide 48: Aggregate Effects of Trend Inflation Innovations
Aggregate Effects of Trend Inflation Innovations PCE inflation PCE core inflation GDP Consumption Percentage deviation Percentage deviation 0 Percentage points Percentage points 0.1 0 0.2 -0.2 0.1 0.05 -0.5 -0.4 0 0 -0.6 -1 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarte
Slide 49: Consumer Expenditure Survey: Data construction
Consumer Expenditure Survey: Data construction • Consumption is defined as sum of durable, nondurable and service consumption expenditures. • Monthly consumption expenditures from the CEX interview files are deflated by CPI, aggregated to calendar quarter frequency and adjusted by family size. • Dat
Slide 50: Distribution of Housing Tenure Status over time
Distribution of Housing Tenure Status over time 1 0.8 0.6 0.4 0.2 0 1985 1990 1995 2000 2005 2010 2015 2020 Renters Mortgagors Owners Figure Distribution of Housing Tenure Status Notes: CEX data over sample from 1984Q1-2019Q4. Households who are classified in different housing tenure status or who s
Slide 51: Pseudogroups - Age distribution
Pseudogroups - Age distribution Figure Demographic characteristics across household tenure groups Notes: CEX data over sample from 1984Q1-2019Q4. back 47
Slide 52: Pseudogroups - Income Distribution
Pseudogroups - Income Distribution Figure Total net income and gross labor income distribution across housing tenure groups Notes: CEX data over sample from 1984Q1-2019Q4. back 48
Slide 53: Disaggregate consumption responses
Disagreggate consumption responses Monetary shock Corporate tax shock 2 2 Durables (%) 0 0 % -2 -2 -4 -4 -6 -6 0 5 10 15 20 0 5 10 15 20 Quarters Quarters 1 1 Nondurables (%) 0.5 0.5 % 0 0 -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are poi
Slide 54: Relative Consumption Responses by Housing Tenure Group
Relative Consumption Responses by Housing Tenure Group Monetary shock Corporate tax shock 0.5 0.5 0 0 pp pp -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters renter-owner renter-mortgagor owner-mortgagor Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confid
Slide 55: Consumption Responses by Housing Tenure Group (Generic trend innovation)
Consumption Responses by Housing Tenure Group (Generic trend innovation) SW trend FMR trend 0.5 0.5 0 0 Consumption (%) Consumption (%) -0.5 -0.5 -1 -1 -1.5 -1.5 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded area
Slide 56: Consumption Responses by Housing Tenure Group (including Covid)
Consumption Responses by Housing Tenure Group (including Covid) Monetary shock 1 0.5 % 0 -0.5 -1 0 2 4 6 8 10 12 14 16 18 20 Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands and markers show significance at 90% level.
Slide 57: Responses of Housing Tenure Shares
Responses of Housing Tenure Shares Monetary shock Corporate tax shock 1 1 0.5 0.5 pp pp 0 0 -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands and markers show signific
Slide 58: Consumption Responses by Housing Tenure (deterministic proxy)
Consumption Responses by Housing Tenure (deterministic proxy) Monetary shock Corporate tax shock 1 1 0.5 0.5 % % 0 0 -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands
Slide 59: Robustness: Trend
Robustness: Trend Figure IRFs to permanent monetary shock Consumption (renters) Consumption (mortgagors) Consumption (owners) 1 1 1 0.5 0.5 0.5 % % % 0 0 0 -0.5 -0.5 -0.5 -1 -1 -1 0 10 20 0 10 20 0 10 20 Quarters Quarters Quarters baseline (linear trend) no trend quadratic trend Note. Solid lines ar
Slide 60: Robustness: Smoothing
Robustness: Smoothing Figure IRFs to permanent monetary shock Consumption (renters) Consumption (mortgagors) Consumption (owners) 1 1 1 0.5 0.5 0.5 % % % 0 0 0 -0.5 -0.5 -0.5 -1 -1 -1 0 10 20 0 10 20 0 10 20 Quarters Quarters Quarters SLP LP LP-MA Note. Solid lines are point estimates, dark (light)
Slide 61: Role of other dimensions of heterogeneity: age
Role of other dimensions of heterogeneity: age Monetary shock Corporate tax shock 1 1 0.5 0.5 % % 0 0 -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters old middle young Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands and markers show signifi
Slide 62: Interactions of heterogeneity dimensions: age and housing tenure
Interactions of heterogeneity dimensions: age and housing tenure Monetary shock Consumption (young, %) Consumption (middle, %) Consumption (old, %) 1 1 1 0 0 0 -1 -1 -1 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarters Consumption (young, %) Consumption (middle, %) Consumption (old,
Slide 63: Role of other dimensions of heterogeneity: permanent income
Role of other dimensions of heterogeneity: "permanent" income Monetary shock Corporate tax shock 1 1 0.5 0.5 % % 0 0 -0.5 -0.5 -1 -1 0 5 10 15 20 0 5 10 15 20 Quarters Quarters high income middle income low income Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confid
Slide 64: Interactions of heterogeneity dim.: income and housing tenure
Interactions of heterogeneity dim.: income and housing tenure Monetary shock Consumption (low income, %) Consumption (middle income, %) Consumption (high income, %) 1 1 1 0 0 0 -1 -1 -1 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Quarters Consumption (low income, %) Consumption (middle
Slide 65: Wealth Heterogeneity Channel: Savings (CEX)
2. Wealth Heterogeneity Channel: Savings (CEX) Monetary shock Corporate tax shock 10 10 5 5 Savings (CEX, %) % 0 0 -5 -5 -10 -10 0 5 10 15 20 0 5 10 15 20 Quarters Quarters owners mortgagors renters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands and
Slide 66: Wealth Heterogeneity Channel: Balance sheet data (DFA)
2. Wealth Heterogeneity Channel: Balance sheet data (DFA) Monetary shock Corporate tax shock 3 6 4 2 2 Total networth (%) 1 0 % -2 0 -4 -1 -6 -2 -8 0 5 10 15 20 0 5 10 15 20 Quarters Quarters Note. Solid lines are point estimates, dark (light) blue shaded areas 68% (90%) confidence bands. DFA data f
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