CON/2010/84 Opinion on the minimum reserves framework, en
USD10030 (OT,liquidity providing):60 mn USD alloted (fixed 1.19%, 100% allotment at margin), more
20100114 (LTRO,liquidity providing):38210.74 mn EUR alloted ( % allotment at margin), more
ECB/2010/24 Decision of the ECB of 25 November 2010 on the interim distribution of the income of the ECB on euro banknotes in circulation and arising from securities purchased under the securities markets programme, en
Speech Gertrude Tumpel-Gugerell: SEPA: a busy year is coming to its end and another exciting year lies ahead, en
Speech Vítor Constâncio: Economic reforms: European and Chinese challenges, en
ECB/2010/22 Decision of the ECB of 25 November 2010 on the quality accreditation procedure for manufacturers of euro banknotes, en
Announcing 20100114 (LTRO,liquidity providing), for 91 days deadline 09:30, more
20100113 (OT,liquidity absorbing):66000 mn EUR alloted (marginal 0.51%, weighted average 0.45%, 92.2857% allotment at margin), more
20100112 (MRO,liquidity providing):177103.4 mn EUR alloted (fixed 1%, 100% allotment at margin), more
Announcing 20100112 (MRO,liquidity providing), for 7 days deadline 09:30, more
Press release Statement by the EC, ECB, and IMF on the Second Review Mission to Greece, en
Speech Gertrude Tumpel-Gugerell: The euro area's economic outlook, en
Press release Closing of the Cultural Days of the European Central Bank – Netherlands 2010, de . en . nl
Speech Vítor Constâncio: Regulation and Supervision of Financial Services in Europe – Reforms and Results, en
No. 1268: Changes in the Austrian structure of wages, 1996-2002: evidence from linked employer-employee data, by Wolfgang Pointner, Alfred Stiglbauer, description, download
(JEL: J22, J31) Analyzing data from the Structure of Earnings Surveys we find that wage dispersion in Austria increased marginally between 1996 and 2002. There was an increase in the returns to education which accrued only to male workers. The positive effects of tenure and especially of experience on wages decreased over time. We adopt the Machado-Mata (2005) counterfactual decomposition technique which allows to attribute changes in each wage decile to changes in worker and workplace characteristics and into changes in returns to these characteristics. Behind the small net increase in inequality we document a number of interesting gross effects that influence the wage distribution. We find that both composition effects due to gender, education and age and market-driven effects such as changes in returns and changing workplace characteristics contributed to a higher dispersion of wages.
No. 1267: Keynesian government spending multipliers and spillovers in the euro area, by Tobias Cwik, Volker Wieland, description, download
(JEL: E62, E63, H31) The global financial crisis has lead to a renewed interest in discretionary fiscal stimulus. Advocates of discretionary measures emphasize that government spending can stimulate additional private spending — the Keynesian multiplier effect. Thus, we investigate whether the spending package announced by Euro area governments for 2009 and 2010 is likely to boost GDP by more than one for one. Because of modeling uncertainty, it is essential that such policy evaluations be robust to alternative modeling assumptions and parameterizations. We use five different empirical macroeconomic models with Keynesian features such as price and wage rigidities to evaluate the impact of the fiscal stimulus. Four of them suggest that the planned increase in government spending will reduce private consumption and investment significantly. Only a model that largely ignores the forward-looking behavioral response of consumers and firms implies crowding-in of private spending. We review a range of issues that may play a role in the recession of 2008-2009. Implementation lags are found to reinforce crowding-out and may even cause an initial contraction. Zero-bound effects may lead the central bank to abstain from interest rate hikes and increase the GDP impact of government spending. Crowding-in, however, requires an immediate anticipation of at least two years at the zero bound. Using a multi-country model, we find that spillovers between euro area countries are negligible or even negative, because direct demand effects are offset by the indirect effect of an euro appreciation. New-Keynesian DSGE models provide a strong case for government savings packages. Announced with sufficient lead time, spending cuts induce a significant short-run stimulus and crowding-in of private spending.
No. 1266: Towards expenditure rules and fiscal sanity in the euro area, by Sebastian Hauptmeier, Jesus Sanchez Fuentes, Ludger Schuknecht, description, download
(JEL: E17, E61, E65, H50, H60) The study looks at primary expenditure developments in the euro area, its three largest members and four “macro-imbalances” countries for the period 1999-2009. It compares actual expenditure trends with those that would have prevailed if countries had followed neutral policies based on expenditure rules since the start of EMU. It also calculates the implications for debt trends. It finds that, all sample countries except Germany applied expansionary expenditure policies. This resulted in much higher expenditure and debt paths compared to a counterfactual neutral expenditure stance. Simple and prudent rules-based spending policies could have led to much safer fiscal positions much more in line with the EU’s Stability and Growth Pact rules.
Speech Gertrude Tumpel-Gugerell: Priorities for Integration, en
Speech Vítor Constâncio: Catching-up strategies after the crisis, en
No. 1265: How much does the public know about the ECB's monetary policy? Evidence from a survey of Dutch households, by Carin van der Cruijsen, David-Jan Jansen, Jakob de Haan, description, download
(JEL: D12, D84, E52, E58) Does the general public know what central banks do? Is this kind of knowledge relevant? Using a survey of Dutch households, we investigate these questions for the case of the European Central Bank (ECB). Our findings suggest that knowledge on the ECB’s objectives is far from perfect. Both a weak desire to be informed and unawareness of insufficient knowledge are barriers for improving the public's understanding of monetary policy. However, our results also show that more intensive use of information improves understanding, suggesting that the media channel may play an important and constructive role in building knowledge. Finally, we find that knowledge on monetary policy objectives contributes to an individual's ability to form realistic inflation expectations.
No. 1264: On approximating DSGE models by series expansions, by Giovanni Lombardo, description, download
(JEL: C63, E0) We show how to use a simple perturbation method to solve non-linear rational expectation models. Drawing from the applied mathematics literature we propose a method consisting of series expansions of the non-linear system around a known solution. The variables are represented in terms of their orders of approximation with respect to a perturbation parameter. The final solution, therefore, is the sum of the different orders. This approach links to formal arguments the idea that each order of approximation is solved recursively taking as given the lower order of approximation. Therefore, this method is not subject to the ambiguity concerning the order of the variables in the resulting state-space representation as, for example, has been discussed by Kim et al. (2008). Provided that the model is locally stable, the approximation technique discussed in this paper delivers stable solutions at any order of approximation.
No. 1263: Autoregressions in small samples, priors about observables and initial conditions, by Marek Jarociński, Albert Marcet, description, download
(JEL: C11, C22, C32) We propose a benchmark prior for the estimation of vector autoregressions: a prior about initial growth rates of the modeled series. We first show that the Bayesian vs frequentist small sample bias controversy is driven by different default initial conditions. These initial conditions are usually arbitrary and our prior serves to replace them in an intuitive way. To implement this prior we develop a technique for translating priors about observables into priors about parameters. We find that our prior makes a big difference for the estimated persistence of output responses to monetary policy shocks in the United States.
CON/2010/76 Opinion on amendments to the Constitution and on the Law on legislation, regarding the legislative powers of the Magyar Nemzeti Bank, en
Announcing 20100103 (MRO,liquidity providing), for 7 days deadline 09:30, more
No. 1262: The impact of supply constraints on bank lending in the euro area - crisis induced crunching?, by Hannah Sabine Hempell, Christoffer Kok Sørensen, description, download
(JEL: C23, E51, E52, G21) Aggregate loan development typically hinges on a combination of factors that impact simultaneously on the demand and the supply side of bank lending. The financial turmoil starting in mid-2007 had detrimental consequences for banks’ balance-sheets, cost of funds and profitability, thus weighing negatively on their ability to supply new loans. This paper examines the impact of supply constraints on bank lending in the euro area with a special focus on this turmoil period. The empirical evidence presented suggests that banks’ ability and willingness to supply loans affects overall bank lending activity in general and has done so particularly during the financial crisis. Applying a cross-country panel-econometric approach using a unique confidential data set on results from the Eurosystem’s bank lending survey allows us to disentangle loan supply and demand effects. We find that even when controlling for the effects coming from the demand side loan growth is negatively affected by supply-side constraints. This applies both for loans to households for house purchase and for loans to non-financial corporations. We furthermore provide evidence that the impact of supply-side constraints, especially related to disruptions of banks’ access to wholesale funding and their liquidity positions, was reinforced since the eruption of the financial crisis and corresponding adjustments in banks’ loan portfolios seem to have been geared primarily via prices rather than outright quantity restrictions.
No. 1261: Surprising comparative properties of monetary models: Results from a new model database, by John B. Taylor, Volker Wieland, description, download
(JEL: E12, E52, E61) In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new database of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy rules are different in the different models. Simple model-specific policy rules that include the lagged interest rate, inflation and current and lagged output gaps are not robust. Some degree of robustness can be recovered by using rules without interest-rate smoothing or with GDP growth deviations from trend in place of the output gap. However, improvement vis-à-vis other models, comes at the cost of significant performance deterioration in the original model. Model averaging offers a much more effective strategy for improving the robustness of policy rules.
No. 1260: A decade (and a global financial crisis) after blinder: The interaction between researchers and policy-makers in central banks, by Matthieu Bussière, Livio Stracca, description, download
(JEL: A11, C1, D58) Periods of economic and financial stress traditionally give rise to profound changes in economic theory and in the way policy decisions are taken. Motivated by the recent interest in renewing macroeconomics after the global financial crisis, we collected the views of senior central bank staff in 32 central banks by means of a special questionnaire on a number of issues related to the interaction between research and policy-making. Thereafter, the paper first surveys the existing literature on the relation between researchers and practitioners and offers some reflections on the fundamental and practical differences between research and policy work. Finally, it delves on the issue of model-based versus judgment-based approaches to economic forecasts and policy simulations, with a special emphasis on the growing role of DSGE models within central banks. We conclude with practical suggestions on how best to integrate models and research into policy making decisions.
CON/2010/75 Opinion on the extension of the Irish State guarantee of certain liabilities of credit institutions, en
ECB/2010/19 Decision of the ECB of 2 November 2010 amending Decision ECB/2007/7 concerning the terms and conditions of TARGET2-ECB, en
Speech Lorenzo Bini Smaghi: The Challenges Facing the Euro Area, en