ECB News: February 2011

 

Archive

 
28/02/2011
No. 1304: Subprime consumer credit demand: evidence from a lender's pricing experiment, by Sule Alan, Ruxandra Dumitrescu, Gyongyi Loranth, description, download
(JEL: D11, D12, D14) We test the interest rate sensitivity of subprime credit card borrowers using a unique panel data set from a UK credit card company. What is novel about our contribution is that we were given details of a randomized interest rate experiment conducted by the lender between October 2006 and January 2007. We find that individuals who tend to utilize their credit limits fully do not reduce their demand for credit when subject to increases in interest rates as high as 3 percentage points. This finding is naturally interpreted as evidence of binding liquidity constraints. We also demonstrate the importance of truly exogenous variation in interest rates when estimating credit demand elasticities. We show that estimating a standard credit demand equation with nonexperimental variation leads to seriously biased estimates even when conditioning on a rich set of controls and individual fixed effects. In particular, this procedure results in a large and statistically significant 3-month elasticity of credit card debt with respect to interest rates even though the experimental estimate of the same elasticity is neither economically nor statistically different from zero.
 
28/02/2011
No. 1303: Behavioural characteristics and financial distress, by Yvonne McCarthy, description, download
(JEL: C25, D14) Using a new nationally representative survey of financial capability and experience in the UK and Ireland, I investigate the key factors that cause individuals to experience financial distress. In this context, a key area that I focus on is whether individuals’ behavioural traits, such as their capacities for self-control, planning, and patience, affect their ability to stay out of financial trouble. I find that the variables that proxy for these behavioural characteristics are both statistically significant and economically important for predicting both mild and extreme forms of financial distress, in a regression controlling for demographic and socio-economic factors. Furthermore, behavioural traits emerge as having a stronger impact on the incidence of financial distress than education or financial literacy. The results raise questions about whether policy can be oriented towards improving financial habits and mitigating the impact of behavioural characteristics on personal finances.
 
28/02/2011
No. 1302: The immigrant/native wealth gap in Germany, Italy and Luxembourg, by Thomas Y. Mathä, Alessandro Porpiglia, Eva Sierminska, description, download
(JEL: D31, F22) This paper analyses the existence of an immigrant/native wealth gap by using household survey data for Luxembourg, Germany and Italy. The results show that, in all three countries, a sizeable wealth gap exists between natives and immigrants. Towards the upper tail of the wealth distribution the gap narrows to a small extent. This gap persists even after controlling for demographic characteristics, country of origin, cohort and age at migration although cross-country differences exist in the immigration penalty.
 
28/02/2011
No. 1301: Wealth mobility and dynamics over entire individual working life cycles, by Stefan Hochguertel, Henry Ohlsson, description, download
(JEL: C230, D140, D310, D910, H240) We study taxable wealth in unique Swedish administrative data, annually following a large sample of households over a period of almost 40 years. The main data limitation is non-observability of wealth for those below the tax exemption level. This implies that much of the focus of the paper is on the rich, since we are confined to those whose wealth becomes taxable over time. We exploit the long panel dimension by estimating dynamic ‘fixed effects’ models for limited dependent variables that allow for individual heterogeneity in both constants and autoregressive parameters, and control for heterogeneity through observables. We find substantial wealth mobility over the long time spans, partly accounted for by life-cycle behavior, while sufficiently capturing dynamics by an AR(1) process at the individual level.
 
28/02/2011
No. 1300: Inheritances and the distribution of wealth or whatever happened to the great inheritance boom?, by Edward N. Wolff, Maury Gittleman, description, download
(JEL: D31, J15) We found that on average over the period from 1989 to 2007, 21 percent of American households at a given point of time received a wealth transfer and these accounted for 23 percent of their net worth. Over the lifetime, about 30 percent of households could expect to receive a wealth transfer and these would account for close to 40 percent of their net worth near time of death. However, there is little evidence of an inheritance “boom.” In fact, from 1989 to 2007, the share of households reporting a wealth transfer fell by 2.5 percentage points. The average value of inheritances received among all households did increase but at a slow pace, by 10 percent, and wealth transfers as a proportion of current net worth fell sharply over this period from 29 to 19 percent or by 10 percentage points. We also found, somewhat surprisingly, that inheritances and other wealth transfers tend to be equalizing in terms of the distribution of household wealth. Indeed, the addition of wealth transfers to other sources of household wealth has had a sizeable effect on reducing the inequality of wealth.
 
28/02/2011
No. 1299: Who lost the most? Financial literacy, cognitive abilities, and the financial crisis, by Tabea Bucher-Koenen, Michael Ziegelmeyer, description, download
(JEL: D91, D14, G11) We study how and to what extent private households are affected by the recent financial crisis and how their financial decisions are influenced by this shock. Our analysis reveals that individuals with low levels of financial literacy are less likely to have invested in the stock market and thus are less likely to report losses in wealth. Yet, individuals with low financial literacy are more likely to sell their assets which lost in value (realize losses). This reaction to short-term losses has potential long-term consequences if individuals do not participate in markets' recovery and face lower returns in the long run.
 
28/02/2011
No. 1298: Check in the mail or more in the paycheck: does the effectiveness of fiscal stimulus depend on how it is delivered?, by Claudia R. Sahm, Matthew D. Shapiro, Joel Slemrod, description, download
(JEL: H31, E62, C83) Recent fiscal policies have aimed to stimulate household spending. In 2008, most households received one-time economic stimulus payments. In 2009, most working households received the Making Work Pay tax credit in the form of reduced withholding; other households, mainly retirees, received one-time payments. This paper quantifies the spending response to these different policies and examines whether the spending response differed according to whether the stimulus was delivered as a one-time payment or as a flow of payments in the form of reduced withholding. Based on responses from a representative sample of households in the Thomson Reuters/University of Michigan Surveys of Consumers, the paper finds that the reduction in withholding led to a substantially lower rate of spending than the one-time payments. Specifically, 25 percent of households reported that the one-time economic stimulus payment in 2008 led them to mostly increase their spending while only 13 percent reported that the extra pay from the lower withholding in 2009 led them to mostly increase their spending. The paper uses several approaches to isolate the effect of the delivery mechanism from the changing aggregate and individual conditions. Responses to a hypothetical stimulus in 2009, examination of “free responses” concerning differing responses to the policies, and regression analysis controlling for individual economic conditions and demographics all support the primary importance of the income delivery mechanism in determining the spending response to the policies.
 
28/02/2011
No. 1297: Consumption and initial mortgage conditions: evidence from survey data, by Giacomo Masier, Ernesto Villanueva, description, download
(JEL: D91, E91) Economic theory predicts that the consumption path of unconstrained homeowners responds to the interest rate, while the consumption path of credit constrained homeowners is determined by the size and timing of payments (mortgage maturity). We exploit the rapid expansion of mortgage markets during the last decade in Spain and a very detailed survey on household finances to estimate group-specific consumption responses to changes in the credit conditions. Our estimates suggest that the consumption of households headed by an individual with high school respondsmore to mortgage maturity than to the interest rate spread. The consumption of the rest of indebted households is insensitive to loan maturity. Those results are confirmed when we instrument loan maturity exploiting the fact that banks are reluctant to offer contracts with age at maturity above 65. An interpretation of those results is that households headed by middle education individuals, 8% of our sample, behave as credit constrained.
 
28/02/2011
No. 1296: Financial advice and stock market participation, by Dimitris Georgarakos, Roman Inderst, description, download
(JEL: E1, G2, D8) We introduce professional financial advice in households’ choice to hold risky financial assets. Consistent with the predictions from a formal model, we present evidence that households’ trust in financial advice only matters when their perceived own financial capability is low. Instead, for households with higher financial capability, only the perception of legal protection in financial markets matters for stock market participation. Our empirical analysis highlights economically significant differences in households’ perception of their rights as consumers of financial services, even when their objective circumstances should not be much different.
 
28/02/2011
No. 1295: Which households use banks? Evidence from the transition economies, by Thorsten Beck, Martin Brown, description, download
(JEL: G2, G18, O16, P34) This paper uses survey data for 29,000 households from 29 transition economies to explore how the use of banking services is related to household characteristics, bank ownership structure and the development of the financial infrastructure. At the household level we find that the holding of a bank account or bank card increases with income, wealth and education in most countries and also find evidence for an urban-rural gap, as well as for a role of religion and social integration. Our results show that foreign bank ownership is associated with more bank accounts among high-wealth, high-income, and educated households. State ownership, on the other hand, does not induce financial inclusion of rural and poorer households. We find that higher deposit insurance coverage, better payment systems and creditor protection encourage the holding of bank accounts in particular by highincome and high-wealth households. All in all, our findings shed doubt on the ability of policy levers to broaden the financial system to disadvantaged groups.
 
28/02/2011
Fine-Tuning Operation, more
 
25/02/2011
ECB/2010/23 Decision of the ECB of 25 November 2010 on the allocation of monetary income of the national central banks of Member States whose currency is the euro (recast), en
 
25/02/2011
Monetary developments in the euro area, more
 
25/02/2011
Speech Vítor Constâncio: The ECB's experience with unconventional measures - Slides from presentation at the US Monetary Policy Forum, en
 
25/02/2011
ECB/2011/15 Opinion on amendments to the legislation on the deposit guarantee fund , en
 
25/02/2011
ECB/2011/1 Recommendation of the ECB of 25 February 2011 to the Council of the European Union on the external auditors of the Nationale Bank van België/Banque Nationale de Belgique, en
 
24/02/2011
USD11008 (OT,liquidity providing):70 mn USD alloted (fixed 1.16%, 100% allotment at margin), more
 
24/02/2011
20110022 (LTRO,liquidity providing):39754.5 mn EUR alloted ( % allotment at margin), more
 
24/02/2011
CON/2011/14 Opinion on amendments to the legislation on settlement finality and on financial collateral arrangements, en
 
23/02/2011
Announcing 20110022 (LTRO,liquidity providing), for 91 days deadline 09:30, more
 
23/02/2011
20110021 (OT,liquidity absorbing):77000 mn EUR alloted (marginal 0.7%, weighted average 0.58%, 22.8872% allotment at margin), more
 
23/02/2011
20110020 (MRO,liquidity providing):119454.5 mn EUR alloted (fixed 1%, 100% allotment at margin), more
 
23/02/2011
Speech Jean-Claude Trichet: Competitiveness and the smooth functioning of EMU, en
 
23/02/2011
Publication European Commission’s public consultation on credit rating agencies – Eurosystem reply , download
 
23/02/2011
Publication European Commission’s public consultation on the review of the MiFID– Eurosystem contribution , download
 
22/02/2011
Announcing 20110020 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
22/02/2011
Longer-term refinancing Operation, more
 
22/02/2011
Speech Lorenzo Bini Smaghi: Eurozone, European crisis & policy responses, en
 
21/02/2011
Speech Jürgen Stark: Central banking after the financial crisis, en
 
21/02/2011
Publication Recent developments in securitisation , download
 
21/02/2011
Fine-Tuning Operation, more
 
18/02/2011
Speech Jean-Claude Trichet: Intellectual challenges to financial stability analysis in the era of macroprudential oversight, en
 
18/02/2011
Other decisions Decisions taken by the Governing Council of the ECB (in addition to decisions setting interest rates), bg . cs . da . de . el . en . es . et . fi . fr . hu . it . lt . lv . mt . nl . pl . pt . ro . sk . sl . sv
 
18/02/2011
Euro area investment fund statistics, more
 
17/02/2011
USD11007 (OT,liquidity providing):70 mn USD alloted (fixed 1.16%, 100% allotment at margin), more
 
17/02/2011
Press release ECB awards contract to new construction company for remaining structural works for the double office tower, de . en
 
17/02/2011
Euro area balance of payments (December 2010 and preliminary overall results for 2010 as a whole), more
 
17/02/2011
Publication Letter from the ECB President to Mr Nuno Melo, Member of the European Parliament, regarding questions on the international monetary system , download
 
16/02/2011
CON/2011/12 Opinion on a proposal for a directive of the European Parliament and of the Council on deposit guarantee schemes (recast) and on a proposal for a directive amending Directive 97/9/EC of the European Parliament and of the Council on investor-co, en
 
16/02/2011
Interview Jean-Claude Trichet: Interview with Die Zeit, en
 
16/02/2011
No. 1294: The normalized CES production function: theory and empirics, by Rainer Klump, Peter McAdam, Alpo Willman, description, download
(JEL: C22, E23, E25, 030, 051) The elasticity of substitution between capital and labor and, in turn, the direction of technical change are critical parameters in many fields of economics. Until recently, though, the application of production functions with non-unitary substitution elasticities (i.e., non Cobb Douglas) was hampered by empirical and theoretical uncertainties. As has recently been revealed, “normalization” of production functions and production-technology systems holds out the promise of resolving many of those uncertainties. We survey and critically assess the intrinsic links between production (as conceptualized in a macroeconomic production function), factor substitution (as made most explicit in Constant Elasticity of Substitution functions) and normalization (defined by the fixing of baseline values for relevant variables). First, we recall how the normalized CES function came into existence and what normalization implies for its formal properties. Then we deal with the key role of normalization in recent advances in the theory of business cycles and of economic growth. Next, we discuss the benefits normalization brings for empirical estimation and empirical growth research. Finally, we identify promising areas of future research on normalization and factor substitution.
 
16/02/2011
CON/2011/11 Opinion on including Polish credit unions in the State Treasury support to financial institutions, en
 
16/02/2011
CON/2011/13 Opinion on economic governance reform in the European Union, en
 
15/02/2011
20110019 (OT,liquidity absorbing):76500 mn EUR alloted (marginal 0.8%, weighted average 0.71%, 76.6935% allotment at margin), more
 
15/02/2011
20110018 (MRO,liquidity providing):137014.9 mn EUR alloted (fixed 1%, 100% allotment at margin), more
 
15/02/2011
Announcing 20110018 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
14/02/2011
Interview Jean-Claude Trichet: Interview with Les Echos, en
 
14/02/2011
Speech Lorenzo Bini Smaghi: Addressing imbalances in the euro area, en
 
14/02/2011
Publication Contribution of the Eurosystem to the public consultation of the European Commission on the communication "Towards a Single Market Act" , download
 
14/02/2011
Fine-Tuning Operation, more
 
14/02/2011
CON/2011/9 Opinion on amendments to the Polish Constitution concerning adoption of the euro, en
 
14/02/2011
CON/2011/10 Opinion on Italy’s participation in International Monetary Fund programmes in response to the financial crisis, en
 
13/02/2011
Interview Jean-Claude Trichet: Interview with Weser-Kurier, en
 
12/02/2011
Press release Statement by the European Commission, European Central Bank and International Monetary Fund on Greece’s Economic Programme, el . en
 
11/02/2011
Press release Statement by the EC, ECB and IMF on the Third Review Mission to Greece, el . en
 
11/02/2011
Speech Jean-Claude Trichet: The essence of Economic and Monetary Union, de . en
 
11/02/2011
CON/2011/8 Opinion on a recommendation for a Council decision on arrangements for the renegotiation of the Monetary Agreement with the Principality of Monaco, en
 
10/02/2011
USD11006 (OT,liquidity providing):70 mn USD alloted (fixed 1.17%, 100% allotment at margin), more
 
10/02/2011
Interview Jean-Claude Trichet: Interview with L’Espresso, en
 
10/02/2011
Speech Lorenzo Bini Smaghi: Monetary Union, Regulation and Supervision, en
 
10/02/2011
Euro area securities issues statistics, more
 
10/02/2011
No. 1293: Financing obstacles among euro area firms: Who suffers the most?, by Annalisa Ferrando, Nicolas Griesshaber, description, download
(JEL: E22, G30, G10, O16, K40) In this study we investigate the determinants of financing obstacles using survey data on a sample of around 5000 firms from the euro area countries. This completely new survey – started at the end of 2009 - gives us the opportunity to test whether firm characteristics such as size, age, economic branch, financial autonomy and ownership are valid predictors of financing obstacles also during the recent financial crisis. Our results show that only age and ownership are robust explanatory variables for firms’ perceived financing obstacles while mixed results are found for size and economic branches.
 
10/02/2011
Statistics Pocket Book Statistics Pocket Book, February 2011, download
 
10/02/2011
Monthly Bulletin Monthly Bulletin, February 2011, download
 
10/02/2011
Publication Article, Monthly Bulletin, February 2011, pp 87-99, The information content of option prices during the financial crisis , download
 
10/02/2011
Publication Article, Monthly Bulletin, February 2011, pp 73-86, Inflation expectations in the euro area: a review of recent developments , download
 
10/02/2011
Publication Letter from the ECB President to Mr Sven Giegold, Member of the European Parliament, regarding questions on the position of the European Central Bank regarding the Balz report in the European Parliament on the ECB’s Annual Report 2009 , download
 
09/02/2011
20110017 (OT,liquidity absorbing):158658.8 mn EUR alloted (marginal 0.8%, weighted average 0.78%, 100% allotment at margin), more
 
09/02/2011
20110016 (OT,liquidity absorbing):76500 mn EUR alloted (marginal 0.95%, weighted average 0.87%, 98.5141% allotment at margin), more
 
09/02/2011
20110015 (MRO,liquidity providing):156709.5 mn EUR alloted (fixed 1%, 100% allotment at margin), more
 
09/02/2011
20110014 (LTRO,liquidity providing):61471.79 mn EUR alloted (fixed 1%, 100% allotment at margin), more
 
09/02/2011
Speech Lorenzo Bini Smaghi: Sovereign risk and the euro (slides from the presentation), en
 
09/02/2011
No. 1292: Does the euro make a difference? Spatio-temporal transmission of global shocks to real effective exchange rates in an infinite VAR, by Matthieu Bussière, Alexander Chudik, Arnaud Mehl, description, download
(JEL: C21, C23) This paper provides evidence on whether the creation of the euro has changed the way global turbulences affect euro area and other economies. Specifically, it considers the impact of global shocks on the competitiveness of individual euro area countries and assesses whether their responses to such shocks have converged, as well as to what pattern. Technically, the paper applies a newly developed methodology based on infinite VAR theory featuring a dominant unit to a large set of over 60 countries' real effective exchange rates, including those of the individual euro area economies, and compares impulse response functions to the estimated systems before and after EMU with respect to three types of shocks: a global US dollar shock, generalised impulse response function shocks and a global shock to risk aversion. Our results show that the way euro area countries' real effective exchange rates adjust to these shocks has converged indeed, albeit to a pattern that depends crucially on the nature of the shock. This result is noteworthy given the apparent divergence in competitiveness indicators of these countries in the first ten years of EMU, which suggests that this diverging pattern is unlikely to be due to global external shocks with asymmetric effects but rather to other factors, such as country-specific domestic shocks.
 
09/02/2011
No. 1291: Liquidity requirements and payment delays - participant type dependent preferences, by Christian Schulz, description, download
(JEL: C15, C5, E58, L14, L41, L51) The paper presents an analysis of the trade-offs of participants of different type between payment delay and liquidity requirement on the basis of synthetically generated data. The generation of the synthetic transaction data set for a simple RTGS system is described and calibrated using real world parameters. The payment system is simulated for various liquidity levels and it is shown that participants of different size in terms of transaction volume and value will have different optimal liquidity requirements, as the payment delays they face for each liquidity level will be different. This is shown using indifference curves between payment delay and liquidity requirements.
 
09/02/2011
Occasional paper no. 123 The international monetary system after the financial crisis , by Ettore Dorrucci and Julie McKay, download
 
08/02/2011
Announcing 20110015 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
08/02/2011
Announcing 20110014 (LTRO,liquidity providing), for 28 days deadline 09:30, more
 
08/02/2011
Press release ECB and construction company agree on execution of structural works, de . en
 
08/02/2011
Fine-tuning operation, more
 
07/02/2011
Guideline ECB/2000/7. Working unofficial consolidated text of Annex 1[1a)-n)]., en
 
07/02/2011
Fine-Tuning Operation, more
 
04/02/2011
Press release ECB publishes an updated version of the General Documentation
, en
 
04/02/2011
Press release Eurosystem and Bank of Russia hold sixth high-level seminar
, en
 
04/02/2011
Publication The implementation of monetary policy in the euro area: General documentation on Eurosystem monetary policy instruments and procedures , download
 
03/02/2011
USD11005 (OT,liquidity providing):70 mn USD alloted (fixed 1.17%, 100% allotment at margin), more
 
03/02/2011
Press conference Jean-Claude Trichet: Introductory statement to the press conference, en
 
03/02/2011
Press release Monetary policy decisions, bg . cs . da . de . el . en . es . et . fi . fr . hu . it . lt . lv . mt . nl . pl . pt . ro . sk . sl . sv
 
03/02/2011
MFI interest rate statistics, more
 
02/02/2011
20110013 (OT,liquidity absorbing):68220 mn EUR alloted (marginal 1%, weighted average 0.85%, 100% allotment at margin), more
 
02/02/2011
20110012 (MRO,liquidity providing):213724.7 mn EUR alloted (fixed 1%, 100% allotment at margin), more
 
02/02/2011
Press release ECB publishes book entitled “Central bank statistics: what did the financial crisis change?”, en
 
02/02/2011
Publication Central bank statistics: what did the financial crisis change? Fifth ECB Conference on Statistics on 19 and 20 October 2010 , download
 
01/02/2011
Announcing 20110012 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
01/02/2011
Speech Jean-Claude Trichet: E pluribus unum – The legacy of Tommaso Padoa-Schioppa, en
 
01/02/2011
CON/2011/7 Opinion on amendments to the national monetary policy operations framework with a view to further harmonising it with the Eurosystem, en