ECB News: August 2011

 

Archive

 
31/08/2011
Announcing 20110096 (LTRO,liquidity providing), for 91 days deadline 09:30, more
 
31/08/2011
20110095 (OT,liquidity absorbing):115500 mn EUR alloted (marginal 1.14%, weighted average 1.02%, 8.454% allotment at margin), more
 
31/08/2011
20110094 (MRO,liquidity providing):121669.1 mn EUR alloted (fixed 1.5%, 100% allotment at margin), more
 
31/08/2011
Speech Peter Praet: A new voice on a familiar topic – SEPA from the perspective of ECB Executive Board Member Peter Praet, en
 
30/08/2011
Announcing 20110094 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
30/08/2011
Longer-term refinancing operation, more
 
29/08/2011
Fine-tuning operation, more
 
29/08/2011
Speech Jean-Claude Trichet: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament, en
 
27/08/2011
Speech Jean-Claude Trichet: Achieving maximum long-term growth, en
 
26/08/2011
Monetary developments in the euro area, more
 
26/08/2011
CON/2011/67 Opinion on responsible lending requirements for credit institutions, en
 
25/08/2011
USD11034 (OT,liquidity providing):0 mn USD alloted (fixed 1.1%, 0% allotment at margin), more
 
25/08/2011
Press release Prolongation of swap facility agreement with the Bank of England, en
 
25/08/2011
No. 1375: Precautionary price stickiness, by James Costain, Anton Nakov, description, download
(JEL: E31, D81, C72) This paper proposes two models in which price stickiness arises endogenously even though firms are free to change their prices at zero physical cost. Firms are subject to idiosyncratic and aggregate shocks, and they also face a risk of making errors when they set their prices. In our first specification, firms are assumed to play a dynamic logit equilibrium, which implies that big mistakes are less likely than small ones. The second specification derives logit behavior from an assumption that precision is costly. The empirical implications of the two versions of our model are very similar. Since firms making sufficiently large errors choose to adjust, both versions generate a strong "selection effect" in response to a nominal shock that eliminates most of the monetary nonneutrality found in the Calvo model. Thus the model implies that money shocks have little impact on the real economy, as in Golosov and Lucas (2007), but fits microdata better than their specification.
 
25/08/2011
No. 1374: The 2007 subprime market crisis through the lens of European Central Bank auctions for short-term funds, by Nuno Cassola, Ali Hortacsu, Jakub Kastl, description, download
(JEL: D44, E58, G01) We study European banks’ demand for short-term funds (liquidity) during the summer 2007 subprime market crisis. We use bidding data from the European Central Bank’s auctions for one-week loans, their main channel of monetary policy implementation. Our analysis provides a high-frequency, disaggregated perspective on the 2007 crisis, which was previously studied through comparisons of collateralized and uncollateralized interbank money market rates which do not capture the heterogeneous impact of the crisis on individual banks. Through a model of bidding, we show that banks’ bids reflect their cost of obtaining short-term funds elsewhere (e.g., in the interbank market) as well as a strategic response to other bidders. The strategic response is empirically important: while a naïve interpretation of the raw bidding data may suggest that virtually all banks suffered an increase in the cost of short-term funding, we find that for about one third of the banks, the change in bidding behavior was simply a strategic response. We also find considerable heterogeneity in the short-term funding costs among banks: for over one third of the bidders, funding costs increased by more than 20 basis points, and funding costs vary widely with respect to the country-of-origin. Estimated funding costs of banks are also predictive of market- and accounting-based measures of bank performance, suggesting the external validity of our findings.
 
25/08/2011
ECB/2011/11 Recommendation of the ECB of 25 August 2011 to the Council of the European Union on the external auditors of the Banco de Portugal , en
 
25/08/2011
ECB/2011/13 Guideline of the ECB of 25 August 2011 amending Guideline ECB/2007/9 on monetary, financial institutions and markets statistics , en
 
25/08/2011
ECB/2011/12 Regulation of the ECB (EU) No 883/2011 of 25 August 2011 amending Regulation (EC) No 25/2009 concerning the balance sheet of the monetary financial institutions sector (ECB/2008/32), en
 
24/08/2011
20110093 (OT,liquidity absorbing):110500 mn EUR alloted (marginal 1.15%, weighted average 1.03%, 16.1543% allotment at margin), more
 
24/08/2011
20110092 (MRO,liquidity providing):133673.9 mn EUR alloted (fixed 1.5%, 100% allotment at margin), more
 
23/08/2011
Announcing 20110092 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
23/08/2011
CON/2011/65 Opinion on a proposal for a Regulation on the issuance of euro coins and on a proposal for a Regulation on denominations and technical specifications of euro coins intended for circulation, en
 
23/08/2011
CON/2011/65 Opinion on a proposal for a Regulation on the issuance of euro coins and on a proposal for a Regulation on denominations and technical specifications of euro coins intended for circulation, en
 
23/08/2011
CON/2011/66 Opinion on a special levy on financial institutions operating in Slovakia, en
 
22/08/2011
Fine-tuning operation, more
 
22/08/2011
No. 1373: Asset prices, collateral and unconventional monetary policy in a DSGE model, by Björn Hilberg, Josef Hollmayr, description, download
(JEL: E4, E5, E61, G21) In this paper we set up a New-Keynesian model that features an interbank market. The introduction of an interbank market is important to analyze liquidity problems among heterogenous agents within the financial sector. First, because this allows for a situation where increased liquidity supply by the central bank is only partially passed on to the interbank market. Second, this framework allows us to analyze one additional policy measure besides the common interest rate policy undertaken by central banks to alleviate the liquidity shortage on the interbank market. Namely haircuts on eligible assets in repurchase agreements (“Repos”). By varying haircuts applied to securities that serve as collateral in repurchase agreements the stress on the interbank market can be mitigated by bringing down the interest rate charged among banks. Furthermore an exogenous bubble process is modeled which enables us to examine the effects of a deviation of the market price of capital from its fundamental price. This leads to a discussion whether central banks should ”lean against the wind”, i.e. react to deviations of asset prices in the setting of their policy instrument. Finally, this paper tries to shed some light on the “exit strategy” that a central bank should follow after the asset price bubble bursted and the interbank market begins to work properly again.
 
22/08/2011
No. 1372: Downward wage rigidity in Hungary, by Gábor Kátay, description, download
(JEL: C23, E24, J3, J5) Following the approach recently developed for the International Wage Flexibility Project (IWFP), the paper presents new estimates of downward real and nominal wage rigidity for Hungary. Results suggest that nominal rigidity is more prominent in Hungary than real rigidity. When compared to other countries participating in the IWFP, Hungary ranks among the countries with the lowest degree of downward real rigidity. The estimated downward nominal rigidity for Hungary is higher, the measure is close to but still below the overall cross-country average. Using the same methodology, the paper also confirms the widespread view that the wage growth bargained at the national level has little compulsory power in Hungary. On the other hand, the minimum wage remains an important source of potential downward wage rigidity in Hungary.
 
22/08/2011
No. 1371: What is driving oil futures prices? Fundamentals versus speculation, by Isabel Vansteenkiste, description, download
(JEL: D84, Q33, Q41, G15) In this paper we analyse the relative importance of fundamental and speculative demand on oil futures price levels and volatility. In a first step, we present a theoretical heterogeneous agent model of the oil futures market based on noise trading. We use the model to study the interaction between the oil futures price, volatility, developments in underlying fundamentals and the presence of different types of agents. We distinguish between commercial traders (who are physically involved in oil) and non-commercial traders (who are not involved physically with oil). Based on the theoretical model we find that a multiplicity of equilibria can exist. More specifically, on the one hand, if we have high fundamental volatility, high uncertainty about future oil demand, and the oil price deviation from fundamentals or the price trend is small, we will only have commercial traders entering the market. On the other hand, if a large unexpected shock to the oil spot price occurs then all traders will enter the market. In a next step, we empirically test the model by estimating a markov-switching model with time-varying transition probabilities. We estimate the model over the period January 1992 - April 2011. We find that up to 2004, movements in oil futures prices are best explained by underlying fundamentals. However, since 2004 regime switching has become more frequent and the chartist regime has been the most prominent.
 
22/08/2011
No. 1370: The global financial crisis: trying to understand the global trade downturn and recovery, by Robert Anderton, Tadios Tewolde, description, download
(JEL: E0, F01, F10, F15, F17) This paper aims to shed light on why the downturn in global trade during the intensification of the financial crisis in 2008Q4-2009Q1 was so severe and synchronized across the world, and also examines the subsequent recovery in global trade during 2009Q2-2010Q1. The paper finds that a structural imports function which captures the different and time-varying importintensities of the components of total final expenditure can explain the sharp decline in global imports of goods and services. By contrast, a specification based on aggregate total expenditure can not fully capture the global trade downturn. In particular, panel estimates for a large number of OECD countries suggest that the high import-intensity of exports at the country-level can explain a significant proportion of the decline in world imports during the crisis, while declines in the highly import-intensive expenditure category of investment also contributed to the remaining fall in global trade. At the same time, the high and rising import-intensity of exports also reflects and captures the rapid growth in “vertical specialisation”, suggesting that widespread global production chains may have amplified the downturn in world trade and partly explains its high-degree of synchronisation across the globe. In addition, the estimates find that stockbuilding, business confidence and credit conditions also played a role in the global trade downturn. Meanwhile, the global trade recovery (2009Q2-2010Q1) can only be partially explained by differential elasticities for the components of demand (although the results confirm that the upturn in OECD imports was also driven by strong export growth and the associated reactivation of global production chains, as well as the recovery in stockbuilding and the fiscal stimulus). This may be due in part to the many policy measures that were implemented to boost global trade at that time and which can not be captured by the specification.
 
22/08/2011
No. 1369: Technology, utilization and inflation: what drives the New Keynesian Phillips Curve?, by Peter McAdam, Alpo Willman, description, download
(JEL: E20, E30) We argue that the New-Keynesian Phillips Curve literature has failed to deliver a convincing measure of “fundamental inflation”. We start from a careful modeling of optimal price setting allowing for non-unitary factor substitution, non-neutral technical change and timevarying factor utilization rates. This ensures the resulting real marginal cost measures match volatility reductions and level changes witnessed in many US time series. The cost measure comprises conventional counter-cyclical cost elements plus pro-cyclical (and co-varying) utilization rates. Although pro-cyclical elements dominate, real marginal costs are becoming less cyclical over time. Incorporating this richer driving variable produces more plausible price-stickiness estimates than otherwise and suggests a more balanced weight of backward and forward-looking inflation expectations than commonly found. Our results challenge existing views of inflation determinants and have important implications for modeling inflation in New-Keynesian models.
 
22/08/2011
No. 1368: Output growth and fluctuation: the role of financial openness, by Alexander Popov, description, download
(JEL: E32, F30, F36, F43, G15) I analyze output growth, volatility, and skewness as the joint outcomes of financial openness. Using an industry panel of 53 countries over 45 years, I find that financial openness increases simultaneously mean growth and the negative skewness of the growth process. The increase in output skewness appears to come from a more negatively skewed distribution of investment, TFP, and new business creation. The growth benefits of financial liberalization are augmented, and its costs associated with higher probability of rare large contractions are mitigated by deep credit markets and by strong institutions. The main result of the paper holds in aggregated data.
 
18/08/2011
USD11033 (OT,liquidity providing):500 mn USD alloted (fixed 1.1%, 100% allotment at margin), more
 
18/08/2011
Euro area financial vehicle corporations statistics, more
 
18/08/2011
No. 0: Financial sector supervisors' accountability: a european perspective, by Phoebus Athanassiou, description, download
Financial sector supervisors’ accountability is widely accepted as a sine qua non condition of good governance and as a guarantor of supervisory independence. An arsenal of accountabilityinspired control instruments aims to ensure that supervisors are accountable to the legislature, the executive, stakeholders and, last but not least, the judiciary. While the general right to damages for losses arising from civil wrongs is well established, liability for faulty supervisory acts or omissions is, in many respects, limited in scope. This paper examines the conceptual underpinnings of financial sector supervisors’ liability and the current legal situation on supervisory liability in the European Union, under both national and Union law. It also inquires into an aspect of the debate that has attracted less attention than it deserves, but which is likely to take on greater importance as the structure of financial supervision undergoes reforms, both at the European Union level and in the Member States: the specificity of the Member States’ national central banks as banking supervisors and, in particular, the tension between their independence and their potential third party liability for damages for supervisory faults.
 
18/08/2011
No. 1367: Cyclical fluctuations in the Mediterranean basin, by Fabio Canova, Matteo Ciccarelli, description, download
(JEL: C11, C33, E32) We investigate the similarities of macroeconomic fluctuations in the Mediterranean basin and their convergence. A model with three indicators, covering the West, the East and the MENA portions of the Mediterranean, characterizes well the historical experience since the early 1980. Convergence and divergence coexist in the region and are reversible. Except for the West, domestic cyclical fluctuations are still due to national and idiosyncratic causes. The outlook for the next few years looks rosier for the MENA and the East blocks than for the West.
 
18/08/2011
Legal working paper no. 12 Financial sector supervisors' accountability: a european perspective , by Phoebus Athanassiou, download
 
18/08/2011
CON/2011/64 Opinion on the protection against counterfeiting and on the preservation of the quality of the cash circulation , en
 
17/08/2011
20110091 (OT,liquidity absorbing):96000 mn EUR alloted (marginal 1.2%, weighted average 0.96%, 8.1067% allotment at margin), more
 
17/08/2011
20110090 (MRO,liquidity providing):147689.3 mn EUR alloted (fixed 1.5%, 100% allotment at margin), more
 
17/08/2011
Euro area balance of payments in June 2011, more
 
17/08/2011
Euro area investment fund statistics, more
 
17/08/2011
CON/2011/63 Opinion on the introduction of omnibus accounts in the legal framework for clearing and settlement systems, en
 
16/08/2011
Announcing 20110090 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
15/08/2011
Fine-tuning operation, more
 
15/08/2011
No. 1366: Stock market firm-level information and real economic activity, by Filippo di Mauro, Fabio Fornari, Dario Mannucci, description, download
(JEL: C53, C58, F37, G15) We provide evidence that changes in the equity price and volatility of individual firms (measures that approximate the definition of 'granular shock' given in Gabaix, 2010) are key to improve the predictability of aggregate business cycle fluctuations in a number of countries. Specifically, adding the return and the volatility of firm-level equity prices to aggregate financial information leads to a significant improvement in forecasting business cycle developments in four economic areas, at various horizons. Importantly, not only domestic firms but also foreign firms improve business cycle predictability for a given economic area. This is not immediately visible when one takes an unconditional standpoint (i.e. an average across the sample). However, conditioning on the business cycle position of the domestic economy, the relative importance of the two sets of firms - foreign and domestic - exhibits noticeable swings across time. Analogously, the sectoral classification of the firms that in a given month retain the highest predictive power for future IP changes also varies significantly over time as a function of the business cycle position of the domestic economy. Limited to the United States, predictive ability is found to be related to selected balance sheet items, suggesting that structural features differentiate the firms that can anticipate aggregate fluctuations from those that do not help to this aim. Beyond the purely forecasting application, this finding may enhance our understanding of the underlying origins of aggregate fluctuations. We also propose to use the cross sectional stock market information to macro-prudential aims through an economic Value at Risk.
 
12/08/2011
Press release Statement by the European Commission, ECB and IMF on the first review mission to Portugal, 
12 August 2011, en
 
11/08/2011
USD11032 (OT,liquidity providing):0 mn USD alloted (fixed 1.08%, 0% allotment at margin), more
 
11/08/2011
20110089 (LTRO,liquidity providing):49752.11 mn EUR alloted ( 100% allotment at margin), more
 
11/08/2011
Monthly Bulletin Monthly Bulletin, August 2011, download
 
11/08/2011
Statistics Pocket Book Statistics Pocket Book, August 2011, download
 
11/08/2011
Publication Article, Monthly Bulletin, August 2011, pp 63-75, Keeping the ECB’s monetary and financial statistics fit for use , download
 
10/08/2011
Announcing 20110089 (LTRO,liquidity providing), for 203 days deadline 09:30, more
 
10/08/2011
20110088 (OT,liquidity absorbing):145149.35 mn EUR alloted (marginal 1.3%, weighted average 1.27%, 100% allotment at margin), more
 
10/08/2011
20110087 (OT,liquidity absorbing):74000 mn EUR alloted (marginal 1.14%, weighted average 1.01%, 7.1369% allotment at margin), more
 
10/08/2011
20110086 (LTRO,liquidity providing):75751.1 mn EUR alloted (fixed 1.5%, 100% allotment at margin), more
 
10/08/2011
20110085 (MRO,liquidity providing):157073 mn EUR alloted (fixed 1.5%, 100% allotment at margin), more
 
10/08/2011
Euro area securities issues statistics, more
 
10/08/2011
Publication 2011 update of the ECB’s environmental statement , download
 
09/08/2011
Announcing 20110086 (LTRO,liquidity providing), for 35 days deadline 09:30, more
 
09/08/2011
Announcing 20110085 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
09/08/2011
Longer-term refinancing operation, more
 
08/08/2011
Fine-tuning operation, more
 
07/08/2011
Press release Statement by the President of the ECB, en
 
05/08/2011
Other decisions Decisions taken by the Governing Council of the ECB (in addition to decisions setting interest rates), en
 
05/08/2011
Publication Letter from the ECB President to Mr Ioannis A. Tsoukalas, Member of the European Parliament , download
 
05/08/2011
CON/2011/61 Opinion on amendments to the Law on prevention of late payments, en
 
05/08/2011
CON/2011/62 Opinion on amendments to the legal framework for payment systems and clearing and settlement systems, en
 
04/08/2011
USD11031 (,):0 mn EUR alloted (fixed 1.15%, 0% allotment at margin), more
 
04/08/2011
Press release ECB announces details of refinancing operations with settlement in the period from 12 October 2011 to 17 January 2012, en
 
04/08/2011
Press conference Jean-Claude Trichet: Introductory statement to the press conference, en
 
04/08/2011
Press release Monetary policy decisions, en
 
03/08/2011
20110084 (OT,liquidity absorbing):74000 mn EUR alloted (marginal 0.99%, weighted average 0.92%, 49.6048% allotment at margin), more
 
03/08/2011
20110083 (MRO,liquidity providing):172020.8 mn EUR alloted (fixed 1.5%, 100% allotment at margin), more
 
03/08/2011
Publication Letter from the ECB President to Nuno Teixeira, Member of the European Parliament, regarding the exchange rate of the euro , download
 
02/08/2011
Announcing 20110083 (MRO,liquidity providing), for 7 days deadline 09:30, more
 
02/08/2011
MFI interest rate statistics, more
 
01/08/2011
Fine-tuning operation, more
 
01/08/2011
No. 1365: Understanding and forecasting aggregate and disaggregate price dynamics, by Colin Bermingham, Antonello D’Agostino, description, download
(JEL: E17, E31, C11, C38) The issue of forecast aggregation is to determine whether it is better to forecast a series directly or instead construct forecasts of its components and then sum these component forecasts. Notwithstanding some underlying theoretical results, it is generally accepted that forecast aggregation is an empirical issue. Empirical results in the literature often go unexplained. This leaves forecasters in the dark when confronted with the option of forecast aggregation. We take our empirical exercise a step further by considering the underlying issues in more detail. We analyse two price datasets, one for the United States and one for the Euro Area, which have distinctive dynamics and provide a guide to model choice. We also consider multiple levels of aggregation for each dataset. The models include an autoregressive model, a factor augmented autoregressive model, a large Bayesian VAR and a time-varying model with stochastic volatility. We find that once the appropriate model has been found, forecast aggregation can significantly improve forecast performance. These results are robust to the choice of data transformation.