ECB/2011/16 Decision of the ECB of 31 October 2011
amending Decision ECB/2010/15 concerning the administration of EFSF loans to Member States whose currency is the euro, and amending Decision ECB/2010/31 concerning the opening of accounts for the processi, en
CON/2011/86 Opinion on stabilisation measures and bridge banks, en
ECB/2011/16 Decision of the ECB of 31 October 2011 amending Decision ECB/2010/15 concerning the administration of EFSF loans to Member States whose currency is the euro, and amending Decision ECB/2010/31 concerning the opening of accounts for the processi, en
Interview Jean-Claude Trichet: Interview with Bild am Sonntag, en
Announcing 20110120 (MRO,liquidity providing), for 8 days deadline 09:30, more
Interview Jean-Claude Trichet: Interview with Le Monde, en
Euro area economic and financial developments by institutional sector, more
No. 1393: Marx vs. Weber: does religion affect politics and the economy?, by Christoph Basten, Frank Betz, description, download
(JEL: Z12, D72, H23, N33) We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure and for redistribution and intervention in the economy. With a Fuzzy Spatial Regression Discontinuity Design, we exploit a historical quasiexperiment in Western Switzerland, where in the 16th century a so far homogeneous region was split and one part assigned to convert to Protestantism. We find that Reformed Protestantism reduces the fraction of citizens voting for more leisure by 13, and that voting for more redistribution and government intervention by respectively 3 and 11 percentage points. These preferences are found to translate into greater income inequality, but we find no robust effect on average income.
No. 1392: China's dominance hypothesis and the emergence of a tri-polar global currency system, by Marcel Fratzscher, Arnaud Mehl, description, download
(JEL: F30, F31, F33, N20) This paper assesses whether the international monetary system is already tripolar and centred around the US dollar, the euro and the Chinese renminbi (RMB). It focuses on what we call China’s “dominance hypothesis”, i.e. whether the renminbi is already the dominant currency in Asia, exerting a large influence on exchange rate and monetary policies in the region, a direct reference to the old “German dominance hypothesis” which ascribed to the German mark a dominant role in Europe in the 1980s-1990s. Using a global factor model of exchange rates and a complementary event study, we find evidence that the RMB has become a key driver of currency movements in
emerging Asia since the mid-2000s, and even more so since the global financial crisis. These results are consistent with China’s dominance hypothesis and with
the view that the international monetary system is already tri-polar. However, we also find that China’s currency movements are to some extent affected by those in the rest of Asia.
No. 1391: Interest rate expectations and uncertainty during ECB governing council days: evidence from intraday implied densities of 3-month Euribor, by Olivier Vergote, Josep Maria Puigvert Gutiérrez, description, download
(JEL: C14, E43, E52, E58, E61) This paper analyses changes in short-term interest rate expectations and uncertainty during ECB Governing Council days. For this purpose, it first extends the estimation of risk-neutral probability density functions up to tick frequency. In particular, the non-parametric estimator of these densities, which is based on fitting implied volatility curves, is applied to estimate intraday expectations of threemonth EURIBOR three months ahead. The estimator proves to be robust to market microstructure noise and able to capture meaningful changes in expectations. Estimates of the noise impact on the statistical moments of the densities further enhance the interpretation. In addition, the paper assesses the impact of the ECB communication during Governing Council days. The results show that the whole density may react to the communication and that such repositioning of market participants’ expectations will contain information beyond that of changes in the consensus view already observed in forward rates. The results also point out the relevance of the press conference in providing extra
information and triggering an adjustment process for interest rate expectations.
No. 1390: Fraud, investments and liability regimes in payment platforms, by Anna Creti, Marianne Verdier, description, download
(JEL: G21, L31, L42) In this paper, we discuss how fraud liability regimes impact the price structure that is chosen by a monopolistic payment platform, in a setting where merchants can invest in fraud detection technologies. We show that liability allocation rules distort the price structure charged by platforms or banks to consumers and merchants with respect to a case where such a responsibility regime is not implemented. We determine the allocation of fraud losses between the payment platform and the merchants that maximises the platform's profit and we compare it to the allocation that maximises social welfare.
No. 1389: Do newspaper articles on card fraud affect debit card usage?, by Anneke Kosse, description, download
(JEL: C22, C23, D12, E21) This paper investigates the impact of newspaper publications about debit card skimming fraud on debit card usage in the Netherlands using daily information from January 1st 2005 to December 31st 2008. Time-series analyses are employed to assess the daily fluctuations in aggregate debit card usage. The results show that newspaper articles that somehow make mention of the phenomenon of skimming fraud significantly affect the number of debit card payments. The direction of the effect depends on the type of skimming fraud addressed. Newspaper articles on fraud at points-of-sale (POS) and ticket machines depress the number of debit card payments. News on ATM fraud, by contrast, has a positive effect on debit card payments. This indicates that the temporarily created fear for using the debit card at the ATM is not automatically translated into fear for using the debit card at the POS. Instead, ATMs and POS terminals are perceived as substitutes. Although significant, all media effects found are relatively small in comparison with other factors such as calendar and holiday effects and daily rainfall. Moreover, the effects only last for one day, with consumers immediately reverting back to their regular payment behaviour. This corresponds to earlier results found in other research fields and suggests that consumers’ confidence in the debit card is relatively sturdy and not easily affected. Moreover, it might be an indication of consumers having a short memory when it comes to newspaper articles.
No. 1388: To surcharge or not to surcharge? A two-sided market perspective of the no-surchage rule, by Nicholas Economides, David Henriques, description, download
(JEL: L13, L42, L80) In Electronic Payment Networks (EPNs) the No-Surcharge Rule (NSR) requires that merchants charge the same final good price regardless of the means of payment chosen by the customer. In this paper, we analyze a three-party model (consumers, merchants, and proprietary EPNs) to assess the impact of a NSR on the electronic payments system, in particular, on competition among EPNs, network pricing to merchants and consumers, EPNs' profits, and social welfare. We show that imposing a NSR has a number of effects. First, it softens competition among EPNs and rebalances the fee structure in favor of cardholders and to the detriment of merchants. Second, we show that the NSR is a profitable strategy for EPNs if and only if the network e¤ect from merchants to cardholders is sufficiently weak. Third, the NSR is socially (un)desirable if the network externalities from merchants to cardholders are sufficiently weak (strong) and the merchants' market power in the goods market is sufficiently high (low). Our policy advice is that regulators should decide on whether the NSR is appropriate on a market-by-market basis instead of imposing a uniform regulation for all markets.
No. 1387: Consumer credit and payment cards, by Wilko Bolt, Elizabeth Foote, Heiko Schmiedel, description, download
(JEL: L11, G21, D53) We consider debit and credit card networks. Our contribution is to introduce the role of consumer credit into these payment networks, and to assess the way this affects competition and equilibrium fees. We analyze a situation in which overdrafts are associated with current accounts and debit cards, and larger credit lines with ‘grace’ periods are associated with credit cards. If we just introduce credit cards, we find their merchant fees depend not only on the networks’ cost of funds and the probability of default, but also on the interest rates of overdrafts. Whilst debit card merchant fees do not depend on funding costs or default risk in a debit-card only world, this changes when they start to compete with credit cards. First, debit merchant acceptance increases with the default probability, even though merchant fees increase. Second, an increase in funding costs causes a surprising increase in debit merchant fees. Effectively, the bank offering the debit card benefits from consumers maintaining a positive current account balance, when they use their credit instead of their debit card. As a result, this complementarity may lead to relatively high debit card merchant fees as the bank discourages debit card acceptance at the margin.
No. 1386: How do you pay? The role of incentives at the point-of-sale, by Carlos Arango, Kim P. Huynh, Leonard Sabetti, description, download
(JEL: E41, C35, C83) This paper uses discrete-choice models to quantify the role of consumer socioeconomic characteristics, payment instrument attributes, and transaction features on the probability of using cash, debit card, or credit card at the point-of-sale. We use the Bank of Canada 2009 Method of Payment Survey, a two-part survey among adult Canadians containing a detailed questionnaire and a three-day shopping diary. We find that cash is still used intensively at low value transactions due to speed, merchant acceptance, and low costs. Debit and credit cards are used more frequently for higher transaction values where safety, record keeping, the ability to delay payment and credit card rewards gain prominence. We present estimates of the elasticity of using a credit card with respect to credit card rewards. Reward elasticities are a key element in understanding the impact of retail payment pricing regulation on consumer payment instrument usage and welfare.
No. 1385: Using cash to monitor liquidity - implications for payments, currency demand and withdrawal behavior, by Ulf Von Kalckreuth, Tobias Schmidt, Helmut Stix, description, download
(JEL: E41, E58, D12) Standard transaction cost arguments can only partially explain why the share of cash transactions is still high in many countries. This paper shows that consumers’ desire to monitor liquidity is one of the reasons. Consumers make use of a distinctive feature of cash – a glance into one’s pocket provides a signal for both the remaining budget as well as the level of past expenses. We propose a theoretical framework which incorporates this feature of cash, and derives implications not only for cash usage as such but also for a broader set of payment-related activities. Survey data from Germany on consumers’ payment and withdrawal patterns are used to test these implications empirically. The data are consistent with all theoretical predictions: consumers who need to keep control over their remaining liquidity and who have elevated costs of information processing and storage will conduct a larger percentage of their payments using cash, hold fewer non-cash payment instruments, withdraw less often and hold larger cash balances than other consumers. Such consumers also use payment cards for some transactions; they switch to non-cash payment instruments only at higher transaction values than other consumers, however. Our model provides an explanation of why cash usage has declined only slowly in some countries despite broad diffusion of non-cash means of payment.
USD11044 (OT,liquidity providing):500 mn USD alloted (fixed 1.07%, 100% allotment at margin), more
20110119 (LTRO,liquidity providing):56934.45 mn EUR alloted ( % allotment at margin), more
20110118 (LTRO,liquidity providing):44564.35 mn EUR alloted ( % allotment at margin), more
No. 1384: Trend-cycle decomposition of output and euro area inflation forecasts: a real-time approach based on model combination, by Pierre Guérin, Laurent Maurin, Matthias Mohr, description, download
(JEL: C53, E32, E37) The paper focuses on the estimation of the euro area output gap. We construct model-averaged measures of the output gap in order to cope with both model uncertainty and parameter instability that are inherent to trend-cycle decomposition models of GDP. We first estimate nine models of trend-cycle decomposition of euro area GDP, both univariate and multivariate, some of them allowing for changes in the slope of trend GDP and/or its error variance using Markov-switching specifications, or including a Phillips curve. We then pool the estimates using three weighting schemes. We compute both ex-post and real-time estimates to check the stability of the estimates to GDP revisions. We finally run a forecasting experiment to evaluate the predictive power of the output gap for inflation in the euro area. We find evidence of changes in trend growth around the recessions. We also find support for model averaging techniques in order to improve the reliability of the potential output estimates in real time. Our measures help forecasting inflation over most of our evaluation sample (2001-2010) but fail dramatically over the last recession.
No. 1383: An international comparison of voting by committees, by Alexander Jung, description, download
(JEL: C23, D72, D83, E58) This paper provides new empirical evidence on policy-makers’ voting patterns on interest rates. Applying (pooled) Taylor-type rules and using real-time information available from published inflation reports and voting records, the paper tests for heterogeneity among committee members in three monetary policy committees: the FOMC, the Bank of England’s MPC and the Riksbank’s Executive Board. It separately estimates the empirical reaction functions with and without imposing the long-run restriction from the inertia, thereby distinguishing between the short-run and long-run responses of members to incoming information. Unconstrained reaction functions that measure the short-term response show that preference heterogeneity and some diversity of views on the inflation and economic outlook was present in all three committees. By contrast, constrained reaction functions that measure the long-term response find that evidence in favour of preference heterogeneity in all three committees is at best weak. Preference distributions in all three committees were fairly symmetric around the respective mean and diversity of views was only observed in the case of Sweden when including the financial crisis episode. A cluster analysis of the Riksbank’s Executive Board, which only comprises internal members, confirms that its members have disperse preferences and views on the transmission mechanism. For the FOMC and for the MPC this analysis suggests that among several background
characteristics (membership, background, tenure), membership is a potentially relevant factor that may explain some of the differences in preferences.
Publication Structural features of distributive trades and their impact on prices in the euro area , download
CON/2011/76 Opinion on reform of the deposit guarantee scheme, en