INTERVIEW
27 September 2022
The impact of rate increases on firms and workers
Many indicators show the economy is going to slow down and we are now making sizeable interest rate increases, says Chief Economist Philip R. Lane. This should make it clear to businesses and workers that demand conditions will become less favourable.
Interview
ACCOUNTABILITY
26 September 2022
European Day of Languages
We’re celebrating the European Day of Languages. Many parts of the ECB’s website are available in a variety of official EU languages. Select your language via the drop-down menu in the top right-hand corner and explore our website in the language of your choice.
EXPLAINER
19 September 2022
Making our bond purchases greener
We will decarbonise our corporate bond holdings, a major step in our climate action plan. This will support the green transition, and incentivise companies to become more transparent and reduce their carbon footprint. Find out how this will work in practice.
Explainer- 27 September 2022
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 27 September 2022
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 27 September 2022
- MONETARY DEVELOPMENTS IN THE EURO AREAAnnexes
- 27 September 2022
- MONETARY DEVELOPMENTS IN THE EURO AREA
- 23 September 2022
- OTHER GOVERNING COUNCIL DECISIONEnglishOTHER LANGUAGES (23) +
- 20 September 2022
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 20 September 2022
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 20 September 2022
- BALANCE OF PAYMENTS (MONTHLY)
- 26 September 2022
- Speech by Christine Lagarde, President of the ECB, at the Hearing of the Committee on Economic and Monetary Affairs of the European ParliamentAnnexes
- 26 September 2022
- 26 September 2022
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Symposium on “Payments and Securities Settlement in Europe – today and tomorrow” hosted by the Deutsche Bundesbank
- 22 September 2022
- Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at the Luxemburg - Frankfurt Financial Professionals meeting
- 20 September 2022
- Karl Otto Pöhl Lecture by Christine Lagarde, President of the ECB, organised by Frankfurter Gesellschaft für Handel, Industrie und Wissenschaft
- 17 September 2022
- Presentation by Philip R. Lane, Member of the Executive Board of the ECB, at the 45th DEW Annual Economic Policy Conference
- 27 September 2022
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by András Szigetvari on 20 September 2022
- 22 September 2022
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Florian Schmidt on 15 September 2022
- 16 September 2022
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by João Silvestre on 9 September
- 25 August 2022
- Interview with Christine Lagarde, President of the ECB, conducted by Morgane Miel on 13 July 2022 and published on 25 August 2022
- 18 August 2022
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Balazs Koranyi and Frank Siebelt on 16 August 2022
- 14 September 2022
- Women and men shop differently and have different perceptions of prices and inflation. This ECB Blog post examines how inflation expectations are formed and revised across gender and why that matters for central banks.Details
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
J16 : Labor and Demographic Economics→Demographic Economics→Economics of Gender, Non-labor Discrimination
- 24 August 2022
- Communication with the general public matters for monetary policy. Although it is hard for central banks to reach out to the wider public, a recent study shows that explaining the inflation target and the ECB strategy to consumers can enhance its credibility.Details
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 10 August 2022
- As part of our monetary policy strategy review we adopted a new symmetric 2% inflation target. One year on, we examine how the strategy review has helped anchor financial analysts’ inflation expectations. We also show that recent policy normalisation is grounded in our strategy.Details
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
e31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 28 July 2022
- Non-immigrants in the euro area are on average better off than immigrants in terms of wages and wealth. These differences can cause immigrants to react differently to economic shocks and changing financial conditions. As economic inequality matters for monetary policy transmission, the ECB Blog takes a closer look.
- 23 July 2022
- Raising interest rates is a landmark moment on our journey towards lower inflation, writes President Christine Lagarde in The ECB Blog.EnglishOTHER LANGUAGES (15) +
- 27 September 2022
- WORKING PAPER SERIES - No. 2734Brexit, what Brexit? Euro area portfolio exposures to the United Kingdom since the Brexit referendumDetails
- Abstract
- We study euro area investors' portfolio adjustment since the Brexit referendum in terms of securities issued in the UK or denominated in pound sterling, in the context of heightened policy uncertainty surrounding the exit process of the UK from the EU. Our sector-level analysis "looks-through" holdings of investment fund shares to gauge euro area sectors' full exposures to debt securities and listed shares. Our key finding is the absence of a negative "Brexit-effect" for euro area investors, which would have rendered UK-issued and pound-denominated securities generally less attractive. Instead, we observe that euro area investors increased their absolute and relative exposures to UK-issued and pound-denominated debt securities since the Brexit referendum. The analysis also reveals an increase in the euro area's exposure to listed shares issued by UK non-financial corporations, while the exposures to shares issued by UK banks declined. These findings should be seen against the backdrop of low yields on euro area debt securities and a strong recovery in UK share prices since the Brexit referendum, which appear to have largely outweighed the uncertainties associated with Brexit.
- JEL Code
- F30 : International Economics→International Finance→General
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 27 September 2022
- WORKING PAPER SERIES - No. 2733Details
- Abstract
- How do households adjust to a large debt shock? This paper studies household responses to a revaluation of foreign currency household debt during a large depreciation in Hungary. Relative to similar local currency debtors, foreign currency debtors reduce consumption expenditures approximately one-for-one with increased debt service, suggesting binding liquidity constraints. Foreign currency debtors reduce both the quantity and quality of expenditures, consistent with nonhomothetic preferences and a “flight from quality.” Debt revaluation has no effect on labor market status, hours, or earnings, but there is a small adjustment toward foreign income streams and a substantial increase in home production.
- JEL Code
- E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
G51 : Financial Economics
J20 : Labor and Demographic Economics→Demand and Supply of Labor→General
- 26 September 2022
- WORKING PAPER SERIES - No. 2732Details
- Abstract
- We study how banks manage their liquidity among the various assets at their disposal. We exploit the introduction of the ECB’s two-tier system which heterogeneously reduced the cost of additional reserves holdings. We find that the treated banks increase reserve holdings by borrowing on the interbank market, decreasing lending to affiliates of the same group, and selling marketable securities. We also find that banks have a preference for a stable portfolio composition of liquid assets over time. Our results imply that frictions in one market for liquidity can spill over to several markets.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 26 September 2022
- WORKING PAPER SERIES - No. 2731Details
- Abstract
- We build currency portfolios based on the paradigm that exchange rates slowly converge to their equilibrium to highlight three results. First, this property can be exploited to build profitable portfolios. Second, the slow pace of convergence at short-horizons is consistent with the evidence of profitable carry trade strategies, i.e. the common practice of borrowing in low-yield currencies and investing in high-yield currencies. Third, the predictive power of equilibrium exchange rates may boost the performance of carry trade strategies.
- JEL Code
- F31 : International Economics→International Finance→Foreign Exchange
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 23 September 2022
- WORKING PAPER SERIES - No. 2730Details
- Abstract
- We propose a new and time-varying optimum currency area (OCA) index for the euro area in assessing the evolution of the OCA properties of the monetary union from an international business cycle perspective. It is derived from the relative importance of symmetric vs. asymmetric shocks that result from a sign and zero restricted open-economy structural vector autoregression (VAR) model. We argue that the euro area is more appropriate through the lens of empirical OCA properties when the relative importance of common symmetric shocks is high, but, at the same time, is not overly dispersed across euro area member countries. We find that symmetric shocks have been the dominant drivers of business cycles across euro area countries. Our OCA index, nevertheless, shows that cyclical convergence among euro area members is not a steady process as it tends to be disrupted by crises, especially those not primarily triggered by common external shocks. In the aftermath of a crisis the OCA index embarks on a recovery trajectory catching up with its pre-crisis level. Our OCA index is slow-moving and a good reflection of changing underlying economic structures across the euro area and, therefore, informative about the ability of monetary policy to stabilise the euro area economy in the medium run.
- JEL Code
- F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
- 23 September 2022
- WORKING PAPER SERIES - No. 2729Details
- Abstract
- Payments are a key focus of central banks, as - together with the safe, efficient operation of the payments market – wide access to cash is fundamentally important for a healthy economy. In this study, three main research areas were investigated: 1. socioeconomic characteristics that can be associated with financial inclusion; 2. factors behind consumers´ payment choices; 3. underlying factors for holding cash in a wallet (i.e. for transactional purposes). Regression results for the first research question confirmed the findings of international literature, i.e. mainly older age, lower income and lower educational level is associated with the lack of access to electronic payment options. The study pursues various approaches to investigate consumer payments choices, and the results from most models showed that those with higher level of income and education, or lower level of cash income are more likely to prefer and actually use electronic payment methods. Finally, concerning the holding of cash the initial expectations were confirmed i.e. those who do not use cash for daily transactions tend to keep less cash in their wallet, while those who indicated preference for cash payments or higher importance of cash payment option are more likely to keep higher cash amounts.
- JEL Code
- D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
J33 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Compensation Packages, Payment Methods
- 22 September 2022
- WORKING PAPER SERIES - No. 2728Details
- Abstract
- The green bond market has increased rapidly in recent years amid growing concerns about climate change and wider environmental issues. However, whether green bonds provide cheaper funding to issuers by trading at a premium, so-called greenium, is still an open discussion. This paper provides evidence that a key factor explaining the greenium is the credibility of a green bond itself or that of its issuer. We define credible green bonds as those which have been under external review. Credible issuers are either firms in green sectors or banks signed up to UNEP FI. Another important factor is investors’ demand as the greenium becomes more statistically and economically significant over time. This is potentially driven by increased climate concerns as the green bond market follows a similar trend to that observed in ESG/green equity and investment fund sectors. To run our analysis, we construct a database of daily pricing data on closely matched green and non-green bonds of the same issuer in the euro area from 2016 to 2021. We then use Securities Holdings Statistics by Sector (SHSS) to analyse investors’ demand for green bonds.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
A56 : General Economics and Teaching
- 22 September 2022
- WORKING PAPER SERIES - No. 2727Details
- Abstract
- What are the economic implications of financial and uncertainty shocks? We show that financial shocks cause a decline in output and goods prices, while uncertainty shocks cause a decline in output and an increase in goods prices. In response to un-certainty shocks, firms increase their markups, in line with the theory of self-insurance against being stuck with too low a price. This explains why goods prices may increase at the onset of a recession and are not accompanied by pronounced deflationary pressures. The two shocks are identified jointly with an approach that is less restrictive than Antolín-Díaz and Rubio-Ramírez’s method.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 22 September 2022
- ECONOMIC BULLETIN
- 22 September 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2022Details
- Abstract
- In-house credit assessment systems (ICASs) of euro area national central banks are an important source of credit risk assessments for credit claims from non-financial corporates. These credit claims can be pledged as collateral in monetary policy operations. Climate change and the transition to a greener economy can affect the growth, financial performance, market position and business model of a company, and hence its creditworthiness. Therefore, as part of the ECB’s action plan for including climate change considerations in monetary policy implementation, the Governing Council has agreed a set of common minimum standards on incorporating these risks in ICAS rating processes. Assessments of climate change risks will mainly focus on the companies most affected and those which pose the highest risk to the Eurosystem. The analysis will be performed at firm level whenever sufficient data is available, using state-of-the-art methods and metrics. All ICASs will comply with the common minimum standards from end-2024 onwards.
- JEL Code
- G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 22 September 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2022Details
- Abstract
- This box describes the ECB’s liquidity conditions and monetary policy operations during the third and fourth reserve maintenance periods of 2022 from 20 April to 26 July.
- JEL Code
- E40 : Macroeconomics and Monetary Economics→Money and Interest Rates→General
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 22 September 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2022Details
- Abstract
- Employment growth in the public sector has played an important role in supporting total employment during the pandemic. Following the small decline in public sector employment and the trough in economic activity in the second quarter of 2020, public sector employment has contributed about 1 percentage point (1.5 million persons) to the cumulative total employment growth of about 4.2% (6.6 million persons). Most of the employment growth in the public sector is associated with the health and education sub-sectors. In both of these sub-sectors, activity has not only increased during the pandemic but has also shown a positive trend over time. Specifically, unlike during previous euro area crises, temporary employment in the public sector has risen during the coronavirus (COVID-19) crisis and remains above its underlying trend by about 300,000 persons (0.2% of the euro area labour force). This increase in temporary public sector employment is itself driven mostly by the education and health sub-sectors and is probably due in particular to the health measures associated with the COVID-19 pandemic. As the impact of the pandemic recedes, this increase could be partly reversed.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
- 21 September 2022
- WORKING PAPER SERIES - No. 2726Details
- Abstract
- We analyse a gradual increase in the tax on emissions in a simple two-period New Keynesian model with an AS-AD representation. We find that the increase in the tax today exerts inflationary pressures, but the expected further increase in the tax tomorrow depresses current demand, putting downward pressure on prices: we show that the second effect is larger. However, if households do not anticipate a future fall in income (because they are not rational or the government is not credible), the overall effect of the transition may be inflationary in the first period. We extend the analysis in a medium-scale DSGE model and we find again that the green transition is deflationary. Also in this larger model, by relaxing the rational expectations assumption, we show the transition may initially be inflationary.
- JEL Code
- D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 21 September 2022
- WORKING PAPER SERIES - No. 2725Details
- Abstract
- One important source of systemic risk can arise from asset commonality among financial institutions. This indirect interconnection may occur when financial institutions invest in similar or correlated assets and is also described as overlapping portfolios. In this work, we propose a methodology to quantify systemic risk derived from asset commonality and we apply it to assess the degree of indirect interconnection of banks due to their financial holdings. Based on granular information of asset holdings of European significant banks, we compute the sensitivity based ∆ CoVaR which captures the potential sources of systemic risk originating from asset commonality. The novel indicator proves to be consistent with other indicators of systemic importance, yet it has a more transparent foundation in terms of the source of systemic risk, which can contribute to effective macroprudential supervision.
- JEL Code
- C58 : Mathematical and Quantitative Methods→Econometric Modeling→Financial Econometrics
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G20 : Financial Economics→Financial Institutions and Services→General
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
- 21 September 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 6, 2022Details
- Abstract
- Mitigating climate change requires sustained and multipronged policy efforts, as a matter of urgency. Many initiatives to mitigate climate change are directly linked to fiscal policy, mainly through public spending or taxation. This article provides an overview of existing, required and expected fiscal climate policy efforts to advance the green transition in the euro area, focusing on carbon pricing and green public investment. It also looks at the distributional consequences of carbon pricing.
- JEL Code
- H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 20 September 2022
- WORKING PAPER SERIES - No. 2724Details
- Abstract
- This paper studies for the first time the links between interbank liability and equity markets (financial exposure), and mergers and acquisitions (M&As) in the European banking sector, both at the micro and macro level. Using a binary logit model, the paper first examines – at the micro level – how financial exposures between banks affect the probability of M&A. It finds that financial interlinkages significantly increase the chances of them taking place. Using a gravity model, the paper then investigates – at the macro level – whether the micro results hold. Not only do financial links are positively and significantly correlated with the number of M&As between countries, but they are also a better predictor than trade – traditionally used in the macro literature on M&A. Since the Capital Market Union would help to geographically diversify banks’ portfolio, it would therefore also foster cross-border M&As. Finally, the paper builds a M&A compatibility index for each pair of EU countries. The study highlights strong M&As prospects linked to high financial interlinkages in core Europe, which could be the sign of a future asymmetrical financial integration in the EU.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G34 : Financial Economics→Corporate Finance and Governance→Mergers, Acquisitions, Restructuring, Corporate Governance
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F34 : International Economics→International Finance→International Lending and Debt Problems
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
- 20 September 2022
- WORKING PAPER SERIES - No. 2723Details
- Abstract
- This paper studies optimal second-best corrective regulation, when some agents/activities cannot be perfectly regulated. We show that policy elasticities and Pigouvian wedges are sufficient statistics to characterize the marginal welfare impact of regulatory policies in a large class of environments. We show that a subset of policy elasticities, leakage elasticities, determine optimal second-best policy, and characterize the marginal value of relaxing regulatory constraints. We apply our results to scenarios with unregulated agents/activities, uniform regulation across agents/activities, and costly regulation. We illustrate our results in applications to financial regulation with environmental externalities, shadow banking, behavioral distortions, asset substitution, and fire sales.
- JEL Code
- H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
D62 : Microeconomics→Welfare Economics→Externalities - Network
- ECB Lamfalussy Fellowship Programme
- 20 September 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2022Details
- Abstract
- The strong rise in inflation has renewed attention on longer-term inflation expectations. The distribution of individual longer-term inflation expectations from the ECB Survey of Professional Forecasters has recently recentred around 2%, although some respondents have lately raised their inflation expectations clearly above 2%. Some commentators have argued that movements in the upper “tails” of the inflation expectations’ distribution might signal a possible de-anchoring of expectations. This box takes a closer look at recent movements in long-term inflation expectations, especially of those forecasters currently in the upper tail of the distribution. We find that (a) historically, this tail group's longer-term inflation expectations have been higher, more volatile and more sensitive to realised inflation than the expectations of the rest of respondents, (b) respondents in this tail group perceive the current inflation spike to be more persistent, and (c) the evidence suggests that their expectations have not led movements in those of the rest of the professional forecasters.
- JEL Code
- E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
D83 : Microeconomics→Information, Knowledge, and Uncertainty→Search, Learning, Information and Knowledge, Communication, Belief
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
- 20 September 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2022Details
- Abstract
- The COVID-19 pandemic triggered a temporary decrease in the labour market activity of older workers in the euro area. Our analysis finds that a part of the decrease was driven by a pandemic-induced shift in the retirement decisions of older workers, affecting around 175,000 people. This represents 0.5% of the labour force aged 55-74 retiring earlier than planned due to the pandemic. The heightened economic uncertainty and health risks stemming from the pandemic persuaded some older workers either to bide their time before returning to work or to retire early. Early retirement was most pronounced for workers in poorer health, stressing the growing importance of health risks for labour market developments.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J14 : Labor and Demographic Economics→Demographic Economics→Economics of the Elderly, Economics of the Handicapped, Non-Labor Market Discrimination
J26 : Labor and Demographic Economics→Demand and Supply of Labor→Retirement, Retirement Policies
- 19 September 2022
- OCCASIONAL PAPER SERIES - No. 306Details
- Abstract
- This article surveys the literature on consumption risk sharing, focusing on the findings for the euro area and for the United States, but also presenting evidence for other countries. The literature examined found that risk sharing is higher in more mature federations, such as the United States, than in the euro area. The papers surveyed suggest that state/country-specific output shocks are primarily smoothed out through the capital and credit channel, whereas the fiscal channel as a minor role, especially in the euro area. Overall, about 70% of shocks is smoothed in the United States while just 40% in the euro area. At the same time, our analysis of the response to the COVID-19 crisis indicates that risk sharing in the euro area has been more resilient than it was during the global financial crisis of 2008-09. Overall, our results point to the need for further improvements to the private and public risk-sharing channels in the euro area to ensure more effective cushioning against asymmetric shocks and to boost progress towards the completion of European Monetary Union (EMU).
- JEL Code
- C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
Interest rates
| Marginal lending facility | 1.50 % |
| Main refinancing operations (fixed rate) | 1.25 % |
| Deposit facility | 0.75 % |
Inflation rate
Inflation dashboardExchange rates
| USD | US dollar | 0.9644 | |
| JPY | Japanese yen | 139.28 | |
| GBP | Pound sterling | 0.89275 | |
| CHF | Swiss franc | 0.9503 |
Financial stability
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