SPEECH
11 October 2021
The monetary policy toolbox
Inflation needs to reach 2% well ahead of the end of our projection horizon and durably for the rest of it, says Chief Economist Philip R. Lane at our Conference on Monetary Policy. Our interest rate policy should not react to inflation shocks expected to fade away.
Speech
SPEECH
8 October 2021
Addressing digital finance risks
Big techs’ role in finance and digital assets such as crypto-assets and stablecoins are growing rapidly, says Executive Board member Fabio Panetta. Their confluence could undermine financial resilience globally and we should not wait for another crisis before regulating them.
Speech
PODCAST
6 October 2021
What is behind current inflation spikes?
What is causing the rise in inflation we are seeing at the moment? And which trends could impact prices in the future? In The ECB Podcast, host Katie Ranger looks for answers to these questions in the discussions held at the recent ECB Forum on Central Banking.
The ECB Podcast- 12 October 2021
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 12 October 2021
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 12 October 2021
- EURO AREA SECURITIES ISSUES STATISTICSAnnexes
- 12 October 2021
- EURO AREA SECURITIES ISSUES STATISTICS
- 12 October 2021
- EURO AREA SECURITIES ISSUES STATISTICS
- 7 October 2021
- MONETARY POLICY ACCOUNT
- 6 October 2021
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 6 October 2021
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 5 October 2021
- EURO MONEY MARKET STATISTICS
- 16 October 2021
- 2021 Per Jacobsson Lecture by Christine Lagarde, President of the ECB, at the IMF Annual Meetings
- 14 October 2021
- Statement by Christine Lagarde, President of the ECB, at the forty-fourth meeting of the International Monetary and Financial Committee
- 12 October 2021
- Speech by Christine Lagarde, President of the ECB, at the Finance at Countdown event
- 11 October 2021
- Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Monetary Policy: bridging science and practice
- 8 October 2021
- Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the panel on “Cross-border dimensions of non-bank financial intermediation: what are the priorities for building resilience globally?”, as part of the UK G7 Presidency Conference on “Safe Openness in Global Trade and Finance” hosted by the Bank of England
- 24 September 2021
- Interview with Christine Lagarde, President of the ECB, conducted by Annette Weisbach, CNBC, on 23 September
- 17 September 2021
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Joost van Kuppeveld and Daan Ballegeer
- 16 September 2021
- Interview with Christine Lagarde, President of the ECB, conducted by David Rubenstein, Bloomberg, on 13 September
- 1 September 2021
- Interview with Christine Lagarde, President of the ECB, conducted by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, on 30 August 2021
- 1 September 2021
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Miquel Roig and Jorge Zuloaga on 26 August and published on 1 September 2021
- 14 September 2021
- Blog post by Isabel Schnabel, Member of the Executive Board of the ECBDetails
- Summary
- While rising inflation understandably worries people, current inflation rates should be interpreted with caution, writes Executive Board member Isabel Schnabel.
- 31 August 2021
- Contribution by Isabel Schnabel, Member of the Executive Board of the ECB, to the International Monetary Fund’s magazine Finance and DevelopmentDetails
- Summary
- The existential threat posed by climate change implies that central banks must not stand on the sidelines in the fight against global warming, writes Executive Board member Isabel Schnabel. Our ambitious climate action plan outlines how the ECB will contribute within its mandate.
- 19 August 2021
- Philip R. Lane, Member of the Executive Board of the ECBDetails
- Summary
- Our revised forward guidance is a fundamental step in fulfilling our commitment to 2% inflation, writes Chief Economist Philip R. Lane. He also discusses the three conditions that should be met before interest rates are raised.
- 27 July 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECBDetails
- Summary
- If we make the recovery fund work and if we embed the lessons from the pandemic in the EMU governance framework, we can emerge from the crisis with a stronger economy and greater social and political cohesion, says Executive Board member Fabio Panetta in The ECB Blog.
- 14 July 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECBDetails
- Summary
- We have decided to launch a project to prepare for possibly issuing a digital euro. A digital euro will be successful if it adds value for people, merchants and financial intermediaries in the euro area, explains Executive Board member Fabio Panetta in The ECB Blog.
- 15 October 2021
- WORKING PAPER SERIES - No. 2610Details
- Abstract
- We analyse the elasticity of the household consumption expenditure (HCE) deflator to the exchange rate, using world input-output tables (WIOT) from 1995 to 2019. In line with the existing literature, we find a modest output-weighted elasticity of around 0.1. This elasticity is stable over time but heterogeneous across countries, ranging from 0.05 to 0.22. Such heterogeneity mainly reflects differences in foreign product content of consumption and intermediate products. Direct effects through imported consumption and intermediate products entering domestic production explain most of the transmission of an exchange rate appreciation to domestic prices. By contrast, indirect effects linked to participation in global value chains play a limited role. Our results are robust to using four different WIOT datasets. As WIOT are data-demanding and available with a lag of several years, we extrapolate a reliable estimate of the HCE deflator elasticity from 2015 onwards using trade data and GDP statistics.
- JEL Code
- C67 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Input?Output Models
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
- 15 October 2021
- WORKING PAPER SERIES - No. 2609Details
- Abstract
- This paper proposes an econometric framework for nowcasting the monetary policy stance and decisions of the European Central Bank (ECB) exploiting the ow of conventional and textual data that become available between two consecutive press conferences. Decompositions of the updated nowcasts into variables' marginal contribution are also provided to shed light on the main drivers of the ECB's reaction function at every point in time. In out-of-sample nowcasting experiments, the model provides an accurate tracking of the ECB monetary policy stance and decisions. The inclusion of textual variables contributes significantly to the gradual improvement of the model performance.
- JEL Code
- E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 14 October 2021
- WORKING PAPER SERIES - No. 2608Details
- Abstract
- The macroeconomic effects of climate-related events and climate policies depend on the interaction between demand- and supply-type of shocks that those events and policies imply. Using a panel of 24 OECD countries for the sample 1990-2019 and a standard macroeconomic framework, the paper tests the combined effect of (1) climate change, (2) environmental policies and (3) environment-related technologies on the macroeconomy. Results show that climate change and policies to counteract them have a significant, albeit not sizeable, macroeconomic effects over the business cycle. We find evidence that physical risks work as negative demand shocks while transition policies or technology improvements resemble downward supply movements. Furthermore, the disruptive effects on the economy are exacerbated for countries without carbon tax or with a high exposure to natural disasters. Overall our results support the need for a uniform policy mix to counteract climate change with a balance between demand-pull and technology-push policies.
- JEL Code
- C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
Q5 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics
- 14 October 2021
- WORKING PAPER SERIES - No. 2607Details
- Abstract
- We provide evidence that the strength of the bank lending channel varies considerably across three major events in the European sovereign debt crisis - the Greek debt restructuring (PSI), outright monetary transactions (OMT), and quantitative easing (QE). We study how lending responds to each shock using detailed bank, firm, and household data from Portugal, a country that was directly exposed to the three events. While the price of sovereign debt securities increased in all three events, banks reduced sovereign debt holdings and realized accumulated capital gains only after QE. As a result, lending to final borrowers reacted more strongly to QE than to the PSI or OMT events. Our results suggest that asset purchases were more effective than signalling events at stimulating the bank lending channel.
- 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
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages - Network
- ECB Lamfalussy Fellowship Programme
- 14 October 2021
- OTHER PUBLICATION
- 14 October 2021
- RESEARCH BULLETIN - No. 88Details
- Abstract
- Policy rates in advanced economies are unusually low. What effect does this have on bank stability? I identify two competing effects. On the one hand, low rates harm bank profits by squeezing interest margins. On the other hand, they boost the value of long-term assets held by banks. Using a standard banking model, I determine the policy rate level at which these two forces cancel each other out, i.e. the tipping point. Past this tipping point, the net effect of low rates on bank capital is negative. Applying the model to the US economy, I quantify the tipping point in August 2007 as a policy rate of 0.55%.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 13 October 2021
- WORKING PAPER SERIES - No. 2606Details
- Abstract
- We estimate a FAVAR with Bayesian techniques in order to investigate the impact of loan supply conditions on euro area corporate investment and its financing structure. We identify shocks to overall demand and loan supply with sign and impact restrictions. Although tightened financial conditions have adversely impacted corporate investment during and after the sovereign debt crisis, the resulting impediments in loan supply, illustrated by lower loan volumes and higher spreads, have been partly alleviated by strengthened corporate debt issuance. We show that (1) part of the protracted increase in debt to loan ratio since the crisis reflects bottlenecks in the provision of bank credit and (2) the tightened loan supply has been more adverse for small corporations with limited market access. Overall, our analysis of macro-financial developments suggests the need for policy actions to deepen the European corporate debt market and enhance market access for smaller corporates.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E66 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General Outlook and Conditions
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 13 October 2021
- OCCASIONAL PAPER SERIES - No. 284Details
- Abstract
- The in-house credit assessment systems (ICASs) developed by euro area national central banks (NCBs) are an important source of credit risk assessment within the Eurosystem collateral framework. They allow counterparties to mobilise as collateral the loans (credit claims) granted to non-financial corporations (NFCs). In this way, ICASs increase the usability of non-marketable credit claims that are normally not accepted as collateral in private market repo transactions, especially for small and medium-sized banks that lend primarily to small and medium-sized enterprises (SMEs). This ultimately leads not only to a widened collateral base and an improved transmission mechanism of monetary policy, but also to a lower reliance on external sources of credit risk assessment such as rating agencies. The importance of ICASs is exemplified by the collateral easing measures adopted in April 2020 in response to the coronavirus (COVID-19) crisis. The measures supported the greater use of credit claim collateral and, indirectly, increased the prevalence of ICASs as a source of collateral assessment. This paper analyses in detail the role of ICASs in the context of the Eurosystem’s credit operations, describing the relevant Eurosystem guidelines and requirements in terms of, among other factors, the estimation of default probabilities, the role of statistical models versus expert analysis, input data, validation analysis and performance monitoring. It then presents the main features of each of the ICASs currently accepted by the Eurosystem as credit assessment systems, highlighting similarities and differences.
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 12 October 2021
- WORKING PAPER SERIES - No. 2605Details
- Abstract
- We examine the transmission of monetary policy via the euro area investment fund sector using a BVAR framework. We find that expansionary shocks are associated with net inflows and that these are strongest for riskier fund types, reflecting search for yield among euro area investors. Search for yield behaviour by fund managers is also evident, as they shift away from low yielding cash assets following an expansionary shock. While higher risk-taking is an intended consequence of expansionary monetary policy, this dynamic may give rise to a build-up in liquidity risk over time, leaving the fund sector less resilient to large outflows in the face of a crisis.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 12 October 2021
- OCCASIONAL PAPER SERIES - No. 283Details
- Abstract
- The consensus back in 2008 – ten years after the introduction of the euro – was that the adoption of a common currency had made a limited impact of around 2% in total on the trade flows of the first wave of euro area countries (Baldwin et al., 2008). Since then, six more countries have joined the euro area, and firms have internationalised their production processes. These two phenomena are interrelated and may have changed the way the common currency affects the euro area economy. Therefore, with the common currency now into its third decade – and with more countries queuing to adopt it – this paper revisits the trade effects of the euro, focusing on the newer euro adopters (i.e. those countries that have adopted the euro since 2007) and their interaction with the first wave of euro area members via supply chains. The contribution of the paper is twofold. First, it revisits the estimated aggregate impact of the euro on euro area trade, as well as on trade within and between the two waves of adopters. Data on bilateral flows between 1990 and 2015 for an extended sample of countries to estimate a gravity equation indicate a significant trade impact, ranging between 4.3% and 6.3% in total on average, with the magnitude being the highest for exports from the second wave of adopters to the first wave of adopters. If a synthetic control approach (Abadie and Gardeazabal, 2003; Abadie et al., 2010) is used instead, the estimated gains associated with euro adoption are greater. In particular, exports of both intermediate and final products from countries belonging to the first wave of euro adopters to those belonging to the second wave are estimated to have increased by about 30% using this approach. The second contribution made by this paper relates to the channels through which trade might be affected by a currency union. This question is explored by looking separately at trade in intermediate goods and final products. While we find that trade gains were mainly driven by trade in intermediate goods among countries that adopted the currency earlier (5.3%), our results also show that the euro had a positive effect on the exports of final products from the second wave of adopters to other euro area countries. This effect is as high as 10.6% with the gravity model and 32% with the synthetic control approach. One of the reasons for the difference in the range of estimates between the two approaches might be that the gravity model can control for unobserved characteristics via fixed effects, while the synthetic control approach may fail to do so. These results suggest that the euro facilitated the establishment and expansion of international production chains in Europe. In turn, this is likely to have increased business cycle synchronisation in the euro area and to have supported market access for later adopters.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
- 11 October 2021
- WORKING PAPER SERIES - No. 2604Details
- Abstract
- Those of professional forecasters do. For a wide range of time series models for the euro area and its member states we find a higher average forecast accuracy of models that incorporate information on inflation expectations from the ECB’s SPF and Consensus Economics compared to their counterparts that do not. The gains in forecast accuracy from incorporating inflation expectations are typically not large but significant in some periods. Both short- and long-term expectations provide useful information. By contrast, incorporating expectations derived from financial market prices or those of firms and households does not lead to systematic improvements in forecast performance. Individual models we consider are typically better than univariate benchmarks but for the euro area the professional forecasters are more accurate, especially in recent years (not always for the countries). The analysis is undertaken for headline inflation and inflation excluding energy and food and both point and density forecast are evaluated using real-time data vintages over 2001-2019.
- JEL Code
- C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
- 11 October 2021
- WORKING PAPER SERIES - No. 2603Details
- Abstract
- This paper analyses the effects of the COVID-19 pandemic shock on small open economies in a monetary union with an application to the euro area. Accounting for a high degree of openness and a strong dependence on intra and extra union trade, we focus on the size and the direction of international spillovers - both from the shock itself and from the ensuing fiscal response. To do so, we use a unified modelling framework: The Euro Area and the Global Economy (EAGLE) model. Furthermore, within this general framework, we assess the extent to which specific modelling features shape the dynamic responses to the COVID-19 pandemic. The main messages are as follows. First, fiscal spillovers from the rest of the monetary union do matter. Second, the effective lower bound amplifies the size of the spillovers. Third, the design of wage negotiations leads to wage subsidies having negative international fiscal policy spillovers. Fourth, import content of government spending interacts with the effective lower bound, strongly affecting the size and sign of spillovers. Fifth, when households have finite lifetimes, the responses of output and inflation are amplified compared to the case with infinitely lived households. Finally, a next generation EU instrument is more effective when financed using a tax on consumption.
- JEL Code
- C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 11 October 2021
- SURVEY OF MONETARY ANALYSTS
- 8 October 2021
- WORKING PAPER SERIES - No. 2602Details
- Abstract
- We quantify the effects of wage bargaining shocks on macroeconomic aggregates using a structural vector auto-regression model for Germany. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This narrative information disciplines the impulse responses to a wage bargaining shock of un-employment and output, and sharpens inference on the behaviour of other variables. The implied transmission mechanism is in line with the theoretical predictions of a large class of search and matching models. We also find that wage bargaining shocks explain a sizeable share of aggregate fluctuations in unemployment and inflation, that their pass-through to prices is very close to being full, and that they imply plausible dynamics for the vacancy rate, firms’ profits, and the labour share.
- JEL Code
- J2 : Labor and Demographic Economics→Demand and Supply of Labor
J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
- 8 October 2021
- WORKING PAPER SERIES - No. 2601Details
- Abstract
- We introduce a Bayesian Mixed-Frequency VAR model for the aggregate euro area labour market that features a structural identification via sign restrictions. The purpose of this paper is twofold: we aim at (i) providing reliable and timely forecasts of key labour market variables and (ii) enhancing the economic interpretation of the main movements in the labour market. We find satisfactory results in terms of forecasting, especially when looking at quarterly variables, such as employment growth and the job finding rate. Furthermore, we look into the shocks that drove the labour market and macroeconomic dynamics from 2002 to early 2020, with a first insight also on the COVID-19 recession. While domestic and foreign demand shocks were the main drivers during the Global Financial Crisis, aggregate supply conditions and labour supply factors reflecting the degree of lockdown-related restrictions have been important drivers of key labour market variables during the pandemic.
- JEL Code
- J6 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
- 7 October 2021
- WORKING PAPER SERIES - No. 2600Details
- Abstract
- This paper develops a Bayesian quantile regression model with time-varying parameters (TVPs) for forecasting inflation risks. The proposed parametric methodology bridges the empirically established benefits of TVP regressions for forecasting inflation with the ability of quantile regression to model flexibly the whole distribution of inflation. In order to make our approach accessible and empirically relevant for forecasting, we derive an efficient Gibbs sampler by transforming the state-space form of the TVP quantile regression into an equivalent high-dimensional regression form. An application of this methodology points to a good forecasting performance of quantile regressions with TVPs augmented with specific credit and money-based indicators for the prediction of the conditional distribution of inflation in the euro area, both in the short and longer run, and specifically for tail risks.
- JEL Code
- C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
- 7 October 2021
- WORKING PAPER SERIES - No. 2599Details
- Abstract
- Prospective economic developments depend on the behavior of consumer spending. A key question is whether private expenditures recover once social distancing restrictions are lifted or whether the COVID-19 crisis has a sustained impact on consumer confidence, p references, and, hence, spending. The elongated and profound experience of the COVID-19 crisis may durably affect consumer preferences. We conducted a representative consumer survey in five European countries in summer 2020, after the release of the first wave’s lockdown restrictions, and document the underlying reasons for households’ reduction in consumption in five key sectors: tourism, hospitality, services, retail, and public transports. We identify a large confidence shock in the Southern European countries and a shift in consumer preferences in the Northern European countries, particularly among high-income earners. We conclude that the COVID-19 experience has altered consumer behavior and that long-term sectoral consumption shifts may occur.
- JEL Code
- D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D81 : Microeconomics→Information, Knowledge, and Uncertainty→Criteria for Decision-Making under Risk and Uncertainty
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E71 : Macroeconomics and Monetary Economics
G51 : Financial Economics
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
- 6 October 2021
- WORKING PAPER SERIES - No. 2598Details
- Abstract
- We study the transmission of (unconventional) monetary policy to the real sector when firm decisions depend on both current and future credit market conditions. For a given level of current credit access, investment and employment increases more at firms expecting bank credit to improve in the future. Three separate unconventional policies by the ECB—the OMT, the introduction of negative rates, and the CSPP—improved expectations of future credit access for SMEs borrowing from banks that were expected to increase SME lending due to the policy. Our results enhance our understanding of the bank balance sheet channel of monetary policy.
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 6 October 2021
- WORKING PAPER SERIES - No. 2597Details
- Abstract
- This paper analyses the incidence and severity of sudden stops in euro area countries before and after the introduction of the ECB’s asset purchase programmes. We define sudden stops as abrupt declines in private net financial inflows, i.e. total flows adjusted for EU and IMF loans and changes in TARGET2 balances. Distinguishing between mild and severe sudden stops, we document that sudden stops were overall more frequent and more severe in euro area countries compared to other OECD economies over the period 1999–2020. On the basis of a multinomial logit model, we find that the susceptibility of euro area countries to severe sudden stops mainly reflects domestic fundamentals whereas there is no clear evidence of an adverse direct effect of being part of the euro area. On the contrary, TARGET2 appears to act as an “automatic stabiliser”, counteracting sudden stops in private financial i nflows. Moreover, our econometric analysis suggests that the asset purchase programmes implemented by the ECB since 2015 have overall almost halved the risk of severe sudden stops in euro area countries. We find tentative evidence that this effect operates through confidence channels.
- JEL Code
- F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F31 : International Economics→International Finance→Foreign Exchange
F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 5 October 2021
- WORKING PAPER SERIES - No. 2596Details
- Abstract
- We propose a theoretical framework to reconcile episodes of V-shaped and L-shaped recovery, encompassing the behaviour of the U.S. economy before and after the Great Recession. In a DSGE model with endogenous growth, negative demand shocks destroy productive capacity, moving GDP to a lower trajectory. A Taylor rule policy designed to reduce the output gap may counterbalance the shocks, preventing the destruction of economic capacity and inducing a V-shaped recovery. However, when shocks are deep and persistent enough, like during the Great Recession, they call for a downward revision of potential output measures, the so-called switching-track, weakening the recovering role of monetary policy and inducing an L-shaped recovery. When calibrated to the U.S. economy, the model replicates well the L-shaped recovery and switching-track that followed the Great Recession, as well as the V-shaped recoveries that followed the oil shock recessions.
- JEL Code
- E12 : Macroeconomics and Monetary Economics→General Aggregative Models→Keynes, Keynesian, Post-Keynesian
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
O41 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→One, Two, and Multisector Growth Models
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
Interest rates
| Marginal lending facility | 0.25 % |
| Main refinancing operations (fixed rate) | 0.00 % |
| Deposit facility | − 0.50 % |
Inflation rate
Inflation dashboardExchange rates
| USD | US dollar | 1.1602 | |
| JPY | Japanese yen | 132.65 | |
| GBP | Pound sterling | 0.84368 | |
| CHF | Swiss franc | 1.0729 |
Financial stability
Our tasks Institutional framework Financial Stability Review Macroprudential policy measuresMarket operations
Open market operations Asset purchase programmes Lendings of holdings under PSPPNOT AN EXPERT? CHECK EXPLAINER
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