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CLIMATE CHANGE

Climate and our monetary policy operations

Within our mandate, we’ll take further steps to incorporate climate change into our monetary policy operations. We'll better account for climate change in our corporate bond purchases, collateral framework, disclosure requirements and risk management.

Press release
EVENT 5 July 2022

Discussing climate change with civil society

We met with civil society representatives to discuss our recent decisions regarding climate change and monetary policy. Our regular dialogue with civil society organisations is important as they play a vital role in pushing for bolder and greener policies in all fields.

SPEECH 4 July 2022

Challenges for monetary policy

We are committed to fighting fragmentation, says Vice-President Luis de Guindos. This is to ensure that the financing conditions of two equally sound euro area firms react in a similar way to adjustments in our policy stance, regardless of where they are based.

Speech
CLIMATE CHANGE 6 July 2022

Relaunch of the climate change webpage

Transparency about what we are doing to manage climate-related risks is key. That’s why we have updated our climate change webpage. Take a look and learn all about our climate agenda, the green transition and more.

Climate change hubpage
6 July 2022
WEEKLY FINANCIAL STATEMENT
Annexes
6 July 2022
WEEKLY FINANCIAL STATEMENT - COMMENTARY
5 July 2022
EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR (EARLY)
Annexes
5 July 2022
EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR (EARLY)
5 July 2022
EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR (EARLY)
5 July 2022
EURO MONEY MARKET STATISTICS
5 July 2022
BALANCE OF PAYMENTS (QUARTERLY)
5 July 2022
MFI INTEREST RATE STATISTICS
4 July 2022
Remarks by Luis de Guindos, Vice-President of the ECB, at the Frankfurt Euro Finance Summit
2 July 2022
Presentation by Isabel Schnabel, Member of the Executive Board of the ECB, at Petersberger Sommerdialog
1 July 2022
Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the European Parliament’s Innovation Day “The EU in the world created by the Ukraine war”
28 June 2022
Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2022 on “Challenges for monetary policy in a rapidly changing world” in Sintra, Portugal
22 June 2022
Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, 10th Annual Conference on Bank Steering & Bank Management at the Frankfurt School of Finance & Management
16 June 2022
Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Dein Spiegel on 19 May 2022
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16 June 2022
Interview with Luis de Guindos, Vice-President of the ECB, conducted by Maria Vasileiou
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30 May 2022
Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Nuño Rodrigo and Laura Salces on 25 May 2022
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7 May 2022
Interview with Christine Lagarde, President of the ECB, conducted by Miha Jenko and published on 7 May 2022
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6 May 2022
Interview on Twitter with Frank Elderson, Member of the Executive Board of the ECB, conducted and published on 6 May 2022
23 May 2022
Blog post by Christine Lagarde, President of the ECB
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Summary
As the expected date of interest rate lift-off draws closer, it gets more important to clarify the path of policy normalisation ahead of us – especially given the complex environment that monetary policy in the euro area is facing, says President Christine Lagarde in The ECB Blog.
10 February 2022
Blog post by Philip R. Lane, Member of the Executive Board of the ECB
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Summary
Looking at inflation dynamics, the relative price dislocations associated with bottlenecks are intrinsically short-term, Chief Economist Philip R. Lane writes in The ECB Blog. An increase in the relative price for a scarce item will stimulate new supply, while cooling demand.
31 December 2021
Blog post by Christine Lagarde, President of the ECB
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Summary
Europe and the euro have become inseparable, President Christine Lagarde writes in The ECB Blog to mark the 20th anniversary of euro banknotes and coins. She recalls her first encounter with a euro banknote, and reflects on how far the euro has come and what lies ahead.
19 November 2021
Blog post by Fabio Panetta, Member of the Executive Board of the ECB
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Summary
To continue playing its role as the anchor of the monetary system, central bank money will need to respond to evolving needs, says Executive Board member Fabio Panetta. This means that we must intensify the work on central bank digital currencies.
4 November 2021
Blog post by Christine Lagarde, President of the ECB
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Summary
The COP26 summit is a vital opportunity to set out a clear path towards a zero-carbon world, President Lagarde writes in a blog post. While the road ahead may seem daunting, she argues that a credible transition path will need clear signposts to break it up into more manageable stages.
6 July 2022
MEP LETTER
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6 July 2022
MEP LETTER
6 July 2022
MEP LETTER
4 July 2022
WORKING PAPER SERIES - No. 2677
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Abstract
We examine the existence of physical and transition climate risk premia in euro areaequity markets. To do so, we develop two novel physical and transition risk indicators, basedon text analysis, which are then used to gauge the presence of climate risk premia. Resultssuggest that climate risk premia for both, transition and physical climate risk, have increasedsince the time of the Paris Agreement. In addition, we investigate which metrics may be usedby investors to proxy a firm’s exposure to either physical or transition risk. To this end, weconstruct portfolios according to the most common firm-specific climate metrics and estimatethe sensitivity of these portfolios to our risk indicators. We compare results from these firmlevelproxies to much simpler sectoral classifications to see if investors may simply pigeonholefirms into the industry they operate in. We find that firm level information appears to beused as a gauge for transition risk, in particular since 2015, whereas sectoral classificationsappear insufficient. However, sectoral classification may be employed to broadly gauge firms’exposures to physical risk.
JEL Code
C58 : Mathematical and Quantitative Methods→Econometric Modeling→Financial Econometrics
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
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
Q51 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Valuation of Environmental Effects
4 July 2022
MEP LETTER
4 July 2022
SURVEY OF MONETARY ANALYSTS
1 July 2022
WORKING PAPER SERIES - No. 2676
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Abstract
Since most macroeconomic data are revised after the initial release both researchers andpolicy-makers have no choice rather than recognising and understanding the revisions. Thispaper analyses revisions to the fiscal data in the euro area, also by contrasting them with the’better-understood’ macro revisions. Concretely, the study verifies whether fiscal revisionsfulfil requirements to treat them as well-behaved. To this end, we construct a fiscal quarterlyreal-time dataset, which contains quarterly releases of Government Finance Statistics andwhich is supplemented by macro variables from Main National Accounts. Fiscal revisionsdo not satisfy desirable properties expected from well-behaved revisions. In particular, theytend to have a positive bias, they exhibit a big dispersion and they are largely predictable.Also, they are similar to macro revisions, in particular since 2014, which contradicts theoften heard view about fiscal data being subject to particularly large revisions.
JEL Code
C80 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
1 July 2022
WORKING PAPER SERIES - No. 2675
Details
Abstract
Digitalisation can be described as a sequence of technology and supply shocks which affect the economy through employment and labour markets, productivity and output, and competition and market structure. This paper focuses on how digitalisation - the process of diffusion of digital technologies - is affected by institutions and governance. It discusses a number of theoretical mechanisms and empirical evidence for different sets of European and other countries. The results indicate that a higher quality of institutions is usually associated with both a greater speed of diffusion and a greater spread of digital technologies. The results also suggest that there are large, policy-relevant differences in the diffusion process depending on the level of development as well as the state of technological change of a country.
JEL Code
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
O11 : Economic Development, Technological Change, and Growth→Economic Development→Macroeconomic Analyses of Economic Development
O31 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Innovation and Invention: Processes and Incentives
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
O57 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Comparative Studies of Countries
1 July 2022
OTHER PUBLICATION
30 June 2022
WORKING PAPER SERIES - No. 2674
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Abstract
This paper studies the bilateral drivers of mergers and acquisitions (M&As) between European banks. Two findings document that banks use M&A as a device to leverage their expertise rather than to diversify. (i) Following the literature on matrimonial matching by using a binary logit model, the paper examines how the structure of acquiring banks in terms of geographical location (headquarters and subsidiaries) influences the choice of targeted banks for an M&A transaction. It finds that banks favour domestic expansion over international diversification. (ii) The paper investigates how the business model of acquiring banks determines their selection of targeted banks. Very often, banks tend to target counterparts with the same business model or, to a lesser extent, those with the same business model as one of their subsidiaries.
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
L22 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Organization and Market Structure
30 June 2022
WORKING PAPER SERIES - No. 2673
Details
Abstract
Using a novel quarterly dataset on debt financing of non-financial corporations, this paper provides the first empirical evaluation of the relative importance of loan and market-based finance (MBF) supply shocks on business cycles in the euro area as a whole and in its five largest countries. In a Bayesian VAR framework, the two credit supply shocks are identified via sign and inequality restrictions. The results suggest that both loan supply and MBF supply play an important role for business cycles. For the euro area, the explanatory power of the two credit supply shocks for GDP growth variations is comparable. However, there is heterogeneity across countries. In particular, in Germany and France, the explanatory power of MBF supply shocks exceeds that of loan supply shocks. Since MBF is mostly provided by non-bank financial intermediaries, the findings suggest that strengthening their resilience — such as through an enhanced macroprudential framework — would support GDP growth.
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
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G2 : Financial Economics→Financial Institutions and Services
27 June 2022
WORKING PAPER SERIES - No. 2672
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Abstract
This paper studies the long-run evolution of bank risk and its links to the macroeconomy. Using data for 17 advanced economies, we show that the riskiness of bank assets declined materially between 1870 and 2016. But even though bank assets have become safer, the losses on these assets are associated with increasingly large output gaps. Before 1945, bank asset returns had no excess predictive power for future economic activity, while after 1945 they have outperformed non-financials as a predictor of GDP. We provide evidence linking this increasing connectedness between banks and the macroeconomy to secular increases in financial and macroeconomic leverage.
JEL Code
G01 : Financial Economics→General→Financial Crises
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
O16 : Economic Development, Technological Change, and Growth→Economic Development→Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
Network
ECB Lamfalussy Fellowship Programme
27 June 2022
WORKING PAPER SERIES - No. 2671
Details
Abstract
We build a model to simulate how the euro area market-based financial system may function under stress. The core of the model is a set of representative agents reflecting key economic sectors, which interact in asset, funding, and derivatives markets and face solvency and liquidity constraints on their behaviour. We illustrate the model's behaviour in a two-layer approach. In Layer 1 the deterioration in the outlook for the corporate sector triggers portfolio reallocation by the model's agents. Layer 2 adds a rating downgrade shock where a fraction of investment grade corporate bonds is downgraded to high yield, which creates further rebalancing pressure and price movements. The model predicts (i) asset flows (buying and selling of marketable securities) across agents and (ii) balance sheet losses. It also provides quantitative evidence on equilibrium effects of the macroprudential regulation of nonbanks, which we illustrate by varying investment fund cash buffers.
JEL Code
G17 : Financial Economics→General Financial Markets→Financial Forecasting and Simulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
27 June 2022
OTHER PUBLICATION
24 June 2022
RESEARCH BULLETIN - No. 97
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Abstract
Throughout the world, the global financial crisis fostered the design and adoption of macroprudential policies to safeguard the financial system. This raises important questions for monetary policy, which, by contrast, primarily focuses on maintaining price stability. What, if any, is the relationship between (conventional) monetary policy and macroprudential policy? In particular, how does the effectiveness of macroprudential policies influence the conduct of monetary policy? This article reviews recent theoretical and empirical research addressing these questions. The main conclusion is that monetary policy can also perform macroprudential functions, but it does so by deviating from its focus on price stability. The quantification of this trade-off remains an exciting question.
JEL Code
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Network
Research Task Force (RTF)
23 June 2022
FORUM ON CENTRAL BANKING
23 June 2022
ECONOMIC BULLETIN
23 June 2022
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 4, 2022
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Abstract
The debt financing structure of euro area firms has broadened since the introduction of the euro. While bank loans still account for a major share of corporate debt, euro area firms have increasingly resorted to bond financing over the past decade and a half. Empirical evidence suggests that this shift in firms’ debt financing structures affects the transmission of shocks to the euro area economy. While corporate bonds and loans typically respond in a similar procyclical manner to exogenous changes in business investment, bond issuance tends to mildly cushion the credit contraction resulting from adverse supply shocks. The evidence also indicates that a higher share of bond financing strengthens the transmission of monetary policy measures that primarily operate via longer-term yields, whereas short-term rate changes tend to exert stronger real effects in economies that are more dependent on loans. From a broader perspective, the higher share of bond financing renders euro area firms more resilient against crises concentrated in the banking sector. However, this benefit may be counteracted by a rising presence of more vulnerable firms in the corporate bond market and by the structural vulnerabilities of non-bank financial intermediaries, which are significant investors in that market.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
23 June 2022
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 4, 2022
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Abstract
This box describes the ECB’s liquidity conditions and monetary policy operations during the first and second maintenance periods of 2022 from 9 February to 19 April 2022.
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
23 June 2022
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 4, 2022
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Abstract
Russia’s invasion of Ukraine has hit economic confidence and increased uncertainty in the euro area. This box illustrates how the increased uncertainty is being transmitted to the economy, adopting a two-step approach. In the first step, the uncertainty shock is identified using a structural vector autoregression model with sign and narrative restrictions. In the second step, the identified shock is used to compute losses in domestic demand, employing local projection methods. The box shows that the uncertainty shock witnessed in the period to April will have a material adverse impact on domestic demand, estimated to be larger for business investment than for consumption. Across sectors, the effect is estimated to be larger for manufacturing than for services and larger for durable goods than for non‑durables.
JEL Code
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles

Interest rates

Marginal lending facility 0.25 %
Main refinancing operations (fixed rate) 0.00 %
Deposit facility − 0.50 %
18 September 2019 Past key ECB interest rates

Inflation rate

Inflation dashboard

Exchange rates

USD US dollar 1.0177
JPY Japanese yen 137.71
GBP Pound sterling 0.85676
CHF Swiss franc 0.9896
Last update: 6 July 2022 Euro foreign exchange rates