ECONOMIC BULLETIN
20 September 2022
Retirement decisions during the pandemic
During the pandemic, fewer older people worked in the euro area, but the outbreak didn’t strongly affect their retirement decisions. Only around 175,000 retired earlier than planned, mostly because of poor health. The participation rate of older workers in the labour market is now increasing again.
Economic Bulletin box
ECONOMIC BULLETIN
19 September 2022
The impact of mortgage rates on the housing market
Mortgage rates in the euro area have risen significantly since the beginning of this year, having fallen to historical lows in 2021. Changes in mortgage rates greatly affect housing market dynamics, particularly in a low interest rate environment.
Economic Bulletin box
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- 20 September 2022
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 20 September 2022
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 20 September 2022
- BALANCE OF PAYMENTS (MONTHLY)
- 19 September 2022
- PRESS RELEASE
- 13 September 2022
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 13 September 2022
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 13 September 2022
- EURO AREA PENSION FUND STATISTICSAnnexes
- 13 September 2022
- EURO AREA PENSION FUND STATISTICS
- 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
- 15 September 2022
- Speech by Luis de Guindos, Vice-President of the ECB, at the CIRSF (Research Centre on Regulation and Supervision of the Financial Sector) Annual International Conference 2022 “The future of the EU financial system in a new geo-economic context”
- 14 September 2022
- Opening remarks by Philip R. Lane, Member of the Executive Board of the ECB, Meeting of the Money Market Contact Group
- 12 September 2022
- Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the seventh ECB Annual Research Conference
- 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
- 29 July 2022
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Tõnis Oja on 25 July
- 16 June 2022
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Dein Spiegel on 19 May 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) +
- 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
- 19 September 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2022Details
- Abstract
- Against a background of rising mortgage rates, this box investigates the impact of changes in mortgage rates on euro area house prices and housing investment through linear and non-linear local projections. The model evidence suggests that housing market dynamics are very sensitive to mortgage rates, especially in a low interest rate environment. At the current juncture, this points to a significant risk of a marked slowdown of the euro area housing market. Yet, pandemic-induced shifts in housing preferences, which are not captured by the models, could counteract higher mortgage rates and could potentially increase uncertainty surrounding the housing outlook.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 16 September 2022
- MEP LETTER
- 16 September 2022
- MEP LETTER
- 16 September 2022
- MEP LETTER
- 16 September 2022
- MEP LETTER
- 16 September 2022
- MEP LETTER
- 16 September 2022
- MEP LETTER
- 16 September 2022
- WORKING PAPER SERIES - No. 2722Details
- Abstract
- Market participants use leveraged derivatives to gain access to equity market exposure through broker banks. Leverage and interconnectedness via overlapping portfolios of dealer banks can amplify adverse market movements, potentially causing sizeable losses. I propose a model, based on granular data, to simulate losses from a banks’ trading book in case of an adverse market scenario. Following a move in asset prices, banks mark their positions and issue margin calls; some (leveraged) counterparties fail to pay their margins, forcing banks to liquidate their positions causing a pressure on asset prices due to market impact. The impact is amplified because of the leverage and when counterparties are exposed to multiple banks over the same underlying. I employ the model to assess current capital and margin rules in covering risks from broker’s exposure to highly leveraged clients.
- JEL Code
- C60 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→General
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
G17 : Financial Economics→General Financial Markets→Financial Forecasting and Simulation
- 15 September 2022
- WORKING PAPER SERIES - No. 2721Details
- Abstract
- The network structure of non-centrally cleared derivative markets, uncovered via the European Market Infrastructure Regulation (EMIR), is investigated with a focus on the Covid-19 market turmoil period. Initial and variation margin networks are reconstructed to analyze channels of potential losses and liquidity dynamics. Despite the absence of central clearing, the derivative network is found to be ultrasmall and a filtering tool is proposed to identify channels in the network characterized by the highest exposures. I find these exposures to be mainly toward institutions outside the euro-area (EA), emphasizing the need for cooperation across different jurisdictions. Anomalous behavior in terms of diverging first and second moments on the degree and strength distributions are detected, signaling the presence of large exposures generating extreme liquidity outflows. A reference table of parameters’ estimates based on real data is provided for different network sizes, with no break of confidentiality, making possible to simulate in a realistic way the liquidity dynamic in global derivative markets even when the access to supervisory data is not granted.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 15 September 2022
- WORKING PAPER SERIES - No. 2720Details
- Abstract
- This paper investigates the impact of the capital relief package adopted to support euro area banks at the outbreak of the COVID-19 pandemic. By leveraging confidential supervisory and credit register data, we uncover two main findings. First, capital relief measures support banks' capacity to supply credit to firms. Second, not all measures are equally successful. Banks adjust their credit supply only if the capital relief is permanent or implemented through established processes that foresee long release periods. By contrast, discretionary relief measures are met with limited success, possibly owing to the uncertainty surrounding their capital replenishment path. Moreover, requirement releases are more effective for banks with a low capital headroom over requirements and do not trigger additional risk-taking. These findings provide key insights on how to design effective bank capital requirement releases in crisis time.
- JEL Code
- E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
G01 : Financial Economics→General→Financial Crises
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 15 September 2022
- OTHER PUBLICATION
- 15 September 2022
- OTHER PUBLICATION
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 | 0.9906 | |
| JPY | Japanese yen | 142.66 | |
| GBP | Pound sterling | 0.87335 | |
| CHF | Swiss franc | 0.9549 |
Financial stability
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