Research Bulletins published in 2016

No. 29
21 November 2016
The effective lower bound: some implications for inflation dynamics beyond the current low interest rate environment

Abstract

JEL Classification

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

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

Abstract

The fact that there is an effective lower bound (ELB) on nominal interest rates makes it more difficult for central banks to achieve their inflation objectives with conventional policy tools. This is the case not only in the current environment where policy rates are at, or close to, the ELB, but also when the economy has recovered and policy rates have risen above the ELB.

No. 28
28 October 2016
The recovery of investment in the euro area in the aftermath of the great recession: how does it compare historically?

Abstract

JEL Classification

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

Abstract

In the aftermath of the Great Recession, investment in the United States has recovered, whereas investment in the euro area has remained low following the sovereign debt crisis which temporarily halted the recovery in the euro area. Nevertheless, investment in the current cyclical phase is not unusual as such; rather, it is aggregate consumption that is growing more slowly than usual — a finding which highlights the importance of policies aimed at stimulating aggregate demand.

No. 27
27 September 2016
Does the tax advantage of debt impact financial stability?

Abstract

JEL Classification

G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages

G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation

G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill

H25 : Public Economics→Taxation, Subsidies, and Revenue→Business Taxes and Subsidies

Abstract

The tax deductibility of interest expenses on debt is an often neglected factor in the policy debate on bank capital requirements. A more equal tax treatment of debt and equity funding could enhance financial stability by giving banks an incentive to reduce leverage.

No. 26
31 August 2016
How distinct are financial cycles from business cycles?

Abstract

JEL Classification

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

Abstract

One foundation for developing new macroprudential policy in addition to traditional macroeconomic stabilisation policy is that financial cycles differ from business cycles. This article identifies properties of credit and housing cycles, shows how they relate to GDP cycles, and compares the reliability of real-time estimates.

No. 25
25 July 2016
The role of the ECB’s asset purchases in preventing a potential de-anchoring of longer-term inflation expectations

Abstract

JEL Classification

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

E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications

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

Abstract

Longer-term inflation expectations are generally seen to be an indicator of the credibility of central banks in achieving their price stability objectives and should, therefore, remain solidly “anchored”. In this article, we argue on the basis of counterfactual analysis that the ECB’s expanded asset purchase programme has been important in preventing a potential de-anchoring of inflation expectations and a further prolongation of the period of low inflation outcomes.

No. 24
1 July 2016
How large is the output gap in the euro area

Abstract

JEL Classification

C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes

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

E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles

E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications

Abstract

The estimates of the output gap depend on the features of the models used to derive them. We discriminate among different estimates on the basis of their ability to forecast inflation. Our analysis suggests that output in the euro area was 6% lower than potential in 2014 and 2015, which is substantially below institutional estimates.