Andrej Sokol

Economics

Division: Prices & Costs
Current Position: Economist
Fields of interest: Macroeconomics and Monetary Economics,International Economics,Mathematical and Quantitative Methods
Email: Andrej.Sokol@ecb.europa.eu

Biography

Education: 2010-2011
MSc Economics, Queen Mary University of London, United Kingdom; 2006-2008
MSc Management, Economics and Industrial Engineering, Politecnico di Milano, Italy; 2003-2006
BSc Management and Production Engineering, Politecnico di Milano, Italy
Professional experience: 2018-
Economist - Prices and Costs Division, Directorate General Economics, European Central Bank; 2017-2018
Senior Research Economist, International Directorate, Bank of England; 2015-2017
Research Economist, International Directorate, Bank of England; 2011-2015
Economist, Monetary Analysis, Bank of England; 2009
Research and Teaching Assistant, Dipartimento di Ingegneria Gestionale, Politecnico di Milano, Italy
Awards: 2011
Principal's prize for outstanding academic achievement, Queen Mary University of London; 2010
"Amici della Fondazione Luigi Einaudi" scholarship, Fondazione Luigi Einaudi
Teaching experience: 2009
Teaching Assistant - Economics (BSc), International Economics (MSc), Economics (MBA), Dipartimento di Ingegneria Gestionale, Politecnico di Milano, Italy

ECB publications

7 December 2021

WORKING PAPER SERIES - No. 2624

Fan charts 2.0: flexible forecast distributions with expert judgement

Andrej Sokol

English

Abstract: I propose a new model, conditional quantile regression (CQR), that generates density forecasts consistent with a specific view of the future evolution of some variables. This addresses a shortcoming of existing quantile regression-based models, for example the at-risk framework popularised by Adrian et al. (2019), when used in settings, such as most forecasting processes within central banks and similar institutions, that require forecasts to be conditional on a set of technical assumptions. Through an application to house price inflation in the euro area, I show that CQR provides a viable alternative to existing approaches to conditional density forecasting, notably Bayesian VARs, with considerable advantages in terms of flexibility and additional insights that do not come at the cost of forecasting performance.
JEL Code: C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets

8 October 2021

WORKING PAPER SERIES - No. 2602

Striking a bargain: narrative identification of wage bargaining shocks

English

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

21 September 2021

OCCASIONAL PAPER SERIES - No. 275

Employment and the conduct of monetary policy in the euro area

English

Abstract: This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across countries, and documents the flatness of the Phillips curve in the euro area. In this context, it is stressed that labour market structures and trend labour market outcomes are primarily determined by national economic policies. The report then recalls that, in many circumstances, inflation and employment move together and pursuing price stability is conducive to supporting employment. However, in response to economic shocks that give rise to a temporary trade-off between employment and inflation stabilisation, the ECB’s medium-term orientation in pursuing price stability is shown to provide flexibility to contribute to the achievement of the EU’s full employment objective. Regarding the conduct of monetary policy in a low interest rate environment, model-based simulations suggest that history-dependent policy approaches − which have been proposed to overcome lasting shortfalls of inflation due to the effective lower bound on nominal interest rates by a more persistent policy response to disinflationary shocks − can help to bring employment closer to full employment, even though their effectiveness depends on the strength of the postulated expectations channels. Finally, the importance of employment income and wealth inequality in the transmission of monetary policy strengthens the case for more persistent or forceful easing policies (in pursuit of price stability) when interest rates are constrained by their lower bound.
JEL Code: E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital

23 April 2021

WORKING PAPER SERIES - No. 2538

Capital flows-at-risk: push, pull and the role of policy

English

Abstract: We characterise the probability distributions of various categories of gross capital flows conditional on information contained in financial asset prices in a panel of emerging market economies, with a focus on ‘tail’ events. Our framework, based on the quantile regression methodology, allows for a separate role of push- and pull-type factors, and because it is based on high-frequency data, can quantify the likelihood of different outturns before official capital flows data are released. We find that both push and pull factors have heterogeneous effects across the distributions of gross capital flows, which are most marked in the left tails. We also explore the role of various policies, and find that macroprudential and capital flows management measures are stabilising, leading to lower chances of either large portfolio inflows or out flows.
JEL Code: F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F34 : International Economics→International Finance→International Lending and Debt Problems
G15 : Financial Economics→General Financial Markets→International Financial Markets

14 December 2020

WORKING PAPER SERIES - No. 2501

Weigh(t)ing the basket: aggregate and component-based inflation forecasts for the euro area

English

Abstract: We compare direct forecasts of HICP and HICP excluding energy and food in the euro area and five member countries to aggregated forecasts of their main components from large Bayesian VARs with a shared set of predictors. We focus on conditional point and density forecasts, in line with forecasting practices at many policy institutions. Our main findings are that point forecasts perform similarly using both approaches, whereas directly forecasting aggregate indices tends to yield better density forecasts. In the aftermath of the Great Financial Crisis, relative forecasting performance was typically only affected temporarily. Inflation forecasts made by Eurosystem/ECB staff perform similarly or slightly better than those from our models for the euro area.
JEL Code: C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
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
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications

12 August 2020

WORKING PAPER SERIES - No. 2453

Nowcasting with large Bayesian vector autoregressions

English

Abstract: Monitoring economic conditions in real time, or nowcasting, is among the key tasks routinely performed by economists. Nowcasting entails some key challenges, which also characterise modern Big Data analytics, often referred to as the three \Vs": the large number of time series continuously released (Volume), the complexity of the data covering various sectors of the economy, published in an asynchronous way and with different frequencies and precision (Variety), and the need to incorporate new information within minutes of their release (Velocity). In this paper, we explore alternative routes to bring Bayesian Vector Autoregressive (BVAR) models up to these challenges. We find that BVARs are able to effectively handle the three Vs and produce, in real time, accurate probabilistic predictions of US economic activity and, in addition, a meaningful narrative by means of scenario analysis.
JEL Code: 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
C01 : Mathematical and Quantitative Methods→General→Econometrics
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods

6 April 2020

WORKING PAPER SERIES - No. 2387

Attention to the tail(s): global financial conditions and exchange rate risks

English

Abstract: We document how the distribution of exchange rate returns responds to changes in global financial conditions. We measure global financial conditions as the common component of country-specific financial condition indices, computed consistently across a large panel of developed and emerging economies. Based on quantile regression results, we provide a characterisation and ranking of the tail behaviour of a large sample of currencies in response to a tightening of global financial conditions, corroborating (and quantifying) some of the prevailing narratives about safe haven and risky currencies. Our approach delivers a more nuanced picture than one based on standard OLS regression. We then carry out a portfolio sorting exercise to identify the macroeconomic fundamentals associated with such different tail behaviour, and find that currency portfolios sorted on the basis of net foreign asset positions, relative interest rates, current account balances and levels of international reserves display a higher likelihood of large losses in response to a tightening of global financial conditions.
JEL Code: F31 : International Economics→International Finance→Foreign Exchange
G15 : Financial Economics→General Financial Markets→International Financial Markets

17 June 2019

ECONOMIC BULLETIN - ARTICLE

Drivers of underlying inflation in the euro area over time: a Phillips curve perspective

Economic Bulletin Issue 4, 2019

English

Abstract: In this article we review the evolution of euro area HICP inflation excluding energy and food since the Great Financial Crisis through the lens of the Phillips curve. This period is particularly interesting, as the euro area experienced two recessions (in 2008-2009 and 2011-2014) and a protracted episode of low inflation from 2013 onwards. We estimate a large set of Phillips curve models for the euro area and review the interpretation of inflation developments that they provide over time. We highlight both the advantages and some of the limitations of this type of analysis. We find that our models can account for much of the weakness in underlying inflation between 2013 and mid-2017, but that they cannot account for the most recent weakness in underlying inflation.
JEL Code: E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies

External publications

2019

International Journal of Forecasting

Forecasting the UK economy with a medium-scale Bayesian VAR