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Barbara Jarmulska

Macro Prud Policy&Financial Stability

Division

Macroprudential Policy

Current Position

Senior Financial Stability Expert

Fields of interest

Financial Economics,Public Economics

Email

Barbara.Jarmulska@ecb.europa.eu

10 October 2022
MACROPRUDENTIAL BULLETIN - FOCUS
Macroprudential Bulletin Issue 19, 2022
Details
Abstract
During the Covid-19 pandemic banks appear to have avoided lending to firms reliant on real estate as collateral. When banks applied downward revaluations to existing real estate collateral they were also less likely to extend loans, particularly to highly leveraged borrowers.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G20 : Financial Economics→Financial Institutions and Services→General
10 October 2022
MACROPRUDENTIAL BULLETIN - FOCUS
Macroprudential Bulletin Issue 19, 2022
Details
Abstract
This focus shows that the interest rate sensitivity of the loan-service-to-income (LSTI) ratio depends on the initial loan-to-income (LTI) ratio, the loan maturity, the interest rate fixation period and the initial interest rate. Based on loan-level simulations for securitised mortgages we find that LSTI increases in response to higher interest rates would be manageable for most loans but pockets of vulnerabilities exist.
JEL Code
G51 : Financial Economics
E27 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Forecasting and Simulation: Models and Applications
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
10 October 2022
MACROPRUDENTIAL BULLETIN - ARTICLE - No. 19
Details
Abstract
This article examines links between Commercial Real Estate (CRE) markets and financial stability. The global financial crisis demonstrated the implications of CRE boom-bust cycles for the stability of many countries’ financial systems. However, CRE risk assessment and macroprudential policy frameworks remain in their infancy due to both the markets’ complexity and the persistence of data gaps. This article takes steps towards closing a number of data gaps by using euro area credit register data to examine the size and nature of links between euro area (EA) banks and CRE markets. Moreover, given that this dataset covers the COVID-19 pandemic crisis period, the operation of these transmission channels can be seen in action, providing insight into how economic theory plays out in practice.
JEL Code
G00 : Financial Economics→General→General
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
R30 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→General
10 October 2022
MACROPRUDENTIAL BULLETIN - ARTICLE - No. 19
Details
Abstract
Understanding the drivers for residential real estate (RRE) price developments, measuring house price overvaluation, monitoring trends in bank lending and borrowers’ creditworthiness is important for assessing RRE risks and informing policy responses. The ECB uses a comprehensive monitoring framework for regularly assessing RRE vulnerabilities comprising a series of core risk indicators complemented by a broad set of analytical tools. This article describes some of these tools to explain how they are employed in risk analysis.
JEL Code
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G51 : Financial Economics
10 October 2022
MACROPRUDENTIAL BULLETIN - ARTICLE - No. 19
Details
Abstract
Credit-fuelled real estate booms can pose financial stability risks due to the important direct and indirect links between real estate markets, the economy and the financial system. Different types of macroprudential policy tools can be used to increase resilience to financial stability risks from residential real estate (RRE) markets. Borrower-based tools put a cap on the risk characteristics of new loans, while capital-based tools increase the loss absorption capacity of banks. The ECB, together with the national authorities, has an important role to play in shaping the macroprudential policy response to RRE risks in the euro area.
JEL Code
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
G51 : Financial Economics
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
R38 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Government Policy
25 May 2022
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2022
Details
Abstract
House prices increased substantially in advanced economies during the pandemic, fuelling concerns about possible price reversals and their implications for financial stability. Shifts in housing preferences, possibly reflecting a desire for more space coupled with less need for commuting due to teleworking modalities, and low interest rates have been important drivers of such recent strong house price growth across advanced economies. In the current low interest rate environment, increased sensitivity of house price growth to changes in real interest rates makes substantial house price reversals more likely. An abrupt repricing in the housing market – if the demand for housing were to go into reverse, for example, with a return to pre-pandemic work modalities, or real interest rates were to rise significantly – could produce spillovers to the wider financial system and economy.
JEL Code
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
R30 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→General
17 November 2021
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2021
Details
Abstract
In order to assess the strength of the current residential real estate expansion, we compare recent developments in euro area housing markets with the period ahead of the global financial crisis (GFC). We find that house price dynamics, overvaluation and the risk profile of new mortgage loans are at similar levels to those observed during the height of the pre-GFC cycle in 2007. However, vulnerabilities from mortgage lending developments and household balance sheets are currently below their pre-GFC levels. We conclude that the continued build-up of vulnerabilities in residential real estate markets calls for close monitoring and possible macroprudential measures.
JEL Code
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
G51 : Financial Economics
P34 : Economic Systems→Socialist Institutions and Their Transitions→Financial Economics
G01 : Financial Economics→General→Financial Crises
14 May 2020
WORKING PAPER SERIES - No. 2408
Details
Abstract
This study seeks to answer whether it is possible to design an early warning system framework that can signal the risk of fiscal stress in the near future, and what shape such a system should take. To do so, multiple models based on econometric logit and the random forest models are designed and compared. Using a dataset of 20 annual frequency variables pertaining to 43 advanced and emerging countries during 1992-2018, the results confirm the possibility of obtaining an effective model, which correctly predicts 70-80% of fiscal stress events and tranquil periods. The random forest-based early warning model outperforms logit models. While the random forest model is commonly understood to provide lower interpretability than logit models do, this study employs tools that can be used to provide useful information for understanding what is behind the black-box. These tools can provide information on the most important explanatory variables and on the shape of the relationship between these variables and the outcome classification. Thus, the study contributes to the discussion on the usefulness of machine learning methods in economics.
JEL Code
C40 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→General
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
G01 : Financial Economics→General→Financial Crises
29 November 2019
WORKING PAPER SERIES - No. 2332
Details
Abstract
Productivity performance in European countries has been a policy concern for some time. This paper shows that productivity can be enhanced by product market policies which, by increasing competition and efficiency, facilitate higher rates of firms’ entry and exit (i.e., firm churning). Drawing on annual country-sector data for the period 2000-2014 across the EU countries, we find that: (i) competition-enhancing regulation is associated with a higher rate of firm churning; (ii) business churning, in turn, appears to be positively related to higher total factor productivity at the sector level by facilitating the entry of new competitive firms and the exit of less productive ones. Overall, we conclude that stringent product market regulation can be indirectly associated, via its impact on business dynamism, with the somewhat weak productivity performance in a number of EU countries. Thus, our results point towards significant productivity gains that could follow from the introduction of further competition-enhancing measures in product markets.
JEL Code
L51 : Industrial Organization→Regulation and Industrial Policy→Economics of Regulation
P23 : Economic Systems→Socialist Systems and Transitional Economies→Factor and Product Markets, Industry Studies, Population
D21 : Microeconomics→Production and Organizations→Firm Behavior: Theory
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
O40 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→General
20 November 2019
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2019
Details
Abstract
The upswing in euro area commercial real estate (CRE) markets in recent years has reflected, in part, a strong appetite from international investors, including US investment funds. Since 2013 transactions in euro area CRE markets have more than doubled, alongside a 20% increase in prices (15% in real terms) and a decline in average yields from 5.2% to 3.5%. In parallel, the share of transactions by foreign investors increased to 54% in 2018, from an average of 49% in 2013 when a particularly strong pick-up in transaction volumes started. Furthermore, the role of investment funds in foreign transactions increased to 63% in 2018 from 48% in 2013, with around 40% of these on average originating from the United States.