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Caterina Mendicino

Research

Division

Monetary Policy Research

Current Position

Lead Economist

Fields of interest

Macroeconomics and Monetary Economics,Financial Economics

Email

caterina.mendicino1@ecb.europa.eu

Other current responsibilities
2018-2021

Coordinator, ECB Research Task Force on Monetary Policy, Macroprudential Policy and Financial Stability

2017-2018

Coordinator, DG-Research Strategic Priority on the New Macroprudential Framework

2015-2017

Coordinator development of the financial block of the ECB-MC multi country model

2015-2017

Work-stream Coordinator, ECB Task Force on Operazionalizing Macroprudential Research (OMRTF)

2014-2016

Work-stream Coordinator, ESCB/WGEM-Low Inflation Task Force

2015

ECB representative, Basel Committee’s Policy Development Group, Research Task Force on the Integration of Regulatory Capital and Liquidity Instruments

2011-2014

Member, ESCB Research Network on Macroprudential Policy (MaRS)

2008-2011

Member, ESCB Working Group on Econometric Modelling

Education
2000-2006

PhD Economics, Stockholm School of Economics, Sweden

2003-2004

Marie-Curie PhD Fellowship Economics, Universitat Pompeu Fabra, Spain

1999-2000

MA Economics, Coripe-University of Turin, Italy

1994-1999

BA Economics, University Rome III, Italy

1986-1994

BA Classical Music, Conservatory of Classical Music “N. Piccinni” Bari, Italy

Professional experience
2020-

Lead/Senior Lead Economist, Monetary Policy Research Division, Directorate General Research, European Central Bank

2015-2019

Principal Economist, Monetary Policy Research Division, Directorate General Research, European Central Bank

2013-2015

Economist (ESCB-IO), Financial Research Division, Directorate General Research, European Central Bank

2008-2013

Research Economist, Monetary Policy Division, Economics and Research Department, Bank of Portugal

2006-2008

Economist, Monetary and Financial Analysis Department, Bank of Canada

2003-2006

Research Fellow (Assegno di Ricerca), Economic Policy Research Group, University Rome III, Italy

2005

Summer Graduate Research Programme, Monetary Policy Research Division, Directorate General Research, European Central Bank

Awards
2021

[*] Best paper award of the MARC Conference

2014

[*] Research Fellowship, UECE-ISEG, Portugal (2014 - )

2010

[*] Research Fellowship, UNICEE, Catholic University, Portugal (2010- 2012)

2006

[*] Research Fellowship, Ente Luigi Einaudi, Italy; Research Grant, Louis Fraenckels stipendiefond, Sweden

2004

[*] Marie-Curie PhD Fellowship of the European Union (HPMT-CT-2001-00327); [*] Research Grant Project: "Credit Frictions and Business Cycle", Bankforskningstitutet, Sweden (2004-2006)

2003

[*]Marie-Curie Early Stage Training program of the European Union (HPMT-CT-2000-00116).

2002

[*] Research Grant, Project "Financial Liberalization, Financial Fragility and Economic Growth" (J02/37), J. Wallander's Foundation Handelsbanken, Sweden (2002-2003)

2001

[*] Scholarship, Liungbergs Foundation, Stockholm University, Sweden (2001-2002); [*] Research Grant, Kocks Linberg Foundation, Sweden (2001, 2002); [*] Research Grant, The Royal Swedish Academy of Sciences, Stiftelsen Söderströms CC Foundation, Sweden; [*]"Fausto Vicarelli" Undergraduate Thesis Award, Ente Luigi Einaudi, Italy;

2000

[*]Scholarship, Widar Bagges Foundation, Stockholm University, Sweden (2000-2001)

1999

[*] Scholarship, CORIPE, Italy (1999-2000); *] Best Graduates Award, University of Rome III, Italy

1994

[*]Scholarship, University of Rome III, Italy (1994-1997)

Teaching experience
2010-2011

Applied Macroeconomics (M.Sc) , Lecturer, Department of Economics, Catholic University, Portugal

2003-2005

Economic Policy (BA), Lecturer, Department of Economics, University Rome III, Italy

2003

Microeconomics I (PhD), Teaching Assistant, Stockholm School of Economics, Sweden

2002

Macroeconomics II (PhD), Teaching Assistant, Stockholm School of Economics, Sweden

30 March 2007
WORKING PAPER SERIES - No. 743
Details
Abstract
This paper investigates the role of credit market size as a determinant of business cycle fluctuations. First, using OECD data I document that credit market depth mitigates the impact of variations in productivity to output volatility. Then, I use a business cycle model with borrowing limits a la Kiyotaki and Moore (1997) to replicate this empirical regularity. The relative price of capital and the reallocation of capital are the key variables in explaining the relation between credit market size and output volatility. The model matches resonably well the reduction in productivity-driven output volatility implied by the established size of the credit market observed in OECD data.
JEL Code
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G20 : Financial Economics→Financial Institutions and Services→General
25 February 2013
OCCASIONAL PAPER SERIES - No. 143
Details
Abstract
This paper analyses the transmission of financial shocks to the macro-economy. The role of macro-financial linkages is investigated from an empirical perspective for the euro area as a whole, for individual euro area member countries and for other EU and OECD countries. The following key economic questions are addressed: 1) Which financial shocks have the largest impact on output over the full sample on average? 2) Are financial developments leading real activity? 3) Is there heterogeneity or a common pattern in macro-financial linkages across the euro area and do these linkages vary over time? 4) Do cross-country spillovers matter? 5) Is the transmission of financial shocks different during episodes of high stress than it is in normal times, i.e. is there evidence of non-linearities? In summary, it is found that real asset prices are significant leading indicators of real activity whereas the latter leads loan developments. Furthermore, evidence is presented that macro-financial linkages are heterogeneous across countries
JEL Code
C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
2 April 2015
WORKING PAPER SERIES - No. 1776
Details
Abstract
This paper provides new insights into expectation-driven cycles by estimating a structural VAR with time-varying coefficients and stochastic volatility, as in Cogley and Sargent (2005) and Primiceri (2005). We use survey-based expectations of the unemployment rate to measure expectations of future developments in economic activity. We find that the effect of expectation shocks on the realized unemployment rate have been particularly large during the most recent recession. Unanticipated changes in expectations contributed to the gradual increase in the persistence of the unemployment rate and to the decline in the correlation between the inflation and the unemployment rate over time. Our results are robust to the introduction of financial variables in the model.
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
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
2 April 2015
WORKING PAPER SERIES - No. 1775
Details
Abstract
This paper explores the link between agent expectations and housing market dynamics. We focus on shifts in the fundamental driving forces of the economy that are anticipated by rational forward-looking agents, i.e. news shocks. Using Bayesian methods and U.S. data, we find that news-shock-driven-cycles account for a sizable fraction of the variability in house prices and other macroeconomic variables over the business cycle and have also contributed to run-ups in house prices over the last three decades. By exploring the link between news shocks and agent expectations, we show that house price growth was positively related to inflation expectations during the boom of the late 1970
JEL Code
C50 : Mathematical and Quantitative Methods→Econometric Modeling→General
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
Network
Macroprudential Research Network
9 July 2015
WORKING PAPER SERIES - No. 1827
Details
Abstract
We develop a dynamic general equilibrium model for the positive and normative analysis of macroprudential policies. Optimizing financial intermediaries allocate their scarce net worth together with funds raised from saving households across two lending activities, mortgage and corporate lending. For all borrowers (households, firms, and banks) external financing takes the form of debt which is subject to default risk. This
JEL Code
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
30 June 2017
WORKING PAPER SERIES - No. 50
Details
Abstract
We examine the optimal size and composition of banks’ total loss absorbing capacity (TLAC). Optimal size is driven by the trade-off between providing liquidity services through deposits and minimizing deadweight default costs. Optimal composition (equity vs. bail-in debt) is driven by the relative importance of two incentive problems: risk shifting (mitigated by equity) and private benefit taking (mitigated by debt). Our quantitative results suggest that TLAC size in line with current regulation is appropriate. However, an important fraction of it should consist of bail-in debt because such buffer size makes the costs of risk-shifting relatively less important at the margin.
JEL Code
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
11 October 2017
OTHER PUBLICATION
English
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15 June 2018
WORKING PAPER SERIES - No. 2157
Details
Abstract
How sizable is the wealth effect on consumption in euro area countries? To address this question, we use newly available harmonized euro area wealth data and the methodology in Carroll et al. (2011b). We find that the marginal propensity to consume out of total wealth averaged across the largest euro area economies is around 3 cents per euro, with a marginal propensity to consume out of financial wealth significantly larger than of housing wealth. Country-group estimates document no significant differences between the largest economies and the rest of the sample. In contrast, remarkable differences emerge between periphery and core countries.
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
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
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
Network
Research Task Force (RTF)
13 July 2018
WORKING PAPER SERIES - No. 2169
Details
Abstract
This paper investigates the costs and benefits of liquidity regulation. We find that liquidity tools are beneficial but cannot completely remove the need for Lender of Last Resort (LOLR) interventions by the central bank. Full compliance with current Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) rules would have reduced banks’ reliance on publicly provided liquidity during the global financial crisis without removing such assistance altogether. The paper also investigates the output costs of introducing the LCR and NSFR using two macro-financial models. We find these costs to be modest.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
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
Network
Discussion papers
24 May 2019
WORKING PAPER SERIES - No. 2286
Details
Abstract
How far should capital requirements be raised in order to ensure a strong and resilient banking system without imposing undue costs on the real economy? Capital requirement increases make banks safer and are beneficial in the long run but also entail transition costs because their imposition reduces credit supply and aggregate demand on impact. In the baseline scenario of a quantitative macro-banking model, 25% of the long-run welfare gains are lost due to transitional costs. The strength of monetary policy accommodation and the degree of bank riskiness are key determinants of the trade-off between the short-run costs and long-run benefits from changes in capital requirements.
JEL Code
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
Network
Research Task Force (RTF)
25 May 2020
WORKING PAPER SERIES - No. 2414
Details
Abstract
We study the interaction between borrowers' and banks' solvency in a quantitative macroeconomic model with financial frictions in which bank assets are a portfolio of defaultable loans. We show that ex-ante imperfect diversification of bank lending generates bank asset returns with limited upside but significant downside risk. The asymmetric distribution of these returns and their implications for the evolution of bank net worth are important for capturing the frequency and severity of twin default crises – simultaneous rises in firm and bank defaults associated with sizeable negative effects on economic activity. As a result, our model implies higher optimal capital requirements than common specifications of bank asset returns, which neglect or underestimate the impact of borrower default on bank solvency.
JEL Code
G01 : Financial Economics→General→Financial Crises
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
Network
Research Task Force (RTF)
27 January 2021
RESEARCH BULLETIN - No. 80
Details
Abstract
Episodes such as the current coronavirus (COVID-19) crisis might lead to a significant rise in borrower defaults and, consequently, weakness in the banking sector. Having well-capitalised banks makes the financial system more resilient to such episodes. We assess how much capital would be optimal for banks to hold, taking into consideration the risk of banking crises driven by borrower defaults (which we term “twin default crises”).
JEL Code
G01 : Financial Economics→General→Financial Crises
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
Network
Research Task Force (RTF)
8 February 2021
WORKING PAPER SERIES - No. 2521
Details
Abstract
We show that a reduction in lender of last resort (LOLR) policy uncertainty positively affects bank lending and propagates to investment and employment. We exploit a unique policy that reduced uncertainty regarding the availability of future LOLR funding for banks as a quasi-natural experiment. Using micro-level data on banks, firms and loans in Portugal, we generate cross-sectional variation in banks’ exposure to uncertainty and find that the size of the haircut subsidy - the gap between private market and central bank security valuations - plays a key role in the propagation of the shock to lending and the real economy.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
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
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
Network
Research Task Force (RTF)
19 February 2021
WORKING PAPER SERIES - No. 2527
Details
Abstract
The Global Financial Crisis fostered the design and adoption of macroprudential policies throughout the world. This raises important questions for monetary policy. What, if any, is the relationship between monetary and macroprudential policies? In particular, how does the effectiveness of macroprudential policies (or lack thereof) influence the conduct of monetary policy? This discussion paper builds on the insights of recent theoretical and empirical research to address these questions.
JEL Code
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
Network
Research Task Force (RTF)
2021
Journal of Monetary Economics
  • M. Jasova, C. Mendicino, D. Supera
2021
Journal of Money Credit and Banking
Expectation-Driven Cycles and the Changing Dynamics of Unemployment
  • A. D'Agostino, C. Mendicino, F. Puglisi
2020
Journal of Monetary Economics
  • C. Mendicino, K. Nikolov, J. Suarez, D. Supera
2019
Journal of Macroeconomics
  • P. Gelain, N. Iskraev, C. Mendicino, K. Lansing
2018
Journal of Monetary Economics
  • D. Finocchiaro, G. Lombardo, C. Mendicino, P.Weil
2018
Economic Modelling
  • C. Mendicino, Y. Zhang
2018
Journal of Money Credit and Banking
  • C. Mendicino, K. Nikolov, J. Suarez, D. Supera
2017
Journal of Economic Dynamics and Control
  • S. Gomes, N. Iskrev, C. Mendicino
2017
Economic Modelling
  • L. Lambertini, C. Mendicino, M.T. Punzi
2016
Canadian Journal of Economics
  • I. Christensen, P. Corrigan, C. Mendicino, S. Nishiyama
2016
Economics Letters
  • D.Finocchiaro, C. Mendicino
2015
International Journal of Central Banking
  • L. Clerc, S. Moyen, A. Derviz, C. Mendicino, K. Nikolov, L. Stracca, J. Suarez, A.Vardoulakis
2014
Journal of Banking and Finance.
  • C. Mendicino, M.T. Punzi
2014
Applied Economics Letters
  • M. Haavio, C. Mendicino, M.T. Punzi
2014
Economics Letters
  • C. Mendicino, M. Prado
2013
Journal Economic Dynamics and Control
  • L. Lambertini, C. Mendicino, M.T. Punzi
2013
Journal of Financial Stability
  • L. Lambertini, C. Mendicino, M.T. Punzi
2013
Economic Modelling
  • A. Dib, C. Mendicino, Y. Zhang
2013
International Journal of Central Banking
  • with P. Gelain, M. Caterina, K.Lansing
2012
Economics Letters
  • C. Mendicino
2017
Achieving Financial Stability Challenges to Prudential Regulation, World Schientific Publishing Co.
  • K.Nikolov, C.Mendicino, D.Supera
2016
Macroprudential Bulletin, European Central Bank, vol. 1
  • Colciago, A., Fahr, S. , Hurtado, S., Mendicino, C., Nikolov, K., Supera, D.
2014
Research Bulletin, European Central Bank, vol. 21, pages 12-15
  • C. Mendicino
2014
Financial Stability Review, Banque de France
  • L. Clerc, S. Moyen, A. Derviz, C. Mendicino, K. Nikolov, L. Stracca, J. Suarez, A.Vardoulakis
2014
Economic Bulletin Article, Bank of Portugal
  • L. Clerc, S. Moyen, A. Derviz, C. Mendicino, K. Nikolov, L. Stracca, J. Suarez, A.Vardoulakis
2013
Economic Bulletin Article, Bank of Portugal
  • C. Mendicino, M. T. Punzi
2011
Macroprudential Regulation and Policy, Bank for International Settlements, ISBN: 1609-0381.
Boom-Bust Cycles and Stabilization Policy
  • C. Mendicino, M.T. Punzi
2011
Economic Bulletin Article, Bank of Portugal
  • C. Mendicino, M. T. Punzi
2010
Moneda y Crédito, vol. 230, 2010. ISSN:0026-959X.
Housing Market and Macroeconomic Boom-Bust Cycles
  • C. Mendicino, M. T. Punzi
2009
Economic Bulletin Article, Bank of Portugal
  • C. Mendicino
2006
The Economics Institute for Research EFI, ISBN: 91-7258-705-9.
Financial Market Imperfections, Business Cycle Fluctuations and Economic Growth
  • C. Mendicino
2004
SSE/EFI Working Paper Series in Economics and Finance 567, Stockholm School of Economics
  • A. Bonfiglioni, C. Mendicino