Caterina Mendicino
Research
- Division
-
Monetary Policy Research
- Current Position
-
Adviser
- Fields of interest
-
Macroeconomics and Monetary Economics,Financial Economics
- Other current responsibilities
- 2021-2023
Member of the German Bernacer Prize Advisory Board
- 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
- 24 June 2022
- RESEARCH BULLETIN - No. 97Details
- Abstract
- Throughout the world, the global financial crisis fostered the design and adoption of macroprudential policies to safeguard the financial system. This raises important questions for monetary policy, which, by contrast, primarily focuses on maintaining price stability. What, if any, is the relationship between (conventional) monetary policy and macroprudential policy? In particular, how does the effectiveness of macroprudential policies influence the conduct of monetary policy? This article reviews recent theoretical and empirical research addressing these questions. The main conclusion is that monetary policy can also perform macroprudential functions, but it does so by deviating from its focus on price stability. The quantification of this trade-off remains an exciting question.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- Network
- Research Task Force (RTF)
- 24 February 2022
- WORKING PAPER SERIES - No. 2647Details
- Abstract
- Recent research developed under the ECB research task force on Monetary Policy, Macroprudential Policy and Financial Stability highlights the existence of trade-offs and spillovers that monetary policy and macroprudential authorities face when deciding on their policy interventions. Monetary policy measures are key to support the supply of credit to the economy, but they could also have unintended consequences on financial stability risks. Macroprudential policies are instead effective in limiting financial stability risks, but they could also reduce the length of economic expansions by preventing credit from flowing to productive economic activities. In addition, since monetary and macroprudential policies transmit to the broad economy via the financial system, they unavoidably affect each other’s effectiveness. Taking these factors into account is key for the design and implementation of both policies.
- 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)
- 24 February 2022
- RESEARCH BULLETIN - No. 92Details
- Abstract
- There are always trade-offs to weigh up when taking monetary and macroprudential policy actions. Thechoice is between supporting the economy by ensuring a smooth supply of credit at favourableconditions, on the one hand, and containing financial stability risks, on the other hand. There are alsosignificant spillovers between the two policies since they are both implemented and transmitted throughthe financial system. Monetary and macroprudential authorities need to take these interactions intoaccount when deciding on interventions. Indeed, there are clear advantages of accounting for financialstability considerations when taking monetary policy decisions and limiting the constraints on the practicalimplementation of macroprudential policy.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- Network
- Research Task Force (RTF)
- 11 January 2022
- WORKING PAPER SERIES - No. 2636Details
- Abstract
- Does the level of deposits matter for bank fragility and efficiency? In a banking model with endogenous bank runs and a consumption-saving decision, we show that the level of deposits has opposite effects on bank fragility depending on the nature of bank runs. In an economy with panic-driven runs, higher deposits make banks less fragile, while the opposite is true when runs are only driven by fundamentals. The effect of deposits is not internalized by depositors. A saving externality arises, leading to excessive fragility and insufficient liquidity provision. The economy features under-saving when runs are panic driven, and over-saving when fundamental driven.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
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
- Research Task Force (RTF)
- 19 February 2021
- WORKING PAPER SERIES - No. 2527Details
- 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
- Discussion papers
- 8 February 2021
- WORKING PAPER SERIES - No. 2521Details
- 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)
- 27 January 2021
- RESEARCH BULLETIN - No. 80Details
- 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)
- 25 May 2020
- WORKING PAPER SERIES - No. 2414Details
- Abstract
- We examine optimal capital requirements in a quantitative general equilibrium model with banks exposed to non-diversifiable borrower default risk. Contrary to standard models of bank default risk, our framework captures the limited upside but significant downside risk of loan portfolio returns (Nagel and Purnanandam, 2020). This helps to reproduce the frequency and severity of twin defaults: simultaneously high firm and bank failures. Hence, the optimal bank capital requirement, which trades off a lower frequency of twin defaults against restricting credit provision, is 5pp higher than under standard default risk models which 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
- 24 May 2019
- WORKING PAPER SERIES - No. 2286Details
- 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)
- 13 July 2018
- WORKING PAPER SERIES - No. 2169Details
- 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
- 15 June 2018
- WORKING PAPER SERIES - No. 2157Details
- 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)
- 11 October 2017
- OTHER PUBLICATION
- 9 July 2015
- WORKING PAPER SERIES - No. 1827Details
- 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
- 2 April 2015
- WORKING PAPER SERIES - No. 1776Details
- 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. 1775Details
- 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
- 25 February 2013
- OCCASIONAL PAPER SERIES - No. 143Details
- 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
- 30 March 2007
- WORKING PAPER SERIES - No. 743Details
- 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
- 2021
- Journal of Monetary Economics
- 2021
- Journal of Money Credit and BankingExpectation-Driven Cycles and the Changing Dynamics of Unemployment
- 2020
- Journal of Monetary Economics
- 2019
- Journal of Macroeconomics
- 2018
- Journal of Monetary Economics
- 2018
- Economic Modelling
- 2018
- Journal of Money Credit and Banking
- 2017
- Journal of Economic Dynamics and Control
- 2017
- Economic Modelling
- 2016
- Canadian Journal of Economics
- 2016
- Economics Letters
- 2015
- International Journal of Central Banking
- 2014
- Journal of Banking and Finance.
- 2014
- Applied Economics Letters
- 2014
- Economics Letters
- 2013
- Journal Economic Dynamics and Control
- 2013
- Journal of Financial Stability
- 2013
- Economic Modelling
- 2013
- International Journal of Central Banking
- 2012
- Economics Letters
- 2017
- Achieving Financial Stability Challenges to Prudential Regulation, World Schientific Publishing Co.
- 2016
- Macroprudential Bulletin, European Central Bank, vol. 1
- 2014
- Research Bulletin, European Central Bank, vol. 21, pages 12-15
- 2014
- Financial Stability Review, Banque de France
- 2014
- Economic Bulletin Article, Bank of Portugal
- 2013
- Economic Bulletin Article, Bank of Portugal
- 2011
- Macroprudential Regulation and Policy, Bank for International Settlements, ISBN: 1609-0381.Boom-Bust Cycles and Stabilization Policy
- 2011
- Economic Bulletin Article, Bank of Portugal
- 2010
- Moneda y Crédito, vol. 230, 2010. ISSN:0026-959X.Housing Market and Macroeconomic Boom-Bust Cycles
- 2009
- Economic Bulletin Article, Bank of Portugal
- 2006
- The Economics Institute for Research EFI, ISBN: 91-7258-705-9.Financial Market Imperfections, Business Cycle Fluctuations and Economic Growth
- 2004
- SSE/EFI Working Paper Series in Economics and Finance 567, Stockholm School of Economics