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Diego Moccero

Macro Prud Policy&Financial Stability

Division

Macroprudential Policy

Current Position

Senior Financial Stability Expert

Fields of interest

Macroeconomics and Monetary Economics,Mathematical and Quantitative Methods,Financial Economics

Email

Diego.Moccero@ecb.int

Education
2009

PhD in Economics, Paris School of Economics, France

2000

MA in Economics, National University of La Plata, Argentina

1997

BA in Economics, National University of La Plata, Argentina

Professional experience
2018-

Senior Financial Stability Expert - Macro Prudential Policies Division, Directorate General Macro Prudential Policies and Financial Stability, European Central Bank

2017

Principal Financial Stability Expert - European Systemic Risk Board

2013-2017

Senior Financial Stability Expert - Macro Financial Linkages Division, Directorate General Macro Prudential Policies and Financial Stability, European Central Bank

2011-2013

Senior Economist - Capital Markets and Financial Structure Division, Directorate General Monetary Policy, European Central Bank

2013

Senior Economist - Euro Area Macroeconomics Division, Directorate General Economics, European Central Bank

2008-2011

Economist - Monetary Policy Unit, Economics Department, Organisation for Economic Cooperation and Development, Paris, France

2006-2008

Economist - Brazil/South America Desk, Economics Department, Organisation for Economic Cooperation and Development, Paris, France

2004

Internship - Inter-American Development Bank, Washington D.C., USA

2003

Internship - École Normale Supérieure de Cachan, France

1999-2002

Economist - Economics Research Unit, Ministry of Economy of the Buenos Aires Province, Argentina

Teaching experience
2002-2005

Monetary Economics - National University of La Plata, Argentina

2005

International Macro-economics - École des Hautes Études Commerciales (HEC), Paris, France

2005

Time Series Econometrics - Center for Macroeconomic Studies of Argentina, Buenos Aires, Argentina

2001-2002

Advanced Macroeconomics - National University of La Plata, Argentina

6 March 2014
WORKING PAPER SERIES - No. 1644
Details
Abstract
We implement a two-step approach to construct a financing conditions index (FCI) for the euro area and its four larger member states (Germany, France, Italy and Spain). The method, which follows Hatzius et al. (2010), is based on factor analysis and enables to summarise information on financing conditions from a large set of financial indicators, controlling for the level of policy interest rates, changes in output and inflation. We find that the FCI tracks successfully both worldwide and euro area specific financial events. Moreover, while the national FCIs are constructed independently, they display a similar pattern across the larger euro area economies over most of the sample period and varied more widely since the start of the sovereign debt crisis in 2010. Focusing on the euro area, we then incorporate the FCI in a VAR model comprising output, inflation, the monetary policy rate, bank loans and bank lending spreads. The credit supply shock extracted with sign restrictions is estimated to have caused around one fifth of the decline in euro area manufacturing production at the trough of the financial crisis and a rise in bank lending spreads of around 30 basis points. We also find that adding the FCI to the VAR enables an earlier detection of credit supply shocks.
JEL Code
E17 : Macroeconomics and Monetary Economics→General Aggregative Models→Forecasting and Simulation: Models and Applications
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
28 May 2014
FINANCIAL STABILITY REVIEW - ARTICLE
Financial Stability Review Issue 1, 2014
Details
Abstract
The global financial crisis revealed a need for macro-prudential policy tools to mitigate the build-up of systemic risk in the financial system and to enhance the resilience of financial institutions against such risks once they have materialised. In the EU, macro-prudential policy is an area that is in an early stage of development. This is also true as regards the use of instruments to address systemic risk for which there is so far only limited experience to draw on. Hence, there is general uncertainty about the effectiveness of such instruments in practice. Nevertheless, country-level experience can serve as a useful yardstick for formulating macro-prudential policy in the EU. This special feature considers the experience of European countries with macro-prudential policy implementation. Overall, the evidence surveyed here indicates that macro-prudential policies can be effective in targeting excessive credit growth and rapidly rising asset prices, although other policies can be a useful complement to reduce the build-up of imbalances. At the same time, the appropriate timing of macro-prudential policy measures remains a challenging task.
JEL Code
G00 : Financial Economics→General→General
17 September 2014
OCCASIONAL PAPER SERIES - No. 155
Details
Abstract
This paper analyses the cross-country heterogeneity in retail bank lending rates in the euro area and presents newly developed pass-through models that account for the riskiness of borrowers, the balance sheet constraints of lenders and sovereign debt tensions affecting interest rate-setting behaviour. Country evidence for the four largest euro area countries shows that downward adjustments in policy rates and market reference rates have translated into a concomitant reduction in bank lending rates. In the case of Spain and Italy, however, sovereign bond market tensions and a deteriorating macroeconomic environment have put upward pressure on composite lending rates to non-financial corporations and households. At the same time, model simulations suggest that higher lending rates have propagated to the broader economy by depressing economic activity and inflation. As a response to increasing financial fragmentation, the ECB has introduced several standard and non-standard monetary policy measures. These measures have gone a long way towards alleviating financial market tensions in the euro area. However, in order to ensure the adequate transmission of monetary policy to financing conditions, it is essential that the fragmentation of euro area credit markets is reduced further and the resilience of banks strengthened where needed. Simulation analysis confirms that receding financial fragmentation could help to boost economic activity in the euro area in the medium term.
JEL Code
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
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
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
20 May 2015
WORKING PAPER SERIES - No. 1792
Details
Abstract
We estimate regime switching models where the strength of the response of monetary policy to macroeconomic conditions depends on the level of risk associated with the inflation outlook and risk in financial markets. Using quarterly data for the Greenspan period we find that: i) risk in the inflation outlook and volatility in financial markets are a powerful driver of monetary policy regime changes in the U.S.; ii) the response of the US Fed to the inflation outlook is invariant across policy regimes; iii) however, in periods of high economic risk, monetary policy tends to respond more aggressively to the output gap and the degree of inertia tends to be lower than in normal circumstances; and iv) the US Fed is estimated to have responded aggressively to the output gap in the late 1980s and begging of the 1990s, and in the late 1990s and early 2000s.
JEL Code
C24 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Truncated and Censored Models, Switching Regression Models
C51 : Mathematical and Quantitative Methods→Econometric Modeling→Model Construction and Estimation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
19 June 2017
WORKING PAPER SERIES - No. 2077
Details
Abstract
We contribute to the empirical literature on the impact of shocks to bank capital in the euro area by estimating a Bayesian VAR model identied with sign restrictions. The variables included in the VAR are those typically used in monetary policy analysis, extended to include aggregate banking sector variables. We estimate two shocks affecting the euro area economy, namely a demand shock and a shock to bank capital. The main findings of the paper are as follows: i) Impulse-response analysis shows that in response to a shock to bank capital, banks boost capital ratios by reducing their relative exposure to riskier assets and by adjusting lending to a larger extent than they increase the level of capital and reserves per se; ii) Historical shock decomposition analysis shows that bank capital shocks have contributed to increasing capital ratios since the crisis, impairing bank lending growth and contributing to widen bank lending spreads; and iii) counterfactual analysis shows that higher capital ratios pre-crisis would have helped dampening the euro area credit and business cycle. This suggests that going forward the use of capital-based macroprudential policy instruments may be helpful to avoid a repetition of the events seen since the start of the global financial crisis.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
24 May 2018
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2018
Details
Abstract
Improving operating efficiency is key if euro area banks are to raise their profitability to sustainable levels. The FSR has been consistently reporting on the basis of accounting indicators, such as the cost-to-income ratio (CIR) and the cost-to-assets ratio, that, on aggregate, euro area banks’ cost efficiency has deteriorated somewhat since 2010. While the improving cyclical environment is supporting bank profitability, raising it to levels that can ensure banks are able to provide financing to the real economy in a sustainable manner would benefit from improving their cost efficiency.
2 July 2019
OCCASIONAL PAPER SERIES - No. 226
Details
Abstract
This paper presents an approach to a macroprudential stress test for the euro area banking system, comprising the 91 largest euro area credit institutions across 19 countries. The approach involves modelling banks’ reactions to changing economic conditions. It also examines the effects of adverse scenarios on economies and the financial system as a whole by acknowledging a broad set of interactions and interdependencies between banks, other market participants, and the real economy. Our results highlight the importance of the starting level of bank capital, bank asset quality, and banks’ adjustments for the propagation of shocks to the financial sector and real economy.
JEL Code
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
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
1 August 2019
WORKING PAPER SERIES - No. 2305
Details
Abstract
We use an industrial organisation approach to quantify the size of Total Factor Productivity Growth (TFPG) for euro area banks after the crisis and decompose it into its main driving factors. In addition, we disentangle permanent and time-varying inefficiency in the banking sector. This is important because lack of distinction may lead to biased estimates of inefficiency and because the set of policies needed in both cases is different. We focus on 17 euro area countries over the period 2006 to 2017. We find that cost efficiency in the euro area banking sector amounted to around 84% on average over the 2006 to 2017 period. In addition, we observe that Total Factor Productivity growth for the median euro area bank decreased from around 2% in 2007 to around 1% in 2017, with technological progress being the largest contributor, followed by technical efficiency. Given the need to boost productivity and enhance profitability in the euro area banking sector, these findings suggests that bank’s efforts in areas such as rationalisation of branches, digitalisation of business processes and possibly mergers and acquisitions should be intensified.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
16 September 2019
MACROPRUDENTIAL BULLETIN - ARTICLE - No. 8
Details
Abstract
How do changes in bank capital requirements affect bank lending, lending spreads and the broader macroeconomy? The answer to this question is important for calibrating and assessing macroprudential policies. There is, however, relatively little empirical evidence to answer this question in the case of the euro area countries. This article contributes to filling this gap by studying the effects of changes in economic bank capital buffers in the four largest euro area countries. We use bank-level data and macroeconomic information to estimate a bank-internal, target level of economic capital ratio, i.e. the capital ratio that a bank would like to hold considering its own characteristics (size, profitability, risk aversion of its creditors, risk exposure, etc.) and macroeconomic conditions (expected GDP growth, etc.). Economic bank capital buffers are then computed as the difference between the current and the target economic capital ratio. However, due to adjustment costs, banks cannot adjust the actual capital ratio to the target level instantaneously. As a result, a change in the target capital ratio will result in an instantaneous change in the economic capital buffer. These buffers are aggregated at the country level and included in a panel Bayesian vector auto regressive (VAR) model. With the VAR, it is then possible to compute the response of macroeconomic and banking variables to a change in the buffer. The idea is that changes in economic capital buffers mimic the effects a change in regulatory capital requirements would have on the economy. We find that a negative economic capital buffer shock, i.e. a decline in actual capital ratios below the target level, leads to a modest decline in output and prices and to a larger decline in bank lending growth. By affecting the difference between actual and target economic capital ratios, these findings suggest that countercyclical capital-based macroprudential policy measures can be useful to dampen the financial cycle.
JEL Code
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
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
15 May 2020
WORKING PAPER SERIES - No. 2411
Details
Abstract
We contribute to the empirical literature on the impact of non-performing loan (NPL) ratios on aggregate banking sector variables and the macroeconomy by estimating a panel Bayesian VAR model for twelve euro area countries. The model is estimated assuming a hierarchical prior that allows for country-specific coefficients. The VAR includes a large set of variables and is identified via Choleski factorisation. We estimate the impact of exogenous shocks to the change in NPL ratios across countries. The main findings of the paper are as follows: i ) An impulse response analysis shows that an exogenous increase in the change in NPL ratios tends to depress bank lending volumes, widens bank lending spreads and leads to a fall in real GDP growth and residential real estate prices; ii ) A forecast error variance decomposition shows that shocks to the change in NPL ratios explain a relatively large share of the variance of the variables in the VAR, particularly for countries that experienced a large increase in NPL ratios during the recent crises; and iii ) A three-year structural out-of-sample scenario analysis provides quantitative evidence that reducing banks' NPL ratios can produce significant benefits in euro area countries in terms of improved macroeconomic and financial conditions.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
23 November 2020
WORKING PAPER SERIES - No. 2491
Details
Abstract
The assets under management of investment funds have soared in recent years, triggering a debate on their possible implications for financial stability. We contribute to this debate assessing the asset price impact of fire sales in a novel partial equilibrium model of euro area funds and banks calibrated over the period between 2008 and 2017. An initial shock to yields causes funds to sell assets to address investor redemptions, while both banks and funds sell assets to keep their leverage constant. These fire sales generate second-round price effects. We find that the potential losses due to the price impact of fire sales have decreased over time for the system. The contribution of funds to this impact is lower than that of banks. However, funds’ relative contribution has risen due to their increased assets under management and banks’ lower leverage and rebalancing towards loans. Should this trend continue, funds will become an increasingly important source of systemic risk.
JEL Code
G1 : Financial Economics→General Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
2019
B.E. Journal of Macroeconomics
  • Kanngiesser, D., Martin, R., Maurin, L. and Moccero, D.
2015
Journal of Banking and Finance
  • Gnabo, J-Y. and Moccero, D.
2014
International Finance
  • Darracq Pariès, M., Maurin, L. and Moccero, D.
2013
Studies in Non-linear Dynamics and Econometrics
  • De Mello, L., Moccero, D. and Mogliani, M.
2012
Review of International Economics
  • Haouat, M, Moccero, D. and Sosa Navarro, R.
2011
Journal of International Money and Finance
  • De Mello, L. and Moccero, D.
2010
International Finance
  • Gnabo, J-Y., de Mello, L. and Moccero, D.
2009
Journal of Money, Credit and Banking
  • De Mello, L. and Moccero, D.
2008
Journal of Applied Economics
  • Moccero, D
2002
Fondo Editorial, Buenos Aires, Argentina
Does Mercosur need a single currency? (in Spanish)
  • Menéndez, L., Moccero, D., Panigo, D. and Torija, E.
1999
Fondo Editorial, Buenos Aires, Argentina
Financing as an Instrument for Economic Growth (in Spanish)
  • Lódola, A., Aramburu, A., Busso, M., Cerimedo, F., Cuenin, F., Menéndez, L. and Moccero, D.
2011
The Euro Area and the Financial Crisis (Beblavý M., Cobham D. and Ódor L. eds.), Cambridge University Press
  • Cournède, B. and Moccero, D.
2008
Deepening Integration in Mercosur, Dealing with Disparities (Blyde J.S. , Fernández-Arias E. and Giordano P. eds.), Inter-American Development Bank
  • Moccero, D. and Winograd, C.
2008
Monetary Policies and Inflation Targeting in Emerging Economies (de Mello L. ed.), Organisation for Economic Cooperation and Development
  • De Mello, L. and Moccero, D.
2011
OECD Economics Department Working Paper
  • Moccero, D., Watanabe, S. and Cournède, B.
2010
WIDER Working Paper
  • Haouat, M., Moccero, D. and Sosa Navarro, R.
2009
OECD Economics Department Working Paper
  • De Mello, L. , Moccero, D. and Mogliani, M.
2009
OECD Economics Department Working Paper
  • Cournède, B. and Moccero, D.
2008
OECD Economics Department Working Paper
  • Moccero, D.
2008
OECD Economics Department Working Paper
  • Gnabo, J-Y., de Mello, L. and Moccero, D.
2007
OECD Economics Department Working Paper
  • Moccero, D.
2007
OECD Economics Department Working Paper
  • De Mello, L. and Moccero, D.
2006
OECD Economics Department Working Paper
  • De Mello, L. and Moccero, D.
2006
Department of Economics Working Paper
The intertemporal approach to the current account: Evidence for Argentina
  • Moccero, D.
2006
OECD Economics Department Working Paper
  • De Mello, L. and Moccero, D.
2006
OECD Economics Department Working Paper
  • De Mello, L. and Moccero, D.