Georgi Krustev
International & European Relations
- Division
External Developments
- Current Position
-
Principal Economist
- Fields of interest
-
Macroeconomics and Monetary Economics,Financial Economics
- Education
- 2010-2017
Doctorate in Economics, Goethe University Frankfurt, Germany
- 2005-2006
MEconSc in European Economic and Public Affairs, University College Dublin, Ireland
- 1997-2002
Laurea in Economics and Banking, University of Siena, Italy
- Professional experience
- 2021-
DG Monetary Policy, European Central Bank
- 2017-2021
DG Economics, European Central Bank
- 2015
Visiting Economist, DG Research, European Central Bank
- 2015
Visiting Economist, International Department, Bank of Canada
- 2008-2014
DG International, European Central Bank
- 2003-2008
Treasury Department, Bulgarian National Bank
- 30 June 2025
- OCCASIONAL PAPER SERIES - No. 372Details
- Abstract
- This report focuses on the implications of the changed inflation environment for the ECB’s monetary policy strategy, including the lessons learned from both the low inflation and high inflation periods, and the transition from one to the other. The starting point of the report is the outcome of the Monetary Policy Strategy Review 2020-21. While the previous review was conducted in an economic environment of low inflation, with interest rates in proximity to the effective lower bound (ELB), the inflation surge that followed the COVID-19 pandemic underscores the importance of a monetary policy strategy that enables the Governing Council to effectively respond to major changes in the inflation environment.
- 30 July 2024
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2024Details
- Abstract
- This article introduces the Distributional Wealth Accounts (DWA) developed by the European System of Central Banks and explores some of their main features and use cases. First, it describes the methodology behind DWA compilation, detailing data sources, estimation techniques and the significance of the dataset for economic analysis. It then highlights key stylised evidence on the changes in the wealth distribution of households over time and across countries. In this context, it highlights the heterogeneous portfolio composition and the varied effects of housing and financial asset prices on wealth accumulation, and their implications for inequality. Finally, the article investigates how the recent surge in inflation and the subsequent monetary policy tightening have affected the distribution of wealth.
- JEL Code
- E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 11 January 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2023Last updated on 30 January 2024Details
- Abstract
- This box analyses recent developments in the net interest income of households and firms in the euro area as a whole and in the largest euro area countries, against the backdrop of rising interest rates. Net interest income is a direct channel through which the ECB transmits policy rate changes to savers and borrowers. Over the last decade net interest income has been negative for households and firms at the aggregate sectoral level. Interest-bearing assets, which affect the interest received by households and firms, and liabilities, which affect interest paid, are important drivers of developments in net interest income. Individual countries demonstrate striking differences in net interest income and interest-bearing assets and liabilities, largely due to specific structural factors.
- JEL Code
- E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 2 August 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 5, 2021Details
- Abstract
- The propensity of households to save has reached extraordinary levels since early 2020. This box analyses the drivers of this surge and tries to infer what they imply for private consumption as the pandemic is brought under control. On the one hand, the spike in household savings mostly comprises involuntary savings held to a large extent in the form of liquid assets, while the effects of the pandemic on household income have been limited. On the other hand, the additional savings are concentrated among older and higher-income households which, together with the services-led nature of the slump in consumption, suggests that these savings have only a limited potential to boost private consumption. Overall, the underlying drivers of the recent surge in household savings do not suggest much of an additional boost to the expected rebound in private consumption in the coming year.
- JEL Code
- 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
- 4 January 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2020Details
- Abstract
- This box assesses the implications of the coronavirus (COVID-19) pandemic for the euro area tourism sector, trade in travel services and consumption of non-residents. Declining mobility during the pandemic has led to a slump in trade in services and tourism. As a result, the drop in non-resident consumption has acted as a shock amplification mechanism in countries exporting tourism services, i.e. countries which receive a lot of tourists, and as a shock absorption mechanism in countries importing tourism services. The partial recovery of tourism services observed during the summer months was mostly generated by domestic tourism substituting foreign tourism. The reintroduction of travel restrictions in October will likely imply that this substitution will continue to affect the dynamics of tourism services. High-frequency data on tourism, travel and services production point to a renewed overall deterioration of tourism services in the final quarter of 2020.
- JEL Code
- E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
F14 : International Economics→Trade→Empirical Studies of Trade
Z3 : Other Special Topics
- 5 October 2020
- WORKING PAPER SERIES - No. 2475Details
- Abstract
- We estimate a modified version of the “Financial Business Cycles” model originally developed by Iacoviello (2015) in order to investigate the role played by financial factors in driving the business cycle in the euro area. In the model, financial shocks such as borrower defaults, collateral shocks and credit supply effects amplify economic downturns by reducing the flow of credit from banks to the real sector. In this novel application to the euro area, we introduce capital reallocation inefficiency, an innovation to the original set-up which allows for more realistic effects of entrepreneur defaults on economic activity. Our results suggest that financial factors, as captured by this model, played a smaller role in the euro area throughout the double-dip recession than in the United States during the 2008-09 global financial crisis. In a scenario on second-round effects implied by potential NFC loan losses due to the COVID-19 pandemic, we find large financial amplification risks to real economic activity.
- JEL Code
- 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
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
- 27 July 2020
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2020Details
- Abstract
- The article explores the behaviour and characteristics of durable goods consumption in the euro area, including an examination of the degree of heterogeneity among the euro area’s largest countries, and offers a perspective based on business cycle turning points. It also covers the relevance of financing conditions, including a specific focus on car purchases, as well as long-run trends in relative price and shares of durable goods in consumption. The analysis is complemented by insights from an empirical (structural VAR) model as described in Casalis and Krustev (2020, ECB Working Paper Series, No 2386), which sheds further light on the importance of durable goods-specific factors, alongside more traditional factors, in driving consumption.
- JEL Code
- 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
- 31 March 2020
- WORKING PAPER SERIES - No. 2386Details
- Abstract
- We study the cyclical dynamics of consumption in the euro area (EA) and the large EA countries by distinguishing durable from nondurable expenditures. We adopt a theoretical partial equilibrium framework to justify the identification strategy of our empirical model, a time-varying parameter structural vector autoregression (TVP-SVAR). Following the main insight from the theoretical model, that liquidity constraints induce important interactions between durables and nondurables, we distinguish durable-specific demand and supply shocks, while taking into account monetary and credit conditions. Our main findings are: (i) durables react faster and more strongly than nondurables after monetary shocks in the euro area and in the largest EA countries, a confirmation of an outcome commonly reported for the US; (ii) there is a large degree of cross-country heterogeneity in how different factors (including durable-specific ones) explain consumption; (iii) the strength of spillovers from durable to nondurable consumption, as predicted by theory, is empirically correlated with how much households across countries are likely to be liquidity constrained.
- 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
D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
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
- 11 July 2018
- WORKING PAPER SERIES - No. 2168Details
- Abstract
- I extend the model of Laubach and Williams (2003) by introducing an explicit role for the financial cycle in the joint estimation of the natural rates of interest, unemployment and output, and the sustainable growth rate of the US economy. By incorporating the financial cycle – arguably an omitted variable from the system – the model is able to deliver more plausible estimates of business cycle dynamics. The sustained decline in the natural rate of interest in recent decades is confirmed, but I estimate that strong and persistent headwinds due to financial deleveraging have lowered temporarily the natural rate on average by around 1 p.p. below its long-run trend over 2008-14. This may have impaired the effectiveness of interest rate cuts to stimulate the economy and lift inflation back to target in the immediate aftermath of the GFC.
- 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
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
- 24 August 2015
- WORKING PAPER SERIES - No. 1843Details
- Abstract
- Using a novel dataset for the US states, this paper examines whether household debt and the protracted debt deleveraging help explain the dismal performance of US consumption since 2007 in the aftermath of the housing bubble. By separating the concepts of deleveraging and debt overhang - a flow and a stock effect - we find that excessive indebtedness exerted a meaningful drag on consumption over and beyond income and wealth effects. The overall impact, however, is modest - around one-sixth of the slowdown in consumption between 2000-06 and 2007-12 - and mostly driven by states with particularly large imbalances in their household sector. This might be indicative of non-linearities, whereby indebtedness begins to bite only when misalignments from sustainable debt dynamics become excessive.
- JEL Code
- C13 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Estimation: General
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
H31 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Household
- 6 March 2014
- WORKING PAPER SERIES - No. 1643Details
- Abstract
- The balance sheet adjustment in the household sector was a prominent feature of the Great Recession that is widely believed to have held back the cyclical recovery of the US economy. A key question for the US outlook is therefore whether household deleveraging has ended or whether further adjustment is needed. The novelty of this paper is to estimate a time-varying equilibrium household debt-to-income ratio determined by economic fundamentals to examine this question. The paper uses state-level data for household debt from the FRBNY Consumer Credit Panel over the period 1999Q1 to 2012Q4 and employs the Pooled Mean Group (PMG) estimator developed by Pesaran et al. (1999), adjusted for cross-section dependence. The results support the view that, despite signifiant progress in household balance sheet repair, household deleveraging still had some way to go as of 2012Q4, as the actual debt-to-income-ratio continued to exceed its estimated equilibrium. The baseline conclusions are rather robust to a set of alternative specifications. Going forward, our model suggests that part of this debt gap could, however, be closed by improving economic conditions rather than only by further declines in actual debt. Nevertheless, the normalisation of the monetary policy stance may imply challenges for the deleveraging process by making a given level of household debt less affordable and therefore less sustainable.
- JEL Code
- C13 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Estimation: General
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
H31 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Household
- 2022
- Journal of International Money and Finance
- 2019
- Journal of Economic Behavior and Organization
- 2018
- Review of Income and Wealth
- 2015
- The B E Journal of Macroeconomics
- 2014
- VoxEU article