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Lorenz Emter

Economics

Division: Euro Area External Sector
Current Position: Economist
Fields of interest: International Economics
Email: lorenz.emter@ecb.europa.eu

Biography

Education: 2017-2022
PhD in Economics, Trinity College Dublin, Dublin, Ireland
Professional experience: 2022
Economist - Euro Area External Sector Division, Directorate General Economics, European Central Bank; 2020-2022
Economist - International Finance Division, Financial Stability Directorate, Central Bank of Ireland; 2019-2020
ECB Schuman Programme Participant - Financial Stability Directorate, Deutsche Bundesbank; 2017-2019
Associate Economist - International Analysis and Relations Function, Financial Stability Directorate, Central Bank of Ireland

ECB publications

31 October 2024

ECONOMIC BULLETIN - BOX

The impact of special-purpose entities on euro area cross-border financial linkages

Economic Bulletin Issue 7, 2024

English

Abstract: This box presents newly released data on the activities of special-purpose entities (SPEs) in the external sector of the euro area. It shows that SPEs make a significant contribution to cross-border financial linkages. Overall, SPEs account for around a third of euro area foreign direct investment positions and more than 10% of total euro area cross-border financial linkages. Their importance varies substantially across countries. Although SPEs inflate the gross external positions of the euro area, their impact on the net international investment position is limited. The contribution made by SPEs in the euro area has declined recently from a high level amid national and global initiatives affecting the regulatory and taxation environments for multinational enterprises.
JEL Code: C82 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Macroeconomic Data, Data Access
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts

30 October 2024

ECONOMIC BULLETIN - BOX

Geopolitical fragmentation in global and euro area greenfield foreign direct investment

Economic Bulletin Issue 7, 2024

English

Abstract: This box illustrates how aggregate greenfield foreign direct investment (FDI) flows are showing increasing signs of fragmentation along geopolitical fault lines. Euro area outward flows are following this trend, with greenfield investments increasingly tilted towards the United States and away from China. However, firms have also stepped up investment between geopolitical blocs to boost local production content in anticipation of protectionist measures or retaliatory tariffs. Econometric evidence from gravity models shows that the overall effect of increasing geopolitical divides on FDI is negative, with FDI flows within geopolitical blocs being almost three times higher than FDI flows between geopolitical blocs in recent quarters. Moreover, the estimates suggest that global FDI flows were dampened by 3% following the increases in average geopolitical distance owing to Russia’s invasion of Ukraine. Since then, geopolitical divides have become a particularly strong deterrent to greenfield FDI both into and out of the euro area.
JEL Code: F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements

18 October 2024

WORKING PAPER SERIES - No. 2989

Monetary policy and growth-at-risk: the role of institutional quality

English

Abstract: This paper analyses how country-specific institutional quality shapes the impact of monetary policy on downside risks to GDP growth in the euro area. Using identified high-frequency shocks in a growth-at-risk framework, we show that monetary policy has a higher impact on downside risks in the short term than in the medium term. However, this result for the euro area average hides significant heterogeneity across countries. In economies with weak institutional quality, medium-term growth risks increase substantially following contractionary monetary policy shocks. In contrast, these risks remain relatively stable in countries with high institutional quality. This suggests that improvements in institutional quality could significantly enhance euro area countries’ economic resilience and support the smooth transmission of monetary policy.
JEL Code: C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth

3 September 2024

THE ECB BLOG

Why competition with China is getting tougher than ever

English

JEL Code: F13 : International Economics→Trade→Trade Policy, International Trade Organizations
H25 : Public Economics→Taxation, Subsidies, and Revenue→Business Taxes and Subsidies

7 June 2024

OCCASIONAL PAPER SERIES - No. 350

Intangible assets of multinational enterprises in Ireland and their impact on euro area activity

English

Abstract: The activities of multinational enterprises (MNEs) have become an increasingly important feature of the euro area economy, affecting output, trade and financial linkages. MNEs contribute to domestic output by maintaining large production facilities, offering high-paid jobs, bringing in new technologies and generating tax revenues. Following statistical changes implemented in 2015 to better capture the increasing importance of intangible investment, the economic impact of MNE activities has become much more evident in measures of intellectual property product (IPP) investment and external IPP trade flows. MNE activities, which often entail large and instantaneous transfers of IPP, are frequently highly volatile and can blur real-time assessment – and forecasting – of the business cycle, the current account and the capital stock in the euro area. Focusing on Ireland, given the strong prevalence of MNE activities in that economy and their importance for the euro area aggregate, this paper assesses the usefulness of the “modified” series for Irish non-construction investment and services imports. Using the modified series would provide a more accurate picture of the domestic dynamics of the Irish economy and enhance real-time assessment of the euro area business cycle, current account and capital stock. This paper brings insights into the unwinding of IPP shocks, which is a more straightforward exercise than seeking to anticipate the shocks themselves. The conclusions of this work underline the urgent need for more granular and internationally harmonised data on MNE activities to gain a clearer understanding of the dynamics of IPP operations and the implications for both short and long-term macroeconomic developments.
JEL Code: E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts

18 March 2024

WORKING PAPER SERIES - No. 2918

Determinants of currency choice in cross-border bank loans

English

Abstract: This paper provides insights into the determinants of currency choice in cross-border bank lending, such as bilateral distance, financial and trade linkages to issuer countries of major currencies, and invoicing currency patterns. Cross-border bank lending in US dollars, and particularly in euro, is highly concentrated in a small number of countries. The UK is central in the international network of loans denominated in euro, although there are tentative signs that this role has diminished for lending to non-banks since Brexit. Offshore financial centres are pivotal for US dollars loans, reflecting, in particular, lending to non-bank financial intermediaries in the Cayman Islands, possibly as a result of regulatory and tax optimisation strategies. The empirical analysis suggests that euro-denominated loans face the “tyranny of distance”, in line with predictions of gravity models of trade, in contrast to US dollar loans. Complementarities between trade invoicing and bank lending are found for both the euro and the US dollar.
JEL Code: F31 : International Economics→International Finance→Foreign Exchange
F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
F34 : International Economics→International Finance→International Lending and Debt Problems
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages

28 September 2023

ECONOMIC BULLETIN - ARTICLE

The euro area current account after the pandemic and energy shock

Economic Bulletin Issue 6, 2023

English

Abstract: In 2022, the euro area current account balance recorded a deficit of 0.8% of euro area GDP compared with a surplus of 2.8% of GDP in 2021. This deterioration of 3.6 percentage points is the biggest annual change in the euro area current account balance on record. This article reviews developments in the current account components. It shows that most of this deterioration is expected to be temporary as it was driven by a decline in the goods trade balance on the back of sharp increases in energy import prices. The euro area current account can therefore be expected to recover, driven by a partial rebound in the terms of trade, anticipated fiscal consolidation and largely unchanged demographic factors. However, as part of the increase in energy prices will probably persist over the medium term, the euro area current account balance is likely to stay somewhat below pre-pandemic levels.
JEL Code: F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

29 June 2023

ECONOMIC BULLETIN - BOX

The great retrenchment in euro area external financial flows in 2022 – insights from more granular balance of payments statistics

Economic Bulletin Issue 4, 2023

English

Abstract: This box provides an analysis of the retrenchment recorded in euro area external financial flows in 2022 – the largest since the global financial crisis – making use of new, more granular data published in the euro area balance of payments and international investment position statistics. The retrenchment was most pronounced in portfolio and foreign direct investment (FDI) flows. Euro area investors’ retrenchment in portfolio investment in 2022 was mainly driven by investment funds, while insurance corporations and pension funds offset the reversal in outflows to some extent. As regards foreign portfolio investment in the euro area in 2022, net purchases of euro area investment fund shares dried up almost completely, while foreign investors’ appetite for euro area debt securities started to return. The retrenchment in FDI mainly reflected “financialised” transactions by multinational enterprises vis-à-vis affiliated “other financial institutions” in euro area financial centres, while FDI flows to the non-financial corporate sector remained more stable.
JEL Code: F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

21 June 2023

THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATURE

Determinants of currency choice in cross-border bank loans

The international role of the euro 2023

English

JEL Code: :

19 May 2023

ECONOMIC BULLETIN - BOX

The energy shock, price competitiveness and euro area export performance

Economic Bulletin Issue 3, 2023

English

Abstract: This box provides empirical evidence on the role of the recent energy price shock in affecting price competitiveness and euro area export performance. At the aggregate level, an analysis based on a structural vector autoregression (SVAR) shows that the chief drivers of export dynamics in the past two years have been shifts in global demand conditions and the effects of supply bottlenecks. The energy supply shock has played a relatively minor role in dampening overall export growth, lowering it by about one percentage point on average over the past year. However, the energy shock may have played a greater role in more exposed sectors, as euro area exports have decreased strongly in high energy-intensive sectors over the past year. Indicators based on relative prices point to a loss of competitiveness for the euro area during 2022. The medium-term outlook for euro area competitiveness may deteriorate further on account of structural changes in energy costs because of the diversification of gas sources and the energy transition, which may lead to higher input costs for euro area exporters compared with their foreign competitors.
JEL Code: F1 : International Economics→Trade

19 May 2023

ECONOMIC BULLETIN - BOX

Intangible assets of multinational enterprises in Ireland and their impact on euro area GDP

Economic Bulletin Issue 3, 2023

English

Abstract: Large-scale transfers of intellectual property products (IPP) conducted by multinational enterprises in Ireland are increasingly affecting euro area output, investment and trade measures. At the time of transfer, the within-quarter impact of these inflows tends to be neutral for euro area real GDP growth, as IPP transfers are often accompanied by services imports of equal size. However, in subsequent quarters these inflows typically have a positive effect on euro area GDP growth, as they boost both the capital stock and future export streams.
JEL Code: E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F43 : International Economics→Macroeconomic Aspects of International Trade and Finance→Economic Growth of Open Economies
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts

10 November 2022

ECONOMIC BULLETIN - BOX

Euro area linkages with Russia: latest insights from the balance of payments

Economic Bulletin Issue 7, 2022

English

Abstract: This box provides an analysis of recent developments in trade and financial linkages between the euro area and Russia as recorded in the euro area balance of payments. The euro area current account balance vis-à-vis Russia turned from a small surplus into a deficit of 0.5% of euro area GDP between the second quarter of 2021 and the second quarter of this year, thus contributing significantly to the reduction in the euro area’s current account surplus over the same period. The bilateral current account deficit vis-à-vis Russia increased on account of the rising value of nominal imports, largely of energy products, and lower exports driven by EU sanctions. Euro area financial exposures to Russia before Russia’s invasion of Ukraine were relatively limited, with foreign direct investment (FDI) being the most important component. Since the start of the war euro area holdings of Russian assets have declined, while liabilities vis-à-vis Russia have increased due to the impact of EU sanctions.
JEL Code: F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

26 February 2018

WORKING PAPER SERIES - No. 2130

Cross-border banking in the EU since the crisis: what is driving the great retrenchment?

English

Abstract: This paper examines the drivers of the retrenchment in cross-border banking in the European Union (EU) since the global financial crisis, which stands out in international comparison as banks located in the euro area and in the rest of the EU reduced their cross-border claims by around 25%. Particularly striking is the sharp and sustained reduction in intra-EU claims, especially in the form of deleveraging from cross-border interbank loans. Examining a wide range of possible determinants, we identify high non-performing loans as an important impediment to cross-border lending after the crisis, highlighting the spillovers from national banking sector conditions across the EU. We also find evidence that prudential policies can entail spillovers via cross-border banking in the EU, albeit with heterogeneity across instruments in terms of direction, magnitude and significance. Our results do not point to a major role of newly introduced bank levies in explaining cross-border banking developments.
JEL Code: F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F30 : International Economics→International Finance→General
F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission
G15 : Financial Economics→General Financial Markets→International Financial Markets
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation

External publications

2025

Journal of International Money and Finance

The global financial cycle and macroeconomic tail risks