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Lucia Quaglietti

21 September 2021
OCCASIONAL PAPER SERIES - No. 263
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Abstract
This paper assesses how globalisation has shaped the economic environment in which the ECB operates and discusses whether this warrants adjustments to the monetary policy strategy. The paper first looks at how trade and financial integration have evolved since the last strategy review in 2003. It then examines the effects of these developments on global productivity growth, the natural interest rate (r*), inflation trends and monetary transmission. While trade globalisation initially boosted productivity growth, this effect may be waning as trade integration slows and market contestability promotes a winner-takes-all environment. The impact of globalisation on r* has been ambiguous: downward pressures, fuelled by global demand for safe assets and an increase in the propensity to save against a background of rising inequality, are counteracted by upward pressures, from the boost to global productivity associated with greater trade integration. Headline inflation rates have become more synchronised globally, largely because commodity prices are increasingly determined by global factors. Meanwhile, core inflation rates show a lower degree of commonality. Globalisation has made a rather modest contribution to the synchronised fall in trend inflation across countries and contributed only moderately to the reduction in the responsiveness of inflation to changes in activity. Regarding monetary transmission, globalisation has made the role of the exchange rate more complex by introducing new mechanisms through which it affects financial conditions, real activity and price dynamics. Against the background of this discussion, the paper then examines the implications for the ECB’s monetary policy strategy. In doing so, it asks two questions. How is the ECB’s economic and monetary analysis affected by globalisation? And how does globalisation influence the choice of the ECB’s monetary policy objective and instruments? ...
JEL Code
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
F65 : International Economics→Economic Impacts of Globalization→Finance
26 April 2021
WORKING PAPER SERIES - No. 2541
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Abstract
This paper sheds light on the impact of global macroeconomic uncertainty on the euro area economy. We build on the methodology proposed by Jurado et al. (2015) and estimate global as well as country-specific measures of economic uncertainty for fifteen key euro area trade partners and the euro area. Our measures display a clear counter-cyclical pattern and line up well to a wide range of historical events generally associated with heightened uncertainty. In addition, following Piffer and Podstawski (2018), we estimate a Proxy SVAR where we instrument uncertainty shocks with changes in the price of gold around specific past events. We find that, historically, global uncertainty shocks have been important drivers of fluctuations in euro area economic activity, with one standard deviation increase in the identified uncertainty shock subtracting around 0.15 percentage points from euro area industrial production on impact.
JEL Code
D81 : Microeconomics→Information, Knowledge, and Uncertainty→Criteria for Decision-Making under Risk and Uncertainty
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
27 July 2020
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 5, 2020
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Abstract
The world economy is facing an unprecedented shock, and as the impact of the pandemic unfolds, world trade will be hit particularly hard. Global value chain linkages are likely to magnify the impact. This box assesses the effects of disruptions associated with the COVID-19 pandemic and provides estimates of the impact on world trade. We find that GVC spillovers could significantly amplify the decline in world trade.
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
F60 : International Economics→Economic Impacts of Globalization→General
6 February 2020
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 1, 2020
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Abstract
Over the past year the global economy has transitioned from a robust and synchronised expansion to a widespread slowdown. Global growth has weakened on the back of soft investment, which was also a key driver of global trade’s sharp fall into contractionary territory in the first half of 2019 (see Chart A). The slowdown in global investment and trade has occurred in an environment of rising trade tensions between the United States and China, slowing Chinese demand, (geo-)political tensions, Brexit and idiosyncratic stresses in several emerging economies, with rising uncertainty magnifying the negative impact. Against this backdrop, this box assesses the role of uncertainty in the recent slowdown of global investment and trade.
JEL Code
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
16 September 2019
OCCASIONAL PAPER SERIES - No. 233
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Abstract
This paper reviews and assesses financial stability challenges in countries preparing for EU membership, i.e. Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Turkey. The paper mainly focuses on the period since 2016 (unless the analysis requires a longer time span) and on the banking sectors that dominate financial systems in this group of countries. For the Western Balkans, the paper analyses recent trends in financial intermediation, as well as the two main challenges that have been identified in the past. Asset quality continues to improve, but the share of non-performing loans is still high in some countries, while regulatory, legal and tax impediments are still to be resolved in most cases. High unofficial euroisation is a source of indirect credit risk for countries with their own national legal tender, which calls for continued efforts to promote the use of domestic currencies in the financial system. At the same time, banking systems seem less prone to financial stress from maturity mismatches than certain EU peers. These risks are met with a solid shock-absorbing capacity in the Western Balkans, as exemplified by robust capital and liquidity buffers. Turkey experienced a period of heightened financial stress during 2018 and, while its banking system appears to have sufficient buffers to absorb shocks overall, significant forex borrowing of corporates and high rollover needs of banks in foreign exchange on the wholesale market constitute considerable financial stability risks.
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
F34 : International Economics→International Finance→International Lending and Debt Problems
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
G15 : Financial Economics→General Financial Markets→International Financial Markets
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
5 August 2019
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 5, 2019
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Abstract
While both global activity and trade have been declining since mid-2018, world trade has slowed particularly sharply. This box investigates the reasons behind the decline in global trade and its decoupling from economic activity. This is largely explained by a turnaround in the most trade-intensive components of global demand, such as investment, exacerbated by rising global uncertainty and tighter financing conditions. From a production perspective, the decline in investment was reflected in a sharp slowdown in manufacturing output.
JEL Code
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
F14 : International Economics→Trade→Empirical Studies of Trade
24 April 2019
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 3, 2019
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Abstract
The risk of a trade war came sharply into focus in 2018, as protectionist threats by the US Administration and its trading partners were followed by concrete actions. Tensions rose over the summer and, while these have been defused on some fronts, the risk of further escalation remains material. The impact of the measures implemented so far on the global and euro area economic outlooks is expected to remain contained. However, the negative impact could become much greater if trade tensions were to escalate further. Uncertainty related to protectionism is weighing on economic sentiment and it may raise further, potentially eroding confidence and affecting the euro area and the global economy more significantly. The complexity of intertwined international production chains could also magnify the impact. Against this backdrop, this article reviews the changes in the trade policy landscape over the past decade. It discusses the macroeconomic implications of the recent surge in protectionism and evaluates the possible effects that an escalation in trade tensions could have on the global economy and the euro area.
JEL Code
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
21 March 2019
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 2, 2019
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Abstract
This box looks at the current phase of the business cycle in major non-euro area advanced economies with a view to assessing the factors behind the transition to weaker growth.It shows that in several key advanced economies the output gap is currently in positive territory, with activity still expanding faster than potential. Although growth in non-euro area advanced economies has been slowing, signals of a severe slowdown or recession appear contained. This notwithstanding, downside risks abound and have increased lately.
JEL Code
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
7 May 2018
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 3, 2018
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Abstract
Public support for globalisation has declined over the past decade and trade reforms have slowed. Moreover, in recent weeks the risk of rising trade tensions has surged on the back of new sets of tariffs announced by the US administration. This box discusses the possible implications of rising trade tensions for the global economy.
JEL Code
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
F13 : International Economics→Trade→Trade Policy, International Trade Organizations