Future rate path open
We expect inflation to return to our two percent target by the end of 2025, Executive Board member Isabel Schnabel tells FAZ. But we need to remain vigilant and continuously cross-check incoming data with the assumptions underlying our projections.
Read the interview
A new dataset on wealth distribution
Household wealth is highly unevenly distributed in the euro area, but inequality has declined since 2015 and remains lower than in the United States. This article looks into the Distributional Wealth Accounts, which provide key evidence on wealth distribution in the euro area.
Read more
The impact of central bank communication
Central banks choose their words carefully. And rightly so – policy makers’ wording can move markets and, eventually, the economy. The ECB Blog shows how unexpected changes in communication influence growth and inflation.
Read The ECB Blog- 31 July 2024
- MFI INTEREST RATE STATISTICS
- 30 July 2024
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 30 July 2024
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 26 July 2024
- EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR (FULL)
- 26 July 2024
- PRESS RELEASE
- 25 July 2024
- PAYMENT INSTRUMENTS AND SYSTEMSAnnexes
- 25 July 2024
- PAYMENT INSTRUMENTS AND SYSTEMS
- 23 July 2024
- Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the Joint ECB-IMF-IMFER Conference 2024
- 18 July 2024
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 18 July 2024EnglishOTHER LANGUAGES (23) +Related
- 18 July 2024
- 18 July 2024
- EnglishOTHER LANGUAGES (23) +
- 4 July 2024
- Keynote speech by Piero Cipollone, Member of the Executive Board of the European Central Bank, at the National Conference of Statistics on official statistics at the time of artificial intelligence
- 4 July 2024
- Slides by Philip R. Lane, Member of the Executive Board of the ECB, at the Master in Economics and Finance (MEF) 2024 Lecture in Naples
- 1 July 2024
- Introductory speech by Christine Lagarde, President of the ECB, at the opening reception of the ECB Forum on Central Banking in Sintra, PortugalRelated
- 6 July 2024
- 26 July 2024
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Christian Siedenbiedel on 22 July 2024
- 23 July 2024
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Sergio Rivas
- 11 June 2024
- Interview with Christine Lagarde, President of the ECB, conducted by Andrés Stumpf, Stefan Reccius, Isabella Bufacchi, Guillaume Benoit and Alexandre Counis in Paris on 7 June 2024
- 27 May 2024
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Arnold on 24 May 2024
- 24 May 2024
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Steffen Clement on 16 May 2024
- 31 July 2024
- Central banks choose their words very carefully. And rightly so – policy makers’ wording can move markets and, eventually, the economy. This ECB Blog post shows how unexpected changes in communication influence growth and inflation.Details
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E59 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Other
- 23 July 2024
- Repo markets are vital for banks to source liquidity and securities. They also represent an essential link in the monetary policy transmission chain. While the Eurosystem is in the process of reducing its market footprint, repo markets are going through a phase of change. The ECB Blog looks at dynamics in this market.Details
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
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
- 10 July 2024
- The green transition will significantly increase demand for key minerals over the coming decades. The impact on energy prices will ultimately depend on how supply adjusts. The ECB Blog looks at the geopolitical risks involved.Details
- JEL Code
- D43 : Microeconomics→Market Structure and Pricing→Oligopoly and Other Forms of Market Imperfection
F51 : International Economics→International Relations, National Security, and International Political Economy→International Conflicts, Negotiations, Sanctions
F55 : International Economics→International Relations, National Security, and International Political Economy→International Institutional Arrangements
- 4 July 2024
- Firms’ inflation expectations are key for monetary policy makers. The ECB Blog presents new survey data on these expectations, evidence on what influences them, how they change when new information becomes available, and if they matter for the plans and choices firms make.Details
- JEL Code
- D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
D81 : Microeconomics→Information, Knowledge, and Uncertainty→Criteria for Decision-Making under Risk and Uncertainty
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
- 27 June 2024
- Europe needs trillions of euros to manage climate change, become digital and defend itself. How can EU and national policymakers support these projects? This Blog post discusses the options in times of low growth and high public debt levels.Details
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
H50 : Public Economics→National Government Expenditures and Related Policies→General
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 31 July 2024
- LEGAL ACT
- 31 July 2024
- WORKING PAPER SERIES - No. 2965Details
- Abstract
- This paper introduces ECB-(RE)BASE as the model-consistent, or rational expectation version of the ECB-BASE model. It brings new analytical capabilities to consider varying degrees of heterogeneity in expectation formation across the agents of the model. While the original version of ECB-BASE features VAR-based expectations, we examine two alternative versions either with full model-consistent expectations or with hybrid expectations. The paper provides a didactic exposition of the changes in the model properties brought by the various expectation settings. Furthermore, we conduct illustrative scenarios around the macroeconomic shocks experienced over the recent years. The simulations notably suggest that moving from VAR-based to model-consistent expectations would limit the pandemic-induced macroeconomic volatility but would exacerbate the price pressures during the inflation surge period. Overall, this model development extends the range of possibilities for risk and policy analysis which can enhance the contribution of ECB-(RE)BASE to monetary policy preparation.
- JEL Code
- C3 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables
C5 : Mathematical and Quantitative Methods→Econometric Modeling
E1 : Macroeconomics and Monetary Economics→General Aggregative Models
E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
- 31 July 2024
- WORKING PAPER SERIES - No. 2964Details
- Abstract
- This article measures the degree of potential de-anchoring of inflation expectations in the euro area vis-à-vis the inflation objective of the European Central Bank (ECB). A no-arbitrage term structure model that allows for a time-varying long-term mean of inflation expectations, π∗t , is applied to inflation-linked swap (ILS) rates, while taking into account survey-basedinflation forecasts. Estimates of π∗t have been close to 2% since the mid-2000s, indicating that long-term inflation expectations have overall remained well anchored to the ECB’s inflation objective. As this objective is however related to the "medium term", expectations components of various forward ILS rates are extracted: they appear to have been broadlyanchored, with tentative signs of de-anchoring up to the two-year horizon. Using backcasted ILS rates, estimates of π∗t are much above 2% in the early 1990s, but they convergence to levels below 2% by the end of the decade when the ECB was established.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→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
- 31 July 2024
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2024Details
- Abstract
- This article provides a technical evaluation of the performance of ECB/Eurosystem staff inflation projections since 2000. It complements the existing literature by examining the influence of HICP components as well as conditioning variables on the properties of HICP inflation projections, also taking into account potential time variation in forecast performance. The article shows how, from the low projection errors over the period leading up to the pandemic, Eurosystem/ECB staff forecast accuracy deteriorated in the face of atypical post-pandemic shocks before improving again since late 2022. However, it finds that the accuracy of Eurosystem/ECB staff projections of headline HICP inflation is broadly comparable to real-time market-based and private professional forecasts even after including the post-pandemic period of high inflation. The HICP forecast accuracy is comparable across main HICP components, including HICP excluding energy and food (HICPX), although HICPX inflation projections tend to show smaller errors than headline inflation projections. The article finds that ECB/Eurosystem staff inflation projections are unbiased overall but exhibit specific periods over the last 25 years in which this unbiasedness broke down. It also points to some rigidities in ECB/Eurosystem staff inflation projections, in particular for HICPX, which might explain part of this occasional bias. Finally, the article underscores the contribution of not only oil price assumptions but also other conditioning assumptions to the rigidities, occasional bias and reduced accuracy of ECB/Eurosystem staff projections of HICP inflation.
- JEL Code
- C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
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
- 30 July 2024
- WORKING PAPER SERIES - No. 2963Details
- Abstract
- This paper examines the use of ETFs by open-ended investment funds in the euro area to manage liquidity. We find that during the COVID-19 market turmoil, investment funds were the most run-prone investor type in the market for ETFs. We also show that open-ended funds that faced larger outflows in March 2020 scaled down their ETF holdings by a larger amount. These results are consistent with open-ended funds passing on their outflows to the ETF shares they held. Since open-ended investment funds are the largest group of ETF investors in the euro area, their trading can materially impact primary ETF flows during times of stress.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 30 July 2024
- WORKING PAPER SERIES - No. 2962Details
- Abstract
- The European fiscal governance framework remains incomplete, hindering policy coordination during economic shocks and affecting the transmission of the single monetary policy. High public debt and low public investment worsen resilience across Member States. Many policymakers, institutions, and academics support establishing a central fiscal capacity (CFC) as a solution. Against this backdrop, we propose a framework to assess a CFC in the euro area, aimed at stabilizing the business cycle, promoting sovereign debt sustainability, and reducing procyclicality in public investment. Our two-region DSGE model with a permanent CFC allocates resources based on the relative output gap while earmarking funds for public investment and imposing fiscal adjustment requirements for the high-debt region. The CFC enhances business cycle stabilization for both regions and significantly reduces the welfare cost of fluctuations. We also explore European bond issuance and a supranational investment strategy to address investment needs through European Public Goods.
- JEL Code
- E12 : Macroeconomics and Monetary Economics→General Aggregative Models→Keynes, Keynesian, Post-Keynesian
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 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
- 29 July 2024
- WORKING PAPER SERIES - No. 2961Details
- Abstract
- This paper introduces a New Keynesian multi-sector industry model that integrates firm heterogeneity, entry, and exit dynamics, while considering energy production from both fossil fuels and renewables. We investigate the effects of a sustained increase in fossil fuel prices on sectoral size, labor productivity, and inflation. A hike in the price of fossil resources results in higher energy prices. Due to ex-ante heterogeneity in energy intensity in production, the profitability of sectors is impacted asymmetrically.As production costs rise, less efficient firms leave the market, while new entrants must display higher idiosyncratic productivity. While this process enhances average labor productivity, it also results in a lasting decrease in the entry of new firms. A central bank with a strong anti-inflationary stance can circumvent the energy price increase and mitigate its inflationary effects by curbing rising production costs. This policy entails a higher impact cost in terms of output and lower average productivity, but leads to a faster recovery in business dynamism. Thus, our results suggest that monetary policy faces a trade-off between stabilizing aggregate activity and business dynamism.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
L16 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Industrial Organization and Macroeconomics: Industrial Structure and Structural Change, Industrial Price Indices
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
- 29 July 2024
- WORKING PAPER SERIES - No. 2960Details
- Abstract
- Rising trade tensions, a spate of trade-inhibiting policy measures and a weakening of multilateral institutions have sparked a growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical considerations are already materially affecting trade flows is scant. In this study, we quantify the impact of geopolitical tensions on trade of manufacturing goods over the period 2012-2022 in a structural gravity framework. To capture the influence of geopolitical tensions, we use a measure of geopolitical distance based on UN General Assembly voting. The econometric analysis offers robust evidence that geopolitical distance has become a trade friction and its impact has steadily increased over time. Our results suggest that a 10% increase in geopolitical distance, like the observed increase in the US-China distance since 2018, is associated with a reduction in trade by about 2%. Our findings also highlight a differential and stronger impact on advanced economies and the emergence of friend-shoring.
- JEL Code
- F10 : International Economics→Trade→General
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
- 29 July 2024
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2024Details
- Abstract
- China’s investment-led growth model enabled an unparalleled period of high growth and economic development. However, the rate at which China can productively absorb investment is declining as its economy matures. Nevertheless, the most recent policy approach to address economic weakness is to double down on its investment-centric approach and to identify new productive sources, which is widely expected to increase already existing overcapacities. Efforts to direct these overcapacities to export markets, often through lower prices or prices made competitive by comparatively high rates of state subsidies, will have global implications for China’s trading partners. Lower priced exports could lead to spillovers of disinflationary pressures, both through direct and indirect effects via changes in the pricing behaviour of trading partners’ domestic firms. China's growing dominance in global exports of advanced manufacturing and green technology will affect competitiveness among China’s major trading partners. Industrial and trade policies will be increasingly important in determining the economic outcome of China’s trade relations.
- JEL Code
- O4 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity
O53 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Asia including Middle East
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F4 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 26 July 2024
- WORKING PAPER SERIES - No. 2959Details
- Abstract
- In the aftermath of the European sovereign debt crisis, the question of who should bear the burden of banking crises has been a cornerstone of the new supervisory framework in Europe. We evaluate the bail-in regulation (BRRD) for bank bond holdings using a proprietary database covering holdings of all euro-denominated securities. We focus on hard-to-value bailinable bank bonds and show that banks increased their holdings of bailinable bank bonds while households and non-financial corporations reduced their holdings of bailinable bonds issued by riskier banks.
- JEL Code
- 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
- 26 July 2024
- WORKING PAPER SERIES - No. 2958Details
- Abstract
- We study the heterogeneous pass-through of carbon pricing on investment across firms. Using balance sheet data of 1.2 million European firms and identified carbon policy shocks, we find that higher carbon prices reduce investment, on average. However, less carbon-intensive firms and sectors reduce their investment relatively more compared to otherwise similar firms after a carbon price tightening shock. Following carbon price tightening, firms in demand-sensitive industries see a relative decrease not only in investment but also in sales, employment and cashflow. Moreover, we find no evidence that higher carbon prices incentivise carbon-intensive firms to produce less emission-intensively. Overall, our results are consistent with theories of the growth-hampering features of carbon price increases and suggest that carbon pricing policy operates as a demand shock.
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
- 25 July 2024
- OCCASIONAL PAPER SERIES - No. 353Details
- Abstract
- This paper explores the relationship between banks and stablecoins and their issuers, focusing on the mechanical effects on banks’ capital and liquidity ratios when issuing stablecoins or collecting deposits from stablecoin issuers.The analysis reveals that converting retail deposits into stablecoin issuers’ deposits weakens a bank’s liquidity coverage ratio (LCR), turning a retail deposit into a wholesale deposit, even when these funds are reinvested in high-quality liquid assets. If a credit institution issues its own stablecoins, the impact on its LCR depends on whether it can identify the stablecoin holders; unknown holders weaken the LCR which could incentivise banks to issue stablecoins where they can continually identify the holders to benefit from more favourable liquidity treatment. Additionally, banks must either hold the reserves backing the stablecoins as central bank reserves or reinvest them in low-risk assets, making these funds a less effective source for economic financing and maturity transformation compared with traditional retail deposits. The study also finds that when retail customers of bank A buy a stablecoin issued by a non-bank that keeps reserves at bank B, both banks could see an unexpected decline in their liquidity ratios, as bank A loses stable retail deposits and bank B gains volatile wholesale deposits. These insights are crucial to understanding the dynamics between banks and stablecoins in the evolving financial landscape.
- JEL Code
- E40 : Macroeconomics and Monetary Economics→Money and Interest Rates→General
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
E49 : Macroeconomics and Monetary Economics→Money and Interest Rates→Other
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G20 : Financial Economics→Financial Institutions and Services→General
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
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 24 July 2024
- WORKING PAPER SERIES - No. 2957Details
- Abstract
- We document novel survey-based facts about preferred long-run inflation rates among US consumers. Consumers on average prefer a 0.20% annual inflation rate, well below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models—describing how inflation lowers the real value of wages and money holdings—affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.
- JEL Code
- C83 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Survey Methods, Sampling Methods
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 24 July 2024
- WORKING PAPER SERIES - No. 2956Details
- Abstract
- We study the importance of information technology (IT) in banking for entrepreneurship. Guided by a parsimonious model, we establish that job creation by young rms is stronger in US counties more exposed to banks with greater IT adoption. We present evidence consistent with banks' IT adoption spurring entrepreneurship through a collateral channel: entrepreneurship increases by more in IT-exposed counties when house prices rise. Further analysis suggests that IT improves banks' ability to determine collateral values, in particular when collateral appraisal is more complex. IT also reduces the time and cost of disbursing collateralized loans.
- JEL Code
- D82 : Microeconomics→Information, Knowledge, and Uncertainty→Asymmetric and Private Information, Mechanism Design
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L26 : Industrial Organization→Firm Objectives, Organization, and Behavior→Entrepreneurship
- 23 July 2024
- WORKING PAPER SERIES - No. 2955Details
- Abstract
- We analyze the optimal window length in the average inflation targeting rule within a Behavioral THANK model. The central bank faces an occasionally binding effective lower bound (ELB) or persistent supply shocks, and can also use quantitative easing. We show that the optimal averaging period is infinitely long given a conventional degree of myopia. Finite yet long-lasting windows dominate for higher cognitive discounting; i.e., the makeup property is shown to be qualitatively resistant to deviation from rational expectations. We point out that the optimal window may depend on the speed of return to the target path. We solve the model both locally and globally to disentangle the effects of uncertainty due to the ELB. The welfare loss difference between solution techniques is considerably decreasing in the degree of history dependence.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
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
E71 : Macroeconomics and Monetary Economics
- 23 July 2024
- WORKING PAPER SERIES - No. 2954Details
- Abstract
- We study the sensitivity of the realised LGD to macroeconomic conditions by exploring Global Credit’s confidential dataset on observed cash flows from defaulted loans. Given the prolonged duration of loan recovery, spanning several years, and the potential for macroeconomic fluctuations during this time frame, our study explores whether the sensitivity of realised LGD to macroeconomic conditions varies based on the timing of cash flows. We find that, regardless of the cash flow timing, the sensitivity of the LGD to macroeconomic conditions is higher for real-estate secured loans than for unsecured loans. The most relevant macroeconomic variables for the secured LGD are unemployment rate and stock returns, followed by house prices and the long-term interest rate. For unsecured loans, real GDP growth and stock returns are the most relevant predictors. These results may be relevant for both micro and macroprudential policymakers by informing on the procyclicality of risk parameters and bank capital requirements.
- JEL Code
- 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
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 23 July 2024
- RESEARCH BULLETIN - No. 121Details
- Abstract
- Households differ considerably in terms of the inflation they experience at any point in time. The main reasons for this are that prices (and thus price changes) differ from place to place and that households do not all buy the same products. Households adjust their purchases over time, but not enough to offset these differences.
- JEL Code
- D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D30 : Microeconomics→Distribution→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 22 July 2024
- WORKING PAPER SERIES - No. 2953Details
- Abstract
- Since the advent of Heterogeneous Agent New Keynesian (HANK) models, countercyclical unemployment risk has been deemed an important amplification mechanism for business cycles shocks. Yet, the aggregate effects of such “unemployment fears” are hard to pin down. We thus revisit this issue in the context of a rich two-asset HANK model, proposing new ways to isolate their general equilibrium effects and tackle the long-standing challenge of modelling wage bargaining in this class of model. While unemployment fears can exert noticeable aggregate effects, we find their magnitude to depend importantly on the distribution of firm profits. Households’ ability to borrow stabilizes the economy. Our framework has also implications for policy: in the aftermath of an adverse energy price shock, fiscal policy can help reducing the hysteresis effects on unemployment and most households gain if the central bank accommodates an employment recovery at the cost of higher inflation.
- JEL Code
- D52 : Microeconomics→General Equilibrium and Disequilibrium→Incomplete Markets
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
J64 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment: Models, Duration, Incidence, and Job Search
- 22 July 2024
- WORKING PAPER SERIES - No. 2952Details
- Abstract
- This paper provides a first empirical analysis of the impact of the European Central Bank’s (ECB’s) climate-risk-related supervisory efforts on (i) climate risk exposure and related risk management of banks; and (ii) on the induced shifts in banks’ portfolio choices with regard to additional green finance. From 2020 onwards, the ECB has introduced various measures to enhance climate-risk-related supervisory efforts. Our identification strategy exploits the fact that the ECB’s efforts on climate supervision has only been introduced for selected banks within the European Union i.e., the Significant Institutions under the Single Supervisory Mechanism. Other banks (i.e., the Less Significant Institutions) have remained unaffected. We set up a difference-in-difference setup based on a novel data set and find a significant impact on both improvements in climate risk exposure and management and on an increase in banks’ green finance activities.
- JEL Code
- D25 : Microeconomics→Production and Organizations
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
Ir-rati tal-imgħax
Faċilità tas-self marġinali | 4.50 % |
Operazzjonijiet ewlenija ta’ rifinanzjament (rata fissa) | 4.25 % |
Faċilità tad-depożitu | 3.75 % |
Rata tal-inflazzjoni
Daxxbord tal-inflazzjoniRati tal-kambju
USD | US dollar | 1.0828 | |
JPY | Japanese yen | 162.76 | |
GBP | Pound sterling | 0.84380 | |
CHF | Swiss franc | 0.9533 |