European Central Bank

Displaying 1-40 of 385 results

  • White Papers // Jul 2011

    Capital Flows, Push Versus Pull Factors And The Global Financial Crisis

    The causes of the 2008 collapse and subsequent surge in global capital flows remain an open and highly controversial issue. Employing a factor model coupled with a dataset of high-frequency portfolio capital flows to 50 economies, the paper finds that common shocks - key crisis events as well as changes...

    Provided By European Central Bank

  • White Papers // Jul 2011

    Real-time Data And Fiscal Policy Analysis: A Survey Of The Literature

    This paper surveys the empirical research on fiscal policy analysis based on real-time data. This paper can be broadly divided in three groups that focus on: the statistical properties of revisions in fiscal data; the political and institutional determinants of fiscal data revisions and of one-year-ahead projection errors by governments...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Theoretical Notes On Bubbles And The Current Crisis

    The authors explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. They embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, they...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Sovereign Credit Ratings And Financial Markets Linkages: Application To European Data

    The authors use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor's, Moody's, Fitch). The results show: significant responses of government bond yield spreads to changes...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Do Financial Investors Destabilize The Oil Price?

    In this paper, the authors assess whether and to what extent financial activity in the oil futures markets has contributed to destabilize oil prices in recent years. They define a destabilizing financial shock as a shift in oil prices that is not related to current and expected fundamentals, and thereby...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Systemic Risk-Taking: Amplification Effects, Externalities, And Regulatory Responses

    This paper analyzes the efficiency of risk-taking decisions in an economy that is prone to systemic risk, captured by financial amplification effects that occur in response to strong adverse shocks. It shows that decentralized agents who have unconstrained access to a complete set of Arrow securities choose to expose themselves...

    Provided By European Central Bank

  • White Papers // Jun 2011

    The Basel III Framework For Liquidity Standards And Monetary Policy Implementation

    Basel III introduces for the first time an international framework for liquidity risk regulation, reflecting the experience of excessive liquidity risk taking of banks in the run up to the financial crisis that erupted in August 2007, and associated negative externalities. As central banks play a crucial role in the...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Determinants Of Credit-Less Recoveries

    This paper aims to shed light on the characteristics and particularly the determinants of credit-less recoveries. After building a dataset and documenting some stylised facts of credit-less recoveries in emerging market economies, this paper uses panel probit models to analyze key determinants of credit-less recoveries. The authors' main findings are...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Systemic Risk And Financial Development In A Monetary Model

    In a stochastic pure endowment economy with money but no financial markets, two types of agents trade one non-durable goods using two alternative types of cash constraints. Simulations of the corresponding variants are compared to Arrow-Debreu and Autarky equilibriums. First, this illustrates how financial innovation or financial regression, including systemic...

    Provided By European Central Bank

  • White Papers // May 2011

    Have Euro Area And EU Economic Governance Worked? Just The Facts

    The authors test whether two key elements of the EU and euro area economic governance framework, the Stability and Growth Pact and the Lisbon Strategy, have had any impact on macroeconomic outcomes. They test this proposition using a difference-in-difference approach on a panel of over 30 countries, some of which...

    Provided By European Central Bank

  • White Papers // May 2011

    The Predictive Content Of Sectoral Stock Prices: A US-Euro Area Comparison

    This paper examines the out-of-sample forecast performance of sectoral stock market indicators for real GDP, private consumption and investment growth up to 4 quarters ahead in the US and the euro area. The findings are that the predictive content of sectoral stock market indicators: is potentially strong, particularly for the...

    Provided By European Central Bank

  • White Papers // May 2011

    Fiscal Data Revisions In Europe

    Public deficit figures are subject to revisions, as most macroeconomic aggregates are. Nevertheless, in the case of Europe, the latter could be particularly worrisome given the role of fiscal data in the functioning of EU's multilateral surveillance rules. Adherence to such rules is judged upon initial releases of data, in...

    Provided By European Central Bank

  • White Papers // May 2011

    Exact Likelihood Computation For Nonlinear DSGE Models With Heteroskedastic Innovations

    Phenomena such as the Great Moderation have increased the attention of macro-economists towards models where shock processes are not (log-) normal. This paper studies a class of discrete-time rational expectations models where the variance of exogenous innovations is subject to stochastic regime shifts. The authors first show that, up to...

    Provided By European Central Bank

  • White Papers // May 2011

    How Wages Respond To Shocks: Asymmetry In The Speed Of Adjustment

    The time series of various economic variables often exhibit asymmetry: decreases in the values tend to be sharp and fast, whereas increases usually occur slowly and gradually. The authors detect signs of an analogous asymmetry in firms' wage setting behaviour on the basis of managerial surveys, with employers tending to...

    Provided By European Central Bank

  • White Papers // May 2011

    The Stock Market Reaction To The 2005 Non-Tradable Share Reform In China

    During 2005-2006, the Chinese government implemented a reform aimed at eliminating the so-called Non-Tradable Shares (NTS), shares typically held by the State or by politically connected institutional investors that were issued at the early stage of financial market development. The analysis, based on the time series of risk factors and...

    Provided By European Central Bank

  • White Papers // May 2011

    Financial Frictions And Optimal Monetary Policy In An Open Economy

    A growing number of papers have studied positive and normative implications of financial frictions in DSGE models. The authors contribute to this literature by studying the welfare-based monetary policy in a two-country model characterized by financial frictions, alongside a number of key features, like capital accumulation, non-traded goods and foreign-currency...

    Provided By European Central Bank

  • White Papers // May 2011

    Who Invests In Home Equity To Exempt Wealth From Bankruptcy?

    Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for...

    Provided By European Central Bank

  • White Papers // May 2011

    A Monetary Policy Strategy In Good And Bad Times: Lessons From The Recent Past

    The authors evaluate the ECB's monetary policy strategy against the underlying economic structure of the euro area economy, in normal times and in times of severe financial dislocations. They show that in the years preceding the financial crisis that started in 2007 the strategy was successful at ensuring macroeconomic stability...

    Provided By European Central Bank

  • White Papers // May 2011

    The Bank Lending Channel: Lessons From The Crisis

    The 2007-2010 financial crises highlighted the central role of financial intermediaries' stability in buttressing a smooth transmission of credit to borrowers. While results from the years prior to the crisis often cast doubts on the strength of the bank lending channel, recent evidence shows that bank-specific characteristics can have a...

    Provided By European Central Bank

  • White Papers // May 2011

    On The Importance Of Sectoral And Regional Shocks For Price-Setting

    The authors use a novel disaggregate sectoral euro area data set with a regional breakdown to investigate price changes and suggest a new method to extract factors from over-lapping data blocks. This allows them to separately estimate aggregate, sectoral, country-specific and regional components of price changes. They thereby provide an...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Distributional Dynamics Under Smoothly State-Dependent Pricing

    Starting from the assumption that firms are more likely to adjust their prices when doing so is more valuable, this paper analyzes monetary policy shocks in a DSGE model with firm-level heterogeneity. The model is calibrated to retail price microdata, and inflation responses are decomposed into "Intensive", "Extensive", and "Selection"...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Central Bank Communication On Financial Stability

    Central banks regularly communicate about financial stability issues, by publishing Financial Stability Reports (FSRs) and through speeches and interviews. The paper asks how such communications affect financial markets. Building a unique dataset, it provides an empirical assessment of the reactions of stock markets to more than 1000 releases of FSRs...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Business Cycle Dynamics Under Rational Inattention

    The authors develop a dynamic stochastic general equilibrium model with rational inattention by households and firms. Consumption responds slowly to interest rate changes because households decide to pay little attention to the real interest rate. Prices respond quickly to some shocks and slowly to other shocks. The mix of fast...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Financial Remoteness And The Net External Position

    This paper shows that, controlling for standard determinants of net external positions; financially-remote countries exhibit more positive net external positions. This finding is found to be stronger for less advanced countries, hinting at external funding problems for more remote countries. Being located near financially very open countries, being in currency...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Securitization, Bank Lending And Credit Quality: The Case Of Spain

    While the 2007-2010 financial crises have hit a variety of countries asymmetrically, the case of Spain is particularly illustrative: this country experienced a pronounced housing bubble partly funded via spectacular developments in its securitization markets leading to looser credit standards and subsequent financial stability problems. The authors analyze the sequential...

    Provided By European Central Bank

  • White Papers // Apr 2011

    The Effectiveness Of Monetary Policy In Steering Money Market Rates During The Recent Financial Crisis

    The recent financial crisis deeply affected the money market yield curve and thus, potentially, the proper functioning of the interest rate channel of monetary policy transmission. Therefore, the authors analyze the effectiveness of monetary policy in steering euro area money market rates using two measures: first, the predictability of money...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Systemic Risk Diagnostics: Coincident Indicators And Early Warning Signals

    The authors propose a novel framework to assess financial system risk. Using a dynamic factor framework based on state-space methods, they construct coincident measures ('Thermometers') and a forward looking indicator for the likelihood of simultaneous failure of a large number of financial intermediaries. The indicators are based on latent macro-financial...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Welfare Costs Of Inflation And The Circulation Of US Currency Abroad

    Empirical studies of the "Shoe-leather" costs of inflation are typically computed using M1 as a measure of money. Yet, official data on M1 includes all currency issued, regardless of the country of residence of the holder. Using monetary data adjusted for US dollars abroad, the authors show that the failure...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Wage Structure Effects Of International Trade: Evidence From A Small Open Economy

    In the last decades, international trade has increased between industrialised countries and between high- and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Nowcasting Inflation Using High Frequency Data

    This paper proposes a methodology to nowcast and forecast inflation using data with sampling frequency higher than monthly. The nowcasting literature has been focused on GDP, typically using monthly indicators in order to produce an accurate estimate for the current and next quarter. This paper exploits data with weekly and...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Structural Reforms And Macroeconomic Performance In The Euro Area Countries: A Model-based Assessment

    The authors quantitatively assess the macroeconomic effects of country-specific supply-side reforms in the euro area by simulating EAGLE, a multi-country dynamic general equilibrium model. They consider reforms in the labor and services markets of Germany (or, alternatively, Portugal) and the rest of the euro area. Their main results are as...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Business Cycle Synchronisation: Disentangling Trade And Financial Linkages

    Drawing on a large sample of countries, this paper explores whether closer economic ties between countries foster business cycle synchronisation and disentangles the role of the various channels, including trade and financial linkages as well as the similarity in sectoral specialisation. Overall, the results confirm that trade integration fosters business...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Macroeconomic Implications Of Downward Wage Rigidities

    Growth of wages, unemployment, employment and vacancies exhibit strong asymmetries between expansionary and contractionary phases. In this paper the authors analyze to what degree downward wage rigidities in the bargaining process affect other variables of the economy. They introduce asymmetric wage adjustment costs in a New-Keynesian DSGE model with search...

    Provided By European Central Bank

  • White Papers // Apr 2011

    What Lies Beneath? A Time-varying Favar Model For The UK Transmission Mechanism

    This paper uses a time-varying Factor Augmented VAR to investigate the evolving transmission of monetary policy and demand shocks in the UK. Simultaneous estimation of time-varying impulse responses of a large set of macroeconomic variables and disaggregated prices suggest that the response of inflation, money supply and asset prices to...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Fiscal Developments And Financial Stress: A Threshold VAR Analysis

    The authors use a threshold VAR analysis to study whether the effects of fiscal policy on economic activity differ depending on financial market conditions. In particular, they investigate the possibility of a non-linear propagation of fiscal developments according to different financial market stress regimes. More specifically they employ a quarterly...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Using The Global Dimension To Identify Shocks With Sign Restrictions

    Identification of structural VARs using sign restrictions has become increasingly popular in the academic literature. This paper argues that identification of shocks can benefit from introducing a global dimension, and shows that summarising information by the median of the available impulse responses - as commonly done in the literature -...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Financial Imbalances And Financial Fragility

    This paper develops a general equilibrium model to analyze the link between financial imbalances and financial crises. The model features an interbank market subject to frictions and where two equilibria may (co-)exist. The normal times equilibrium is characterized by a deep market with highly leveraged banks. The crisis time's equilibrium...

    Provided By European Central Bank

  • White Papers // Apr 2011

    The ECBs New Multi-country Model For The Euro Area: NMCM - With Boundedly Rational Learning Expectations

    Rational expectations has been the dominant way to model expectations, but the literature has quickly moved to a more realistic assumption of boundedly rational learning where agents are assumed to use only a limited set of information to form their expectations. A standard assumption is that agents form expectations by...

    Provided By European Central Bank

  • White Papers // Apr 2011

    The ECBs New Multi-country Model For The Euro Area: NMCM - Simulated With Rational Expectations

    The model presented here is a New estimated medium-scale Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenarios analysis at the European Central Bank. The model has a tight theoretical structure which allows for non-unitary elasticity of substitution, non-constant augmenting technical...

    Provided By European Central Bank

  • White Papers // Apr 2011

    Price And Wage Setting In Portugal: Learning By Asking

    This paper presents the main findings of a survey conducted on a sample of Portuguese firms. The main aim was to identify some relevant characteristics about the dynamics of prices and wages in Portugal. The most important conclusions are: changes to wages are more synchronized than changes to prices; most...

    Provided By European Central Bank

  • White Papers // May 2009

    National Prices And Wage Setting In A Currency Union

    Existing work on wage bargaining (as exemplified by Cukierman and Lippi, 2001) typically predicts more aggressive wage setting under monetary union. This insight has not been confirmed by the EMU experience, which has been characterised by wage moderation, thereby eliciting criticism from Posen and Gould (2006). The present paper formulates...

    Provided By European Central Bank

  • White Papers // May 2009

    Euro Area Private Consumption: Is There A Role For Housing Wealth Effects

    This paper adds to the literature on wealth effects on consumption by disentangling financial wealth effects from housing wealth effects for the euro area. The authors use two macro-datasets for the estimations, one on the aggregate euro area for the period 1980-2006, and one on the individual euro area countries...

    Provided By European Central Bank

  • White Papers // May 2009

    The Impact Of Extreme Weather Events On Budget Balances And Implications For Fiscal Policy

    This paper explores implications of climate change for fiscal policy by assessing the impact of large scale extreme weather events on changes in public budgets. The authors apply alternative measures for large scale extreme weather events and conclude that the budgetary impact of such events ranges between 0.23% and 1.1%...

    Provided By European Central Bank

  • White Papers // May 2009

    Fiscal Behaviour In The European Union: Rules, Fiscal Decentralization And Government Indebtedness

    The authors assess the fiscal behaviour in the European Union countries for the period 1990- 2005 via the responsiveness of budget balances to several determinants. The results show that the existence of effective fiscal rules, the degree of public spending decentralization, and the electoral cycle can impinge on the country's...

    Provided By European Central Bank

  • White Papers // May 2009

    Bidding Behaviour In The ECB?s Main Refinancing Operations During The Financial Crisis

    Liquidity provision through its repo auctions has been one of the main instruments of the European Central Bank (ECB) to address the recent tensions in financial markets since summer 2007. In this paper, the authors analyse banks' bidding behaviour in the ECB's Main Refinancing Operations (MROs) during the ongoing turmoil...

    Provided By European Central Bank

  • White Papers // May 2009

    Are More Data Always Better For Factor Analysis? Results For The Euro Area, The Six Largest Euro Area Countries And The UK

    Factor based forecasting has been at the forefront of developments in the macro-econometric forecasting literature in the recent past. Despite the flurry of activity in the area, a number of specification issues such as the choice of the number of factors in the forecasting regression, the benefits of combining factor-based...

    Provided By European Central Bank

  • White Papers // May 2009

    Wealth Effects On Consumption: Evidence From The Euro Area

    This paper estimates the wealth effects on consumption in the euro area as a whole. The author shows that: financial wealth effects are relatively large and statistically significant; housing wealth effects are virtually nil and not significant; consumption growth exhibits strong persistence and responds sluggishly to shocks; and the immediate...

    Provided By European Central Bank

  • White Papers // May 2009

    Labour Force Participation In The Euro Area: A Cohort Based Analysis

    The authors use a cohort based model to analyse determinants of labour force participation for disaggregated groups of workers in the euro area and the five largest euro area countries. The model captures age and cohort effects as indicators of (unobserved) determinants of participation behaviour. They use these effects and...

    Provided By European Central Bank

  • White Papers // Apr 2009

    Downward Wage Rigidity And Optimal Steady-State Inflation

    This paper examines the impact of downward wage rigidity (nominal and real) on optimal steady-state inflation. For this purpose, the authors extend the workhorse model of Erceg, Henderson and Levin (2000) by introducing asymmetric menu costs for wage setting. They estimate the key parameters by simulated method of moments, matching...

    Provided By European Central Bank

  • White Papers // Apr 2009

    The Impact Of Reference Norms On Inflation Persistence When Wages Are Staggered

    In this paper, the authors present an extension of the Taylor model with staggered wages in which wage-setting is also influenced by reference norms (i.e. by benchmark wages). They show that reference norms can considerably increase the persistence of inflation and the extent of real wage rigidity but that these...

    Provided By European Central Bank

  • White Papers // Jul 2009

    Housing Finance And Monetary Policy

    The authors study how the structure of housing finance affects the transmission of monetary policy shocks. They document three main facts: first, the features of residential mortgage markets differ markedly across industrialized countries; second, and according to a wide range of indicators, the transmission of monetary policy shocks to residential...

    Provided By European Central Bank

  • White Papers // Jul 2009

    Asset Price Misalignments And The Role Of Money And Credit

    This paper contributes to the literature on the properties of money and credit indicators for detecting asset price misalignments. After a review of the evidence in the literature on this issue, the paper discusses the approaches that can be considered to detect asset price busts. Considering a sample of 17...

    Provided By European Central Bank

  • White Papers // Jul 2009

    Universal Banks And Corporate Control: Evidence From The Global Syndicated Loan Market

    Banks play a role in the corporate governance of firms as well as acting as debt financiers around the world. Universal banks can have control over borrowing firms by representation on the board of directors or by holding shares through direct stakes or institutional holdings. The authors investigate the effects...

    Provided By European Central Bank

  • White Papers // Jun 2009

    Monetary Policy And Inflationary Shocks Under Imperfect Credibility

    This paper quantifies the deterioration of achievable stabilization outcomes when monetary policy operates under imperfect credibility and weak anchoring of long-term expectations. Within a medium-scale DSGE model, the authors introduce through a simple signal extraction problem, an imperfect knowledge configuration where price and wage setters wrongly doubt about the determination...

    Provided By European Central Bank

  • White Papers // Jun 2009

    Does It Pay To Have The Euro? Italy?s Politics And Financial Markets Under The Lira And The Euro

    There is a broad consensus that the quality of the political system and its institutions are fundamental for a country's prosperity. The paper focuses on political events in Italy over the past 35 years and asks whether the adoption of the euro in 1999 has helped insulate Italy's financial markets...

    Provided By European Central Bank

  • White Papers // Jun 2009

    Does Private Equity Investment Spur Innovation? Evidence From Europe

    The authors provide the first cross-country evidence of the effect of investment by private equity firms on innovation, focusing on a sample of European countries and using Kortum and Lerner's (2000) empirical methodology. Using an 18-country panel covering the period 1991-2004, they study how private equity finance affects patent applications...

    Provided By European Central Bank

  • White Papers // Jun 2009

    External Shocks And International Inflation Linkages: A Global VAR Analysis

    Amid the recent commodity price gyrations, policy makers have become increasingly concerned in assessing to what extent oil and food price shocks transmit to the inflationary outlook and the real economy. In this paper, the authors try to tackle this issue by means of a Global Vector AutoRegressive (GVAR) model....

    Provided By European Central Bank

  • White Papers // Jun 2009

    The Distribution Of Households Consumption-Expenditure Budget Shares

    This paper explores the statistical properties of household consumption-expenditure budget share distributions - defined as the share of household total expenditure spent for purchasing a specific category of commodities - for a large sample of Italian households in the period 1989-2004. The authors find that household budget share distributions are...

    Provided By European Central Bank

  • White Papers // Jun 2009

    What Explains Global Exchange Rate Movements During The Financial Crisis?

    A striking and unexpected feature of the financial crisis has been the sharp appreciation of the US dollar against virtually all currencies globally. The paper finds that negative US-specific macroeconomic shocks during the crisis have triggered a significant strengthening of the US dollar, rather than a weakening. Macroeconomic fundamentals and...

    Provided By European Central Bank

  • White Papers // Jun 2009

    Forecasting The World Economy In The Short-Term

    Forecasting the world economy is a difficult task given the complex interrelationships within and across countries. This paper proposes a number of approaches to forecast short-term changes in selected world economic variables and aims, first, at ranking various forecasting methods in terms of forecast accuracy and, second, at checking whether...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Financing Obstacles And Growth: An Analysis For Euro Area Non-Financial Corporations

    This paper investigates whether financial obstacles, and, more generally, financial pressure faced by firms, significantly affect firm growth. For this purpose, the authors use an unbalanced panel of about 1,000,000 observations for around 155,000 non-financial corporations in five euro area countries. In addition to the balance sheet information in this...

    Provided By European Central Bank

  • White Papers // Jan 2009

    What Drives Euro Area Break-Even Inflation Rates?

    The yield spread between nominal and inflation-linked bonds (or Break-Even Inflation Rates, BEIR) is a fundamental indicator of inflation expectations (and associated premia). This paper investigates which macroeconomic and financial variables explain BEIRs. The authors evaluate a large number of potential explanatory variables through Bayesian model selection techniques and document...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Current Account Benchmarks For Central And Eastern Europe: A Desperate Search?

    This paper examines two competing approaches for calculating current account benchmarks, i.e. the external sustainability approach ? la Lane and Milesi-Ferretti (LM) versus the Structural Current Accounts literature (SCA) based on panel econometric techniques. The aim is to gauge the medium term adjustment in current account positions that may be...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Fiscal Sustainability And Policy Implications For The Euro Area

    In this paper, the authors examine the sustainability of euro area public finances against the backdrop of population ageing. They critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher than projected...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Has Emerging Asia Decoupled? An Analysis Of Production And Trade Linkages Using The Asian International Input-Output Table

    Due to the emergence of global production networks, trade statistics have became less accurate in describing the dependence of emerging Asia on external demand. This paper analyses, using an update of the Asian International Input-Output (AIO) table, the interdependence of emerging Asian countries, the United States, the EU15, and Japan...

    Provided By European Central Bank

  • White Papers // Jan 2009

    FDI And Productivity Convergence In Central And Eastern Europe: An Industry-Level Investigation

    This paper presents empirical evidence of the effect of FDI inflows on productivity convergence in central and Eastern Europe, using industry-level data. Four conclusions stand out. First, there is a strong convergence effect in productivity, both at the country and at the industry level. Second, FDI inflow plays an important...

    Provided By European Central Bank

  • White Papers // Jan 2009

    The Macroeconomic Effects Of Fiscal Policy

    The authors investigate the macroeconomic effects of fiscal policy using a Bayesian Structural Vector Autoregression approach. They build on a recursive identification scheme, but they: include the feedback from government debt; look at the impact on the composition of output; assess the effects on asset markets; add the exchange rate;...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Fiscal Policy, Housing And Stock Prices

    This paper investigates the link between fiscal policy shocks and movements in asset markets using a Fully Simultaneous System approach in a Bayesian framework. Building on the works of Blanchard and Perotti (2002), Leeper and Zha (2003), and Sims and Zha (1999, 2006), the empirical evidence for the U.S., the...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Modelling Loans To Non-Financial Corporations In The Euro Area

    The authors model the determinants of loans to non-financial corporations in the euro area. Using the Johansen (1992) methodology, they identify three cointegrating relationships. These relationships are interpreted as the long-run loan demand, investment and loan supply equations. The short-run dynamics of loan demand for the euro area are subsequently...

    Provided By European Central Bank

  • White Papers // May 2009

    Inflation Dynamics With Labour Market Matching: Assessing Alternative Specifications

    This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, the authors consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new...

    Provided By European Central Bank

  • White Papers // Jun 2009

    Fiscal Policy Challenges In Oil-Exporting Countries A Review Of Key Issues

    Fiscal policy choices have a particularly significant impact on economic performance in oil-exporting countries, owing to the importance of the oil sector in the economy and the fact that in most countries oil revenues accrue to the government. At the same time, fiscal policy in oil-centred economies is facing specific...

    Provided By European Central Bank

  • White Papers // Sep 2008

    The Changing Role Of The Exchange Rate In A Globalised Economy

    In addition to its direct effects on the global trading and production structure, the ongoing process of globalisation may have important implications for the interaction of exchange rates and the overall economy. This paper presents evidence regarding possible changes in the role of exchange rates in a more globalised economy....

    Provided By European Central Bank

  • White Papers // Aug 2010

    The Impact Of The Global Financial Turmoil And Recession On Mediterranean Countries' Economies

    This paper reviews the impact of the global financial turmoil and the subsequent recession on the economies of southern and eastern Mediterranean countries. The major effects on the economies of this region have come through transmission channels associated with the real economy, i.e. the global recession. These are, in particular,...

    Provided By European Central Bank

  • White Papers // Jun 2010

    The Impact Of The Global Economic And Financial Crisis On Central, Eastern And South-Eastern Europe A Stock-Taking Exercise

    The paper first reviews the main drivers of the growth and real convergence process in Central, Eastern and South-Eastern Europe (CESEE) since 2000 and assesses the key macro-financial strengths and vulnerabilities of the region at the beginning of the global economic and financial crisis. The main part of the paper...

    Provided By European Central Bank

  • White Papers // Jan 2010

    Cross-Border Banking And The International Transmission Of Financial Distress During The Financial Crisis Of 2007-2008

    The authors study the effect of financial distress in foreign parent banks on local SME financing in 14 European countries during the early stages of the 2007-2008 financial crisis. They use survey data on applicant and non-applicant firms that enable them to disentangle effects driven by shocks to the banking...

    Provided By European Central Bank

  • White Papers // Jun 2011

    The Basel III Framework For Liquidity Standards And Monetary Policy Implementation

    Basel III introduces for the first time an international framework for liquidity risk regulation, reflecting the experience of excessive liquidity risk taking of banks in the run up to the financial crisis that erupted in August 2007, and associated negative externalities. As central banks play a crucial role in the...

    Provided By European Central Bank

  • White Papers // Jul 2011

    Capital Flows, Push Versus Pull Factors And The Global Financial Crisis

    The causes of the 2008 collapse and subsequent surge in global capital flows remain an open and highly controversial issue. Employing a factor model coupled with a dataset of high-frequency portfolio capital flows to 50 economies, the paper finds that common shocks - key crisis events as well as changes...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Determinants Of Credit-Less Recoveries

    This paper aims to shed light on the characteristics and particularly the determinants of credit-less recoveries. After building a dataset and documenting some stylised facts of credit-less recoveries in emerging market economies, this paper uses panel probit models to analyze key determinants of credit-less recoveries. The authors' main findings are...

    Provided By European Central Bank

  • White Papers // Jun 2011

    Systemic Risk And Financial Development In A Monetary Model

    In a stochastic pure endowment economy with money but no financial markets, two types of agents trade one non-durable goods using two alternative types of cash constraints. Simulations of the corresponding variants are compared to Arrow-Debreu and Autarky equilibriums. First, this illustrates how financial innovation or financial regression, including systemic...

    Provided By European Central Bank

  • White Papers // Oct 2009

    Cross-Border Banking And The International Transmission Of Financial Distress

    The authors study the effect of financial distress in foreign parent banks on local SME financing in 14 European countries during the early stages of the 2007-2008 financial crisis. The available information on firms that select themselves out of the business loan application process enables one to identify a supply...

    Provided By European Central Bank