European Central Bank

Displaying 1-40 of 265 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

    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 // 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

    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 // 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 // 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...

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  • 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

    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

    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 // 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 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 // 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 // May 2007

    Econometric Analyses With Backdated Data: Unified Germany And The Euro Area

    In this paper the authors compare alternative approaches for the construction of time series of macroeconomic variables for Unified Germany prior to 1991, and then use them for the construction of corresponding time series for the euro area. The resulting series for Germany and the euro area are compared with...

    Provided By European Central Bank

  • White Papers // Feb 2011

    Liquidity Requirements And Payment Delays - Participant Type Dependent Preferences

    The paper presents an analysis of the trade-offs of participants of different type between payment delay and liquidity requirement on the basis of synthetically generated data. The generation of the synthetic transaction data set for a simple RTGS system is described and calibrated using real world parameters. The payment system...

    Provided By European Central Bank

  • White Papers // Jan 2011

    Non-Standard Monetary Policy Measures And Monetary Developments

    Standard accounts of the Great Depression attribute an important causal role to monetary policy errors in accounting for the catastrophic collapse in economic activity observed in the early 1930s. While views vary on the relative importance of money versus credit contraction in the propagation of this policy error to the...

    Provided By European Central Bank

  • White Papers // Jan 2011

    Bayesian Prior Elicitation In DSGE Models: Macro- Vs Micro-Priors

    Bayesian approaches to the estimation of DSGE models are becoming increasingly popular. Prior knowledge is normally formalized either be information concerning deep parameters' values ('Microprior') or some macroeconomic indicator, e.g. moments of observable variables ('Macroprior'). In this paper the authors introduce a non parametric prior which is elicited from impulse...

    Provided By European Central Bank

  • White Papers // Jan 2011

    Getting Beyond Carry Trade: What Makes A Safe Haven Currency?

    There is already a substantial literature documenting the fact that low yield currencies typically appreciate during times of global financial stress and behave as safe havens. The main objective of this paper is to find out what the fundamentals of safe haven currencies are. The authors analyse a large panel...

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  • White Papers // Jan 2011

    Are Universal Banks Better Underwriters? Evidence From The Last Days Of The Glass-Steagall Act

    It has often been argued during the recent credit crisis that commercial banks' involvement in investment banking activities might have had an impact on the intensity of their underwriting standards. The authors turn to evidence from the period prior to the complete revocation of the Glass-Steagall Act in the United...

    Provided By European Central Bank

  • White Papers // Jan 2011

    Corporate Bond Spreads And Real Activity In The Euro Area - Least Angle Regression Forecasting And The Probability Of The Recession

    This paper aims at providing a detailed analysis of the leading indicator properties of corporate bond spreads for real economic activity in the euro area. In- and out-of-sample predictive content of corporate bond spreads are examined along three dimensions: the bonds' quality, their term to maturity, as well as the...

    Provided By European Central Bank

  • White Papers // Jan 2011

    Identifying The Global Transmission Of The 2007-09 Financial Crisis In A GVAR Model

    The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite played for the global transmission of the financial crisis. Dealing with identification and the large dimensionality of the empirical exercise with a Global VAR approach, the findings highlight the diversity of...

    Provided By European Central Bank

  • White Papers // Jan 2011

    Euro Area Labour Markets: Different Reaction To Shocks?

    A small labour market model for the six largest euro area countries (Germany, France, Italy, Spain, the Netherlands, Belgium) is estimated in a state -space framework. The model entails, in the long run, four driving forces: a trend labour force component, a trend labour productivity component, a long-run inflation rate...

    Provided By European Central Bank

  • White Papers // Sep 2009

    The Effects Of Monetary Policy On Unemployment Dynamics Under Model Uncertainty: Evidence From The US And The Euro Area

    This paper explores the role that the imperfect knowledge of the structure of the economy plays in the uncertainty surrounding the effects of rule-based monetary policy on unemployment dynamics in the euro area and the US. The authors employ a Bayesian model averaging procedure on a wide range of models...

    Provided By European Central Bank

  • White Papers // Sep 2009

    Inflation Perceptions And Expectations In The Euro Area: The Role Of News

    The aim of this paper is to assess empirically to what extent the degree of heterogeneity of consumers' inflation perceptions and expectations is driven by the flow of information related to current and future price developments in the euro area. The authors conduct the analysis both on an aggregate level...

    Provided By European Central Bank

  • White Papers // Sep 2009

    Modelling Global Trade Flows: Results From A GVAR Model

    This paper uses a Global Vector Auto-Regression (GVAR) model in a panel of 21 emerging market and advanced economies to investigate the factors behind the dynamics of global trade flows, with a particular view on the issue of global trade imbalances and on the conditions of their unwinding. The GVAR...

    Provided By European Central Bank

  • White Papers // Sep 2009

    Euro Area Money Demand: Empirical Evidence On The Role Of Equity And Labour Markets

    This paper presents empirical evidence on the long-run motives for holding euro area money by focusing on the role of equity and labour markets. Equity positively affects money demand through wealth effects, as equities are a significant store of household wealth and thus part of a financial transaction motive. Negative...

    Provided By European Central Bank

  • White Papers // Aug 2009

    An Empirical Study On The Decoupling Movements Between Corporate Bond And CDS Spreads

    Applied to the European markets, this paper analyzes the price of credit risk on the Credit Default Swap (CDS) and corporate bond markets by comparing the sensitivity of the credit spreads on each market to systematic, idiosyncratic risk factors and liquidity. The authors' analysis confirms the existence of a long-run...

    Provided By European Central Bank

  • White Papers // Aug 2009

    How Are Firms? Wages And Prices Linked: Survey Evidence In Europe

    This paper presents new evidence on the patterns of price and wage adjustment in European firms and on the extent of nominal rigidities. It uses a unique dataset collected through a firm-level survey conducted in a broad range of countries and covering various sectors. Several conclusions are drawn from this...

    Provided By European Central Bank

  • White Papers // Aug 2009

    Evaluating Microfoundations For Aggregate Price Regidities: Evidence From Matched Firm-Level Data On Product Prices And Unit Labor Cost

    Using data on product-level prices matched to the producing firm's unit labor cost, the authors reject the hypothesis of a full and immediate pass-through of marginal cost. Since they focus on idiosyncratic variation, this does not fit the predictions of the Mackowiak and Wiederholt (2009) version of the Rational Inattention...

    Provided By European Central Bank

  • White Papers // Aug 2009

    Disagreement Among Forecasters In G7 Countries

    Using the Consensus Economics dataset with individual expert forecasts from G7 countries the authors investigate determinants of disagreement (cross-sectional dispersion of forecasts) about six key economic indicators. Disagreement about real variables (GDP, consumption, investment and unemployment) has a distinct dynamic from disagreement about nominal variables (inflation and interest rate). Disagreement...

    Provided By European Central Bank

  • White Papers // Aug 2009

    Liquidity Premia In German Government Bonds

    There is strong evidence that on-the-run U.S. Treasury securities trade much more liquidly and at significantly higher prices than their off-the-run counterparts. The authors examine if the same phenomenon is present in the German government bond market whose market structure differ markedly from that of the U.S. Treasury market. In...

    Provided By European Central Bank

  • White Papers // Aug 2009

    Productivity And Job Flows: Heterogeneity Of New Hires And Continuing Jobs In The Business Cycle

    This paper focuses on tenure driven productivity dynamics of a firm-worker match as a potential explanation of "Unemployment volatility puzzle". The authors let new matches and continuing jobs differ by their productivity levels and by their sensitivity to aggregate productivity shocks. As a result, new matches have a higher destruction...

    Provided By European Central Bank

  • White Papers // Aug 2009

    EMU And European Government Bond Market Integration

    The main objective of this paper is to study whether the introduction of the euro had an impact on the degree of integration of European Government bond markets. The authors adopt the CAPM-based model of Bekaert and Harvey (1995) to compare, from the beginning of Monetary Union until June 2008,...

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  • White Papers // Aug 2009

    The Reception Of Public Signals In Financial Markets - What If Central Bank Communication Becomes Stale?

    How do financial markets price new information? This paper analyzes price setting at the intersection of private and public information, by testing whether and how the reaction of financial markets to public signals depends on the relative importance of private information in agents' information sets at a given point in...

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  • White Papers // Jul 2009

    Optimal Monetary Policy In A New Keynesian Model With Habits In Consumption

    While consumption habits have been utilised as a means of generating a hump shaped output response to monetary policy shocks in sticky-price New Keynesian economies, there is relatively little analysis of the impact of habits (particularly, external habits) on optimal policy. In this paper, the authors consider the implications of...

    Provided By European Central Bank

  • White Papers // Jul 2009

    Bank Risk And Monetary Policy

    The authors find evidence of a bank lending channel for the euro area operating via bank risk. Financial innovation and the new ways to transfer credit risk have tended to diminish the informational content of standard bank balance-sheet indicators. They show that bank risk conditions, as perceived by financial market...

    Provided By European Central Bank

  • White Papers // Jul 2009

    Can Non-Linear Real Shocks Explain The Persistence Of PPP Exchange Rate Disequilibria?

    A core stylized fact of the empirical exchange rate literature is that half-life deviations of equilibrium real exchange rates from levels implied by Purchasing Power Parity (PPP) are very persistent. Empirical efforts to explain this persistence typically proceed along two distinct paths, resorting either to the presence of real shocks...

    Provided By European Central Bank

  • White Papers // Jul 2009

    How Important Are Common Factors In Driving Non-Fuel Commodity Prices? A Dynamic Factor Analysis

    This paper analyses the importance of common factors in shaping non-fuel commodity price movements for the period 1957-2008. For this purpose, a dynamic factor model is estimated using Kalman Filtering techniques. Based on this set-up the authors are able to separate common and idiosyncratic developments of commodity prices. Their estimation...

    Provided By European Central Bank

  • White Papers // Jul 2009

    Monetary Policy Committees: Meetings And Outcomes

    Monetary Policy Committees differ in the way the interest rate proposal is prepared and presented in the policy meeting. In this paper, the authors show analytically how different arrangements could affect the voting behaviour of individual MPC members and therefore policy outcomes. They then apply their results to the Bank...

    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 // 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 // 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