European Central Bank

Displaying 1-40 of 385 results

  • 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 // 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

    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 // 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

    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...

    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 // 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 // Mar 2009

    Cross-Border Mergers And Acquisitions: Financial And Institutional Forces

    Cross-border Mergers and Acquisitions (M&As) sharply increased over the last two decades. It is often pointed out that cross-border capital reallocation is partly the result of financial liberalization policies, government policies and regional agreements. In this paper, the authors identify some of the main forces driving cross-border M&As using a...

    Provided By European Central Bank

  • White Papers // Mar 2009

    When Does Lumpy Factor Adjustment Matter For Aggregate Dynamics?

    The authors analyze the dynamic effects of lumpy factor adjustments at the firm level onto the aggregate economy. They find that distinguishing between capital and labour as lumpy factors within the production function result in very different dynamics for aggregate output, investment and labour in an otherwise standard real business...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Inflation Forecasting In The New EU Member States

    To the best of the authors' knowledge, the paper is the first systematic study of the predictive power of monetary aggregates for future inflation for the cross section of New EU Member States. This paper provides stylized facts on monetary versus non-monetary (economic and fiscal) determinants of inflation in these...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Asset Prices And Current Account Fluctuations In G7 Economies

    The paper analyses the effect of equity price shocks on current account positions for the G7 industrialized countries in 1974-2007. It uses a Bayesian VAR with sign restrictions for the identification of asset price shocks and to test empirically for their effect on current accounts. Such shocks are found to...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Petrodollars And Imports Of Oil Exporting Countries

    This paper investigates the empirical determinants of import demand in oil exporting countries. Using a new dataset including a large cross section of oil exporting countries, the authors show with a panel cointegration analysis that import demand in these countries depends positively on domestic demand and exports, the real exchange...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Optimal Sticky Prices Under Rational Inattention

    This paper presents a model in which price setting firms decide what to pay attention to, subject to a constraint on information flow. When idiosyncratic conditions are more variable or more important than aggregate conditions, firms pay more attention to idiosyncratic conditions than to aggregate conditions. When the authors calibrate...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Liquidity (Risk) Concepts: Definitions And Interactions

    The authors discuss the notion of liquidity and liquidity risk within the financial system. They distinguish between three different liquidity types, central bank liquidity, funding and market liquidity and their relevant risks. In order to understand the workings of financial system liquidity, as well as the role of the central...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Sequential Bargaining In A New-Keynesian Model With Frictional Unemployment And Staggered Wage Negotiation

    The authors consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hour's negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, the more firms adjust on the intensive margin, reducing employment...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Understanding Sectoral Differences In Downward Real Wage Rigidity: Workforce Composition, Institutions, Technology And Competition

    This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. The authors adopt the measure of Downward Real Wage Rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Labor Market Institutions And Macroeconomic Volatility In A Panel Of OECD Countries

    In this paper the authors analyze empirically how labor market institutions influence business cycle volatility in a sample of 20 OECD countries. Their results suggest that countries characterized by high union density tend to experience more volatile movements in output, whereas the degree of coordination of the wage bargaining system...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Characterising The Inflation Targeting Regime In South Korea

    This paper attempts at characterising South Korean monetary policy in the period of explicit inflation targeting started in 1999. The authors explain Korean interest rates in relation to an estimated macro-model, assuming that monetary policy is set optimally. This allows them to obtain the central bank's parameters in the policy...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Real Wages Over The Business Cycle: OECD Evidence From The Time And Frequency Domains

    The authors study differences in the adjustment of aggregate real wages in the manufacturing sector over the business cycle across OECD countries, combining results from different data and dynamic methods. Summary measures of cyclicality show genuine cross-country heterogeneity even after controlling for the impact of data and methods. They find...

    Provided By European Central Bank

  • White Papers // Feb 2009

    Assessing Portfolio Credit Risk Changes In A Sample Of EU Large And Complex Banking Groups In Reaction To Macroeconomic Shocks

    In terms of regulatory and economic capital, credit risk is the most significant risk faced by banks. The authors implement a credit risk model - based on publicly available information - with the aim of developing a tool to monitor credit risk in a sample of Large and Complex Banking...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Wealth Effects In Emerging Market Economies

    The authors build a panel of 14 emerging economies to estimate the magnitude of housing, stock market, and money wealth effects on consumption. Using modern panel data econometric techniques and quarterly data for the period 1990:1-2008:2, they show that: wealth effects are statistically significant and relatively large in magnitude; housing...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Risk-Adjusted Forecasts Of Oil Prices

    This paper documents the existence of a significant forecast error on crude oil futures. The authors interpret it as a risk premium, which, in part, could have been explained by means of a real-time US business cycle indicator, such as the degree of capacity utilization in manufacturing. This result is...

    Provided By European Central Bank

  • White Papers // Jan 2009

    Infinite-Dimensional VARs And Factor Models

    This paper introduces a novel approach for dealing with the 'Curse of dimensionality' in the case of large linear dynamic systems. Restrictions on the coefficients of an unrestricted VAR are proposed that are binding only in a limit as the number of endogenous variables tends to infinity. It is shown...

    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 // 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...

    Provided By European Central Bank

  • 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 // 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 // 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