Financial institutions

Tax thy neighbour: local corporate taxes and consumer prices across German regions

05/27/2022 European Central Bank Central banks

To what extent are corporate taxes passed on to consumers? And more generally, how do wholesaleproducers affect retail prices? Using data from Germany, where individual municipalities set local corporate taxrates, we shed new light on these questions. To estimate the impact of changes in producers’ tax rates onconsumer prices, we link 1,058 tax changes between 2013 and 2017 to changes in the retail prices of morethan 125,000 food and personal care products sold across Germany.

Household spending and fiscal support during the pandemic – the role of public perceptions

04/21/2022 European Central Bank Central banks

The coronavirus (COVID-19) pandemic shock posed an enormous challenge to fiscal policy in supporting household consumption. In this analysis, we report the results of a recent study (Georgarakos and Kenny, 2022) on the extent to which the pandemic-related fiscal interventions influenced consumers’ spending behaviour. The study finds that improving public perceptions about the adequacy of fiscal interventions incentivises spending. Importantly, this perceptions channel operates equally strongly for consumers who receive government support and for those who do not.

Monetary policy communication – past ECB policymakers commend Bank’s progress and call for more

03/24/2022 European Central Bank Central banks

A survey among former ECB policymakers about the Bank’s monetary policy communication provides broad support for recent innovations in communication practices. It suggests that communication with expert audiences is generally adequate. Nevertheless, it highlights room for improvement along several dimensions, in particular in communication with the wider public.

Monetary and macroprudential policies: trade-offs and interactions

02/24/2022 European Central Bank Central banks

There are always trade-offs to weigh up when taking monetary and macroprudential policy actions. Thechoice is between supporting the economy by ensuring a smooth supply of credit at favourableconditions, on the one hand, and containing financial stability risks, on the other hand. There are alsosignificant spillovers between the two policies since they are both implemented and transmitted throughthe financial system. Monetary and macroprudential authorities need to take these interactions intoaccount when deciding on interventions.

Younger generations and the lost dream of home ownership

01/25/2022 European Central Bank Central banks

Homeownership among younger households has been decreasing in several major advanced economies. In this analysis, I show that increases in labour income inequality and uncertainty are key drivers of this trend. Confronted with high house prices and low, risky incomes, many young households cannot or do not want to risk making such a big, illiquid investment. As a result, they accumulate less wealth.

Benefits of macroprudential policy in low interest rate environments

12/08/2021 European Central Bank Central banks

The natural rate of interest is the equilibrium real interest rate that is consistent with inflation on target andproduction at full capacity. This article argues that in economies with low natural rates, such as the euroarea today, macroprudential policy can have benefits for the effectiveness of conventional monetarypolicy, in addition to safeguarding financial stability.

Debt specialisation and diversification: International evidence

02/17/2021 BIS International

We uncover a strong U-shape in bond financing by US firms. Firms with total debt in the range of $10 million to $100 million tend to use much less bond financing relative to loan financing than do firms with more or less total debt.

Do macroprudential policies affect non-bank financial intermediation?

02/11/2021 BIS International

We analyse how macroprudential policies (MaPs), largely applied to banks and to a lesser extent borrowers, affect non-bank financial intermediation (NBFI).

Fintech regulation: how to achieve a level playing field

02/02/2021 BIS International

Fintech regulation: how to achieve a level playing field - Occasional Papers No 17, February 2021

Answering the Queen: Machine learning and financial crises

02/01/2021 BIS International

Financial crises cause economic, social and political havoc. Macroprudential policies are gaining traction but are still severely under-researched compared to monetary policy and fiscal policy. We use the general framework of sequential predictions also called online machine learning to forecast crises out-of-sample.

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