European Central Bank

Household borrowing and monetary policy transmission: post-pandemic insights from nine European credit registers

11/10/2025 European Central Bank Central banks

We study heterogeneity in households’ credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-2024 using granular credit register data. We first document substantial between- and within-country variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the passthrough of the ECB’s recent tightening cycle to household borrowing costs, and assess its heterogeneous impact across households.

Household borrowing and monetary policy transmission: post-pandemic insights from nine European credit registers

11/10/2025 European Central Bank Central banks

Repo collateral reuse and liquidity windfalls

11/10/2025 European Central Bank Central banks

Collateral reuse in repo markets helps entities meet short-term funding needs, maintain market efficiency, and anchor collateral valuations, although it creates risks through interconnectedness. A prominent view in the literature is that securities dealers use their market position to obtain temporary free-cash wedges from differences in collateral requirements when reusing collateral, so-called “liquidity windfalls”. By affecting dealers’ funding structures, such windfalls could influence yield curve determination, leverage, and monetary policy transmission.

Monetary policy transmission through cross-selling banks

11/10/2025 European Central Bank Central banks

Banks trade off short-term losses on deposits against long-term profits from cross-selling other products to new depositors. This strategy is especially attractive when policy rates are low and future sales are more valuable. Therefore, deposit rates move less than policy rates: banks keep them relatively higher when policy rates fall, and relatively lower when policy rates rise. As returns on other financial assets follow policy rates more closely, this makes deposits relatively less attractive for depositors at higher policy rates.

Collateral easing in non-standard times: a review of the role of Additional Credit Claims in the Eurosystem collateral framework

11/06/2025 European Central Bank Central banks

In this paper we explore the role of the temporary and country-specific Additional Credit Claims (ACC) frameworks as a monetary policy implementation tool. We discuss their evolution and provide a novel and detailed description of all ACC measures adopted by the different euro area NCBs since 2012. Reviewing the literature, we document the channels through which ACCs contributed to liquidity distribution during the euro area sovereign debt crisis, the negative interest rate period and the pandemic.

Monetary and fiscal policy interactions in the aftermath of an inflationary shock

11/06/2025 European Central Bank Central banks

This paper studies the effect of alternative monetary policy responses and the implementation of different fiscal policy measures to an inflationary shock in a monetary union, through the lens of a global DSGE model calibrated to the euro area. We find that a more aggressive monetary policy response mitigates the inflation surge, but has a detrimental impact on economic activity that imposes a stronger increase of public debt, reducing the fiscal policy space.

Monetary and fiscal policy interactions in the aftermath of an inflationary shock

11/06/2025 European Central Bank Central banks

Monetary policy transmission: a reference guide through ESCB models and empirical benchmarks

11/06/2025 European Central Bank Central banks

This paper serves as a reference guide on the effects of “standard” monetary policy shocks on output and prices, based on harmonised simulation exercises conducted across models of the European System of Central Banks (ESCB), meta-analysis of existing empirical literature for the euro area, and selected works on heterogeneity and non-linearities in the monetary transmission mechanism as captured by empirical models.

Geopolitical risk, bank lending and real effects on firms: evidence from the Russian invasion of Ukraine

11/05/2025 European Central Bank Central banks

This paper investigates whether geopolitical risk causes a reduction in bank lending. In particular, it focuses on how the increase in geopolitical risk stemming from the Russian invasion of Ukraine affected euro area bank credit supply. Matching granular supervisory and credit register data and using a panel difference-in-difference approach, the results show that banks with larger exposure to the increase in geopolitical risk cut lending significantly more than those with smaller exposure.

The protectionist gamble: How tariffs shape greenfield foreign direct investment

11/05/2025 European Central Bank Central banks

Motivated by current events, this paper assesses the impact of tariff increases on bilateral greenfield foreign direct investment (FDI) over the period 2016-2023. Leveraging a comprehensive dataset of announced greenfield investment projects, official FDI statistics, and bilateral product-level tariff data, we estimate a series of gravity equations to uncover key relationships. Our results show that, at an aggregate level, tariff increases are associated with a rise in greenfield FDI, consistent with the tariff-jumping hypothesis.

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