European Central Bank

Nowcasting consumer price inflation using high-frequency scanner data: evidence from Germany

04/22/2024 European Central Bank Central banks

We study how millions of granular and weekly household scanner data combined with machine learning can help to improve the real-time nowcast of German inflation. Our nowcasting exercise targets three hierarchy levels of inflation: individual products, product groups, and headline inflation. At the individual product level, we construct a large set of weekly scanner-based price indices that closely match their official counterparts, such as butter and coffee beans.

Decomposing systemic risk: the roles of contagion and common exposures

04/22/2024 European Central Bank Central banks

We evaluate the effects of contagion and common exposure on banks’ capital through a regression design inspired by the structural VAR literature and derived from the balance sheet identity. Contagion can occur through direct exposures, fire sales, and market-based sentiment, while common exposures result from portfolio overlaps. We estimate the structural regression on granular balance sheet and interbank exposure data of the Canadian banking market.

Housing investment and the user cost of housing in the euro area

04/22/2024 European Central Bank Central banks

This box examines the current level of housing investment in the euro area as a whole, and in the four largest euro area economies, in relation to the evolution of the user cost of housing. To this end, the box proposes a novel quarterly measure of the user cost of housing by combining quarterly data on mortgage rates, long-term risk-free interest rates and expected house price growth with information on tax rates and structural characteristics of residential construction and housing finance.

How big is the household housing burden? Evidence from the ECB Consumer Expectations Survey

04/22/2024 European Central Bank Central banks

In recent quarters, euro area households have faced higher housing costs, and in particular rising rent or mortgage payments. The ECB Consumer Expectations Survey shows that housing cost dynamics vary across households depending on the type of ownership, with the highest cost increases being borne by those who do not own their home outright (mortgage and renter households). Since 2022 rising housing costs have, on average, largely been offset by growth in household income, leading to stable housing cost to household income ratios.

Monetary asmmetries without (and with) price stickiness

04/19/2024 European Central Bank Central banks

The evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our mechanism generates monetary asymmetries in a model that jointly reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear.

Central bank asset purchases and auction cycles revisited: new evidence from the euro area

04/19/2024 European Central Bank Central banks

This study provides new evidence on the relationship between unconventional monetary policy and auction cycles in the euro area. Using proprietary data on purchases of public sector securities implemented by the Eurosystem, the paper examines the flow effects of asset purchase programmes on 10-year government bond yields in secondary markets around dates of public debt auctions. The findings indicate that Eurosystem’s asset purchase flows mitigate yield cycles during auction periods and counteract the amplification impact of market volatility.

Monetary asymmetries without (and with) price stickiness

04/19/2024 European Central Bank Central banks

The evidence suggests that monetary policy transmission is asymmetric over the business cycle. Interacting financing frictions with a preference for liquidity provides an explanation for this fact. Our mechanism generates monetary asymmetries in a model that jointly reproduces a set of asset market and business cycle facts. Accounting for the joint dynamics of asset prices and business cycle fluctuations is key; in a variant of the model that is unable to produce realistic macro-finance implications, monetary asymmetries disappear.

Central bank asset purchases and auction cycles revisited: new evidence from the euro area

04/19/2024 European Central Bank Central banks

This study provides new evidence on the relationship between unconventional monetary policy and auction cycles in the euro area. Using proprietary data on purchases of public sector securities implemented by the Eurosystem, the paper examines the flow effects of asset purchase programmes on 10-year government bond yields in secondary markets around dates of public debt auctions. The findings indicate that Eurosystem’s asset purchase flows mitigate yield cycles during auction periods and counteract the amplification impact of market volatility.

Unlocking efficiency: optimal monetary policy when capital misallocation matters

04/19/2024 European Central Bank Central banks

Some firms have the capacity to contribute significantly to economic productivity but cannot obtain the necessary capital for investment, which instead flows to less productive firms. While “misallocation of capital” and its detrimental impact on productivity is traditionally beyond the scope of central banks, monetary policy can influence it through firms’ investment decisions. Using a New Keynesian model and granular data on Spanish firms, our results show that expansionary monetary policy reduces capital misallocation.

Climate change-related statistical indicators

04/18/2024 European Central Bank Central banks

Climate change entails risks to the global economy and impacts financial stability. Beyond managing related risks, the financial sector can also contribute to the transition toward a net-zero economy. Guided by the ECB’s climate and nature plan, this paper discusses the methodology and key findings of statistical indicators developed in three areas: sustainable finance, carbon emissions, and physical risk. Our work aims to enhance data transparency in climate change analysis, while informing monetary policy, financial stability and banking supervision.

Pages

Subscribe to European Central Bank