Lucrezia Reichlin, Dirk Schoenmaker, 26 March 2020

Fiscal and monetary policy coordination is not working in the euro area. This column argues that in order to rebalance the weight of both during major crises, the asymmetry between decision making at the ECB (by majority voting) and the ESM (by unanimity or qualified majority) must be harmonised. This is urgent since the ESM is the only instrument available to provide the common fiscal capacity needed to fight the COVID-19 pandemic.

Alexander Dietrich, Keith Kuester, Gernot Müller, Raphael Schoenle, 24 March 2020

The effects of the COVID-19 pandemic on the global economy are still largely unknown. The short-term economic impact will depend importantly on people’s expectations of the overall effect, and the amount of uncertainty thereof. This column uses a survey of US households to show that the expected economic effect is negative, large, and highly uncertain. An asset-pricing equation is used to quantify the implication of these expectations for the natural rate of interest. The natural rate declines by several percentage points, suggesting a role for monetary accommodation to (partially) offset the shock.

Aida Caldera, Alessandro Maravalle, Lukasz Rawdanowicz, Ana Sanchez Chico, 23 March 2020

Global economic growth is expected to remain weak and significant downside risks persist. As room for conventional monetary policy is limited or exhausted, policymakers will need to rely increasingly on fiscal policy to stabilise the economy during the next economic downturn. This column presents new OECD estimates which suggest that automatic stabilisers on average offset 60% of a specific shock to market income across 23 OECD economies. However, there are marked differences across OECD countries leaving scope to make automatic stabilisers more effective.

Lukas Hoesch, Barbara Rossi, Tatevik Sekhposyan, 07 March 2020

The information channel of monetary policy theory – whereby economic agents revise their beliefs after an unexpected monetary policy announcement not only because they learn about the current and future path of monetary policy, but also because they learn new information about the economic outlook – can potentially explain the puzzle of output increasing after a contractionary monetary policy shock. This column argues, however, that the information channel has disappeared in the US, perhaps due to the improved communication strategies implemented by the Federal Reserve.

Christian Bayer, Benjamin Born, Ralph Luetticke, 26 February 2020

How much does inequality matter for the business cycle and vice versa? This column explores the two-way relationship using a heterogeneous agent New Keynesian model estimated on both the macro and micro data. Although adding data on wealth and income inequality may not materially change the estimated shocks driving the US business cycle, the estimated business cycle shocks themselves are useful for explaining the evolution of US wealth and income inequality from the 1950s to today.

Ugo Albertazzi, Francesca Barbiero, David Marques-Ibanez, Alexander Popov, Costanza Rodriguez d'Acri, Thomas Vlassopoulos, 25 February 2020

The response of major central banks to the Global Crisis has rekindled the debate on the interactions between monetary policy and financial stability. This column reviews empirical evidence on how monetary policy affects bank stability, focusing on unconventional monetary policy measures deployed by the ECB during the crisis. It argues that by stabilising the economy and averting a systemic crisis, these measures helped shore up stability, with the positive effects outweighing the adverse spillovers on banks’ intermediation capacity and risk-taking. However, such measures may need to be complemented with counterbalancing actions that go beyond monetary policy. 

Simone Arrigoni, Roland Beck, Michele Ca' Zorzi, Livio Stracca, 24 February 2020

Governments are increasingly confronted with the task of preserving the positive effects of increased global integration while also managing their manifold side effects. This column looks at the effects of globalisation on inflation and financial stability and the role for central banks. It concludes that central banks are far from immune from the forces of globalisation and should continue to evolve and reassess their role and instruments in a changing world.

Mariarosaria Comunale, Francesco Paolo Mongelli, 27 January 2020

Over the past 30 years, euro area countries have undergone significant changes and endured diverse shocks. This column assembles a large set of variables covering the years 1990-2016 and investigates possible links to fluctuations and differences in growth rates. The findings suggest a significant positive role for institutional integration in supporting long-run growth, particularly for periphery countries. Competitiveness and monetary policy also matter for sustained growth in the long run, while higher sovereign stress, equity price cycles, loans to non-financial corporations and debt over GDP have either mixed or negative effects in core and periphery countries.

Markus K Brunnermeier, Jean-Pierre Landau, 15 January 2020

Central banks have been called on to contribute to fighting climate change. This column presents a framework for thinking about the issue and identifies some major trade-offs and choices. It argues that climate should be a major part of risk assessments and that capital ratios could be used in a proactive way by applying favourable regimes to ‘green’ loans and investments. It also suggests that central banks may want to take several climate change-related aspects into account when designing and implementing monetary policies. However, the central bank should retain absolute discretion to interrupt any action if its first-priority objective – price stability – were to be compromised.

Marco Buti, 12 January 2020

In December 2019, Marco Buti left the position of Director General for Economic and Financial Affairs at the European Commission at the end of a rough journey through the crisis and its aftermath. In this column, he draws the main lessons out of five key moments in the crisis for the completion of EMU and the appropriate policy mix in the euro area.

Henrik Yde Andersen, Søren Leth-Petersen, 20 December 2019

House prices and aggregate spending move together, but little is known about the underlying mechanism linking the two. This column introduces a test to discriminate between the housing wealth effect hypothesis, which says that homeowners consider home value changes as windfalls, and the collateral effect hypothesis, which says that a home value increase generates additional collateral that can be borrowed against. Homeowner behaviour in response to home value rises when they are close to their collateral borrowing constraint, suggesting that the collateral effect is important for explaining the link between house prices and spending. 


The Bank of Russia is hosting its third annual International Research Conference in Saint Petersburg on 7-8 July 2020 (Tuesday-Wednesday).

The scientific committee of the conference is comprised of the Research Advisory Board of the Bank of Russia.

Modern central banks perform multiple functions. They guarantee price and financial stability, carry out prudential regulation of financial sector trying to create the right stimulus for market players and enforce the rules of the game. A number of challenges appear regarding each of the policies as well as their interactions.

This conference will bring together researchers from academia, central banks, and policy institutions, who will present and discuss their theoretical and empirical research on challenges for these central banks’ policies and their interactions. The conference will also discuss rationale for changes to the ammunition of central banks to better address current and some future challenges.

Plamen Nikolov, Paolo Pasimeni, 11 December 2019

If properly designed, even a small fiscal capacity can maximise its stabilisation effect. The column studies the macroeconomic stabilisation provided by the federal budget in the US as an example for monetary unions. Corporate income tax, on the revenue side, and social security, on the spending side, are the two most effective items. The key is to collect revenues based on the income of the most mobile factor, and to provide support to the income of the least mobile factor. 

Paweł Kopiec, 06 December 2019

Research shows that individual spending behaviour is heterogeneous across households and that it depends on characteristics such as income and wealth. Using Italian data, this column shows that household heterogeneity plays a crucial role in the propagation of fiscal expenditure shocks. Household inequality gives rise to a rich set of new channels that propagate government expenditures shocks through consumer spending, which are related to households’ balance sheets and monetary-fiscal interactions. The values of the fiscal multiplier diverge from those predicted by the standard macroeconomic framework and the difference is particularly large at the zero lower bound.

Klaus Adam, Henning Weber, 04 December 2019

Consumer goods prices systematically depend on product age. This column analyses this dependence and shows that relative prices tend to fall during the product lifecycle. It uses insights from a sticky price framework to demonstrate how these price trends matter for aggregate inflation and the optimal inflation rate

Heikki Oksanen, 01 November 2019

Preparations for reforming the euro area have stalled, with experts disappointed that politicians have not heard their proposals. This column, however, is optimistic  that the euro area can be reformed via a pragmatic reorientation without high-profile changes to the EU Treaty. The reforms must cover a reorientation of fiscal policy towards a long-term vision and entail revamping the Eurosystem to allow it to perform its proper role as a central bank.

Laurence Boone, Marco Buti, 18 October 2019

After years of solid growth, worldwide economic activity has slowed down sharply in 2019 while global trade has stalled. At October’s annual meeting of the IMF, policymakers have the difficult task of addressing the immediate policy challenges to support economic growth while also preparing our economies for the future. This column argues that while monetary policy is widely recognised as facing increasing constraints, fiscal policy and structural reforms need to play a stronger role. In particular, fiscal policy could become more supportive, notably in the euro area. Undertaking the right type of public investment now – in infrastructure, education or to mitigate climate change – would both stimulate our economies and contribute to making them stronger and more sustainable. 

Carlo Altavilla, Luca Brugnolini, Refet Gürkaynak, Roberto Motto, Giuseppe Ragusa, 04 October 2019

The newly released Euro Area Monetary Policy Event-Study Database makes available high-resolution data on asset price responses to ECB monetary policy announcements. In this column, the authors – the creators of the dataset – show that market perceptions of ECB policy communication comprise four factors: policy target, timing, forward guidance, and quantitative easing. These factors elicit large and long-lasting market reactions and help explain asset price changes in response to policy maker speeches and other news as well.

Carlo Altavilla, Luca Brugnolini, Refet Gürkaynak, Roberto Motto, Giuseppe Ragusa, 03 October 2019

High frequency data are an essential input to study the effects of monetary policy communication. This column introduces a new database, the Euro Area Monetary Policy Event-Study Database, which makes available intraday asset price changes around ECB policy announcements for a wide range of assets. The high resolution of the intraday data allows for the measurement of asset price changes separately for the press release and press conference windows.

Miguel Ampudia, Thorsten Beck, Andreas Beyer, Jean-Edouard Colliard, Agnese Leonello, Angela Maddaloni, David Marques-Ibanez, 20 September 2019

The decade since the Global Crisis has seen notable changes in the architecture of supervision, with separation of responsibility for monetary and financial stability having been reversed in many countries on the one hand, and a move towards more cross-border cooperation between supervisors on the other. This column discusses these two trends in Europe, where responsibility for supervision of the largest banks is housed in the same authority with responsibility for monetary policy, the ECB. It argues that the Single Supervisory Mechanism is a good reflection of the subtle economics of supervisory architecture and the many trade-offs that have to be taken into account.



CEPR Policy Research