Stan Olijslagers, Annelie Petersen, Nander de Vette, Sweder Van Wijnbergen, 17 June 2019

The decade since the Global Crisis has seen central banks employ a range of monetary policy tools. This column draws two lessons from the unconventional monetary policy measures employed during the European sovereign debt crisis. First, central banks should communicate clearly – and with sufficient detail – in times of heightened market stress to lower tail risk perceptions in financial markets. Second, policies aimed at changing the relative supply within different asset classes have an impact on perceived crash risk, while measures aimed at easing financing costs of commercial banks do not.

Anne-Laure Delatte, Pranav Garg, Jean Imbs, 21 May 2019

The ECB's unconventional monetary policy package implemented in February 2012 changed collateral requirements. This column examines the effects in the French credit market, using data on corporate loans. Credit indeed increased after the liquidity injection, exclusively driven by supply. There was also strategic risk-taking by a group of banks, an unintentional implication of the policy.

Carlo Altavilla, Wolfgang Lemke, Roberto Motto, Natacha Valla, 28 February 2019

The ECB Conference on Monetary Policy took place in Frankfurt from 29 to 30 October 2018. This column describes presentations on topics including the interaction of monetary policy and financial markets, the relevance of banks and credit flows for monetary policy transmission, and the current challenges for monetary policy frameworks and strategies. The conference provided a forum for academic research and the practice of central banking to meet. 

The Editors, 26 February 2019

Philip Lane, a CEPR Research Fellow, will soon become the ECB's chief economist. Read this selection of his columns to find out his opinions on the euro area, financial stability, and monetary policy.

Benoît Coeuré, 25 February 2019

There is a growing debate in Europe as to whether recent shifts in global governance should be seen as a reason to strengthen the global role of the euro. This column explains that while the ECB does not take a view on foreign policy questions, the alignment between policies that will strengthen the euro’s global role and policies that are needed to make the euro area more robust, together with the implications for monetary policy that a stronger international role of the euro would have, make the debate relevant to the central bank.

Maik Schmeling, Christian Wagner, 22 February 2019

According to Ben Bernanke, “monetary policy is 98% talk and 2% action”.Using data on policy rate announcements and press conferences by the ECB between 1999 and 2017, this column shows that central bank tone affects asset prices, even after controlling for policy actions and economic fundamentals. The results are consistent with the idea that communication tone is a monetary policy tool that allows central banks to affect the risk appetite of market participants and the risk premia they require.

Ralf Fendel, Nicola Mai, Oliver Mohr, 17 January 2019

The flattening of the US yield curve has left academics, central bankers and market commentators divided, with one camp interpreting it as a sign of impending recession (in line with historical patterns), and the other camp arguing that this time is different given unprecedented changes in monetary policy and other structural forces. This column argues that the ECB’s quantitative easing programme undermined the performance of term spreads as predictors of recessions. It suggests and tests a modified term spread and several other variables that are more successful at predicting recessions. 

Ashoka Mody, Milan Nedeljkovic, 14 January 2019

The ECB’s actions in the wake of the Global Crisis have been described as hesitant, relative to other central banks. Based on analysis of financial markets' response to the ECB's interventions during the euro crisis, this column argues that central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress. The ECB did not follow these principles, limiting its ability to improve financial market sentiment. 

Vítor Constâncio, 28 December 2018

Vítor Constâncio, Former Vice-President of the European Central Bank, talks about euro area performance to date and suggests what should come next for the area.

Christiane Nickel, Derry O'Brien, 20 November 2018

Just like other central banks, the ECB generally monitors a range of measures of underlying inflation to help distinguish noise from signal in headline inflation. This column describes measures of underlying inflation that are routinely used at the ECB for measuring euro area headline inflation and provides some insights on their interpretation. Each of the measures has merits and shortcomings and they should be taken together in arriving at a first-pass assessment of developments in headline inflation. At the same time, the measures need to be complemented by a more structural examination of their driving forces in order to better understand the inflation process.

Pierluigi Bologna, Arianna Miglietta, Anatoli Segura, 29 October 2018

Proponents of contingent convertible bonds, or CoCos, argue that they are effective instruments for bank recapitalisation. Sceptics argue that they introduce too much complexity, with potentially destabilising consequences. This column addresses this dispute empirically, using the dynamics of the CoCo market in 2016. The CoCo market at the time exhibited adverse dynamics that can’t be explained by banks’ fundamentals. Though some of this instability may have been transitory, the findings imply that the market should be monitored as it develops.

Matteo Leombroni, Andrea Vedolin, Gyuri Venter, Paul Whelan, 18 October 2018

It has been argued that central bank announcements can simultaneously convey both optimism and pessimism. This column explores the issue by looking at the effects of ECB communications on euro area bond yields. It finds direct evidence that monetary policy not only affects long-term rates through expectations of future short-term rates, but also by influencing the risk premia investors need in order to hold long-term bonds. 

Vincent Legroux, Imène Rahmouni-Rousseau, Urszula Szczerbowicz, Natacha Valla, 05 October 2018

Among the tools used by central banks to tame the financial crisis, some – such as haircuts applied by the central bank to the collateral posted at its provision of central liquidity to the banking system – have gone largely unnoticed. This column introduces a liquidity mismatch index to quantify the extent to which central banks effectively supported bank liquidity. The analysis suggests that in the case of French banks, the ECB alleviated banks’ liquidity mismatch significantly between 2011 and 2015.

Bert Smid, Beau Soederhuizen, Rutger Teulings, 10 September 2018

The transition to a European banking union is not straightforward. A key issue is how to prioritise risk sharing and risk reduction. This column examines three possible approaches, describing the respective transition scenarios and analysing the consequences for banks during the transition phase. None of the scenarios is optimal for all countries, but waiting too long may lead to solutions needing to be found under the pressure of a new crisis.

Philipp Hartmann, Peter McAdam, 29 October 2018

The origins and implications of the low inflation dynamics that characterised the post-crisis recoveries in many advanced economies were at the heart of the ECB’s 2018 Sintra Forum on Central Banking. In this column, two of the organisers highlight some of the main points from the discussions, including why measured economic slack did not translate into more vivid price and wage growth, which role inflation expectations play in the conduct of monetary policy, as well as where the challenges lie in reconciling changes in micro price-setting with aggregate inflation dynamics.

Martina Jasova, 10 August 2018

Financial institutions rely on borrowing at short maturities, but when credit markets panic, banks are unable to roll over their short-term debt. Martina Jasova discusses how the ECB’s Very Long-Term Refinancing Operations revived lending in the euro area following the financial crisis, which in turn allowed firms to invest and hire more. The video was recorded at CEPR's Third Annual Spring Symposium.

Antoine Levy, 22 July 2018

The euro improved the credibility of monetary policy for many member states, but the downsides of not having monetary autonomy became painfully apparent during the European debt crisis. This column proposes ‘targeted inflation targeting’ as a way to improve stabilisation mechanisms in the euro area, without losing the benefits of integration. The ECB would maintain a rules-based approach that targets countries in a weaker macroeconomic position more aggressively.



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