{"title":"Do Inflation Expectations Improve Model-Based Inflation Forecasts?","authors":"Marta Bańbura, Danilo Leiva-León, Jan-Oliver Menz","doi":"10.2139/ssrn.3961520","DOIUrl":"https://doi.org/10.2139/ssrn.3961520","url":null,"abstract":"Those of professional forecasters do. For a wide range of time series models for the euro area and its member states we find a higher average forecast accuracy of models that incorporate information on inflation expectations from the ECB’s SPF and Consensus Economics compared to their counterparts that do not. The gains in forecast accuracy from incorporating inflation expectations are typically not large but significant in some periods. Both short- and long-term expectations provide useful information. By contrast, incorporating expectations derived from financial market prices or those of firms and households does not lead to systematic improvements in forecast performance. Individual models we consider are typically better than univariate benchmarks but for the euro area the professional forecasters are more accurate, especially in recent years (not always for the countries). The analysis is undertaken for headline inflation and inflation excluding energy and food and both point and density forecast are evaluated using real-time data vintages over 2001-2019.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132816367","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Striking a Bargain: Narrative Identification of Wage Bargaining Shocks","authors":"Žymantas Budrys, M. Porqueddu, Andrej Sokol","doi":"10.2139/ssrn.3939316","DOIUrl":"https://doi.org/10.2139/ssrn.3939316","url":null,"abstract":"We quantify the effects of wage bargaining shocks on macroeconomic aggregates using a structural vector auto-regression model for Germany. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This narrative information disciplines the impulse responses to a wage bargaining shock of un-employment and output, and sharpens inference on the behaviour of other variables. The implied transmission mechanism is in line with the theoretical predictions of a large class of search and matching models. We also find that wage bargaining shocks explain a sizeable share of aggregate fluctuations in unemployment and inflation, that their pass-through to prices is very close to being full, and that they imply plausible dynamics for the vacancy rate, firms’ profits, and the labour share.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121385219","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Chadha, L. Corrado, Jack Meaning, Tobias Schuler
{"title":"Monetary and Fiscal Complementarity in the Covid-19 Pandemic","authors":"J. Chadha, L. Corrado, Jack Meaning, Tobias Schuler","doi":"10.2139/ssrn.3923209","DOIUrl":"https://doi.org/10.2139/ssrn.3923209","url":null,"abstract":"In response to the coronavirus (Covid-19) pandemic, there has been a complementary approach to monetary and fiscal policy in the United States with the Federal Reserve System purchasing extraordinary quantities of securities and the government running a deficit of some 17% of projected GDP. The Federal Reserve pushed the discount rate close to zero and stabilised financial markets with emergency liquidity provided through a new open-ended long-term asset purchase programme. To capture the interventions, we develop a model in which the central bank uses reserves to buy much of the huge issuance of government bonds and this offsets the impact of shutdowns and lockdowns in the real economy. We show that these actions reduced lending costs and amplified the impact of supportive fiscal policies. We then run a counterfactual analysis which suggests that if the Federal Reserve had not intervened to such a degree, the economy may have experienced a significantly deeper contraction as a result from the Covid-19 pandemic. JEL Classification: E31, E40, E51","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130870752","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Fabiani, Michael Fidora, Ralph Setzer, Andreas Westphal, Nico Zorell
{"title":"Sudden Stops and Asset Purchase Programmes in the Euro Area","authors":"J. Fabiani, Michael Fidora, Ralph Setzer, Andreas Westphal, Nico Zorell","doi":"10.2139/ssrn.3937767","DOIUrl":"https://doi.org/10.2139/ssrn.3937767","url":null,"abstract":"\u0000 This paper analyses the incidence and severity of sudden stops in euro area countries before and after the introduction of the ECB’s asset purchase programmes. We define sudden stops as abrupt declines in private net financial inflows, i.e. total flows adjusted for EU and IMF loans and changes in TARGET2 balances. We document that sudden stop were more frequent and more severe in euro area countries compared to other OECD economies over the period 1999–2020. We find that the susceptibility of euro area countries to severe sudden stops mainly reflects domestic fundamentals whereas there is no clear evidence of an adverse direct effect of being part of the euro area. Moreover, our econometric analysis suggests that the ECB asset purchase programmes have overall almost halved the risk of severe sudden stops in euro area countries. We find tentative evidence that this effect operates through confidence channels.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"55 4","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114019231","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Miguel Ampudia, Marco Lo Duca, Mátyás Farkas, Gabriel Pérez-Quirós, Gerhard Rünstler, Eugen Tereanu
{"title":"On the Effectiveness of Macroprudential Policy","authors":"Miguel Ampudia, Marco Lo Duca, Mátyás Farkas, Gabriel Pérez-Quirós, Gerhard Rünstler, Eugen Tereanu","doi":"10.2866/869839","DOIUrl":"https://doi.org/10.2866/869839","url":null,"abstract":"Since the global financial crises, many countries have implemented macroprudential policies with the aim to render the financial system more resilient to shocks and limit the procyclicality of the financial system. We present theoretical and empirical evidence on the effectiveness of macroprudential policy, on both, financial stability and economic growth focussing on capital measures and borrower-based measures. JEL Classification: G21","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115501018","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"International Medium-Term Business Cycles","authors":"Dominik Hirschbühl, M. Spitzer","doi":"10.2866/08879","DOIUrl":"https://doi.org/10.2866/08879","url":null,"abstract":"Foreign driven medium-term oscillations that originate from fluctuations in technological frontier countries gained widespread attention among policymakers. To study this phenomenon in the context of domestic and other foreign drivers of the euro area business cycle, we develop a medium-scale, two-economy dynamic stochastic general equilibrium model with endogenous growth and estimate it with Bayesian methods for the United States and the euro area for the period from 1984:Q1 to 2017:Q4. The framework suggests that foreign shocks can be a substantial source of medium-term oscillations that contribute to pro-cyclicality of real GDP across countries. Notably, US shocks to liquidity preference and trade demand explain more than a third of the euro area downturn during the Great Recession.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131365189","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Gert Bijnens, J. Hutchinson, J. Konings, Arthur Saint Guilhem
{"title":"The Interplay between Green Policy, Electricity Prices, Financial Constraints and Jobs: Firm-Level Evidence","authors":"Gert Bijnens, J. Hutchinson, J. Konings, Arthur Saint Guilhem","doi":"10.2139/ssrn.3825658","DOIUrl":"https://doi.org/10.2139/ssrn.3825658","url":null,"abstract":"Increased investment in clean electricity generation or the introduction of a carbon tax will most likely lead to higher electricity prices. We examine the effect from changing electricity prices on manufacturing employment. Analyzing firm-level data, we find that rising electricity prices lead to a negative impact on labor demand and investment in sectors most reliant on electricity as an input factor. Since these sectors are unevenly spread across countries and regions, the labor impact will also be unevenly spread with the highest impact in Southern Germany and Northern Italy. We also identify an additional channel that leads to heterogeneous responses. When electricity prices rise, financially constrained firms reduce employment more than less constrained firms. This implies a potentially mitigating role for monetary policy.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129837447","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. Dieppe, Neville R. Francis, Gene Kindberg-Hanlon
{"title":"The Identification of Dominant Macroeconomic Drivers: Coping with Confounding Shocks","authors":"A. Dieppe, Neville R. Francis, Gene Kindberg-Hanlon","doi":"10.2866/212981","DOIUrl":"https://doi.org/10.2866/212981","url":null,"abstract":"We address the identification of low-frequency macroeconomic shocks, such as technology, in Structural Vector Autoregressions. Whilst identification issues with long-run restrictions are well documented, we demonstrate that the recent attempt to overcome said issues using the Max-Share approach of Francis et al. (2014) and Barsky and Sims (2011) has its own shortcomings, primarily that they are vulnerable to bias from confounding non-technology shocks, although less so than long-run specifications. We offer a new spectral methodology to improve empirical identification. This new preferred methodology offers equivalent or improved identification in a wide range of data generating processes and when applied to US data. Our findings on the bias generated by confounding shocks also importantly extends to the identification of dominant business-cycle shocks, which will be a combination of shocks rather than a single structural driver. This can result in a mis-characterization of the business cycle anatomy.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"291 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132618874","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Tatjana Dalhaus, Julia Schaumburg, Tatevik Sekhposyan
{"title":"Networking the Yield Curve: Implications for Monetary Policy","authors":"Tatjana Dalhaus, Julia Schaumburg, Tatevik Sekhposyan","doi":"10.2866/248681","DOIUrl":"https://doi.org/10.2866/248681","url":null,"abstract":"Quelle influence differentes mesures de politique monetaire exercent-elles sur la courbe de rendement et comment interagissent-elles entre elles? Pour repondre a ces questions, nous elaborons un nouveau modele de reseau pour determiner les variations inattendues des taux d’interet a differentes echeances. Nous etablissons les proprietes et l’identification du modele a l’aide de simulations. Differents scenarios de politique monetaire sont analyses au moyen du modele. Nous modelisons des interventions simultanees visant differents segments du marche obligataire tout en faisant varier la communication a propos de la trajectoire du taux directeur. \u0000 \u0000Nos resultats montrent que l’incidence globale des mesures sur la courbe de rendement depend de l’ampleur des chocs de politique monetaire, des echeances ciblees et du contenu des indications prospectives. Par consequent, l’echeance que la banque centrale devrait cibler et l’ampleur de la variation des taux dependront des objectifs poursuivis. Ainsi, il est sans doute preferable de cibler les taux de rendement obligataires a moyen terme pour faire evoluer dans la meme direction les taux a toutes les echeances. Si la banque centrale cherche plutot a rendre la courbe de rendement plus ou moins plate ou a la modifier dans un segment plus que dans d’autres, un jeu de combinaisons de mesures monetaires pourrait lui permettre d’obtenir le resultat souhaite. \u0000 \u0000Notre etude met en lumiere le role de la hierarchie des retombees dans la formulation de la politique monetaire. Elle souligne aussi l’importance, pour les autorites monetaires, d’un examen attentif des complementarites des outils d’intervention et de leurs effets amplificateurs possibles.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131345599","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Homeownership and Portfolio Choice Over the Generations","authors":"Gonzalo Paz-Pardo","doi":"10.2139/ssrn.3797142","DOIUrl":"https://doi.org/10.2139/ssrn.3797142","url":null,"abstract":"Earnings are riskier and more unequal for households born in the 1960s and 1980s than for those born in the 1940s. Despite the improvements in financial conditions, younger generations are less likely to be living in their own homes than older generations at the same age. By using a life-cycle model with housing and portfolio choice that includes flexible earnings risk and aggregate asset price risk, I show that changes in earnings dynamics account for a large part of the reduction in homeownership across generations. Lower-income households find it harder to buy housing, and as a result accumulate less wealth.","PeriodicalId":269524,"journal":{"name":"ECB: Working Paper Series (Topic)","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128478013","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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