Tina Zumer
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 263Details
- Abstract
- This paper assesses how globalisation has shaped the economic environment in which the ECB operates and discusses whether this warrants adjustments to the monetary policy strategy. The paper first looks at how trade and financial integration have evolved since the last strategy review in 2003. It then examines the effects of these developments on global productivity growth, the natural interest rate (r*), inflation trends and monetary transmission. While trade globalisation initially boosted productivity growth, this effect may be waning as trade integration slows and market contestability promotes a winner-takes-all environment. The impact of globalisation on r* has been ambiguous: downward pressures, fuelled by global demand for safe assets and an increase in the propensity to save against a background of rising inequality, are counteracted by upward pressures, from the boost to global productivity associated with greater trade integration. Headline inflation rates have become more synchronised globally, largely because commodity prices are increasingly determined by global factors. Meanwhile, core inflation rates show a lower degree of commonality. Globalisation has made a rather modest contribution to the synchronised fall in trend inflation across countries and contributed only moderately to the reduction in the responsiveness of inflation to changes in activity. Regarding monetary transmission, globalisation has made the role of the exchange rate more complex by introducing new mechanisms through which it affects financial conditions, real activity and price dynamics. Against the background of this discussion, the paper then examines the implications for the ECB’s monetary policy strategy. In doing so, it asks two questions. How is the ECB’s economic and monetary analysis affected by globalisation? And how does globalisation influence the choice of the ECB’s monetary policy objective and instruments? ...
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
F65 : International Economics→Economic Impacts of Globalization→Finance
- 5 January 2021
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2020Details
- Abstract
- The Bulgarian lev and the Croatian kuna were included in the exchange rate mechanism (ERM II) on 10 July 2020. This marks a milestone towards further enlargement of the euro area. The process unfolded along a roadmap agreed by the various ERM II parties, which reflects the lessons learned from the past and the creation of banking union, as well as a careful assessment of country-specific strengths and vulnerabilities. First, this article briefly reviews the history, main features and procedures of ERM II. It then argues on the basis of quantitative evidence that the process of euro adoption may induce a regime shift when a country joins ERM II. This shift may alter the economic incentives of both domestic and foreign investors and the authorities of the Member State concerned, with important policy implications. For this reason, countries need sound policies, governance and institutions in order to allocate international financial inflows and domestic credit efficiently. They must also address risks with adequate macroeconomic, macroprudential, supervisory and structural measures. Drawing on this analysis, the third part of the article explains the rationale for ERM II participation and the roadmap towards it that has been successfully implemented for Bulgaria and Croatia. This includes the completion of several policy measures before joining ERM II, as well as post-entry policy commitments made by the Bulgarian and Croatian authorities. The article concludes by highlighting the way ahead and challenges faced by the two countries on the path towards euro adoption.
- JEL Code
- E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F02 : International Economics→General→International Economic Order
F31 : International Economics→International Finance→Foreign Exchange
F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 6 August 2020
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2020Details
- Abstract
- This box reviews the recent decision on the inclusion of the Bulgarian lev and the Croatian kuna in ERM II from a historical, institutional, policy and economic perspective. It explains the key features of ERM II, describes the process and rationale underlying the decision, including the prior and post‑ERM II entry policy commitments made by the Bulgarian and Croatian authorities, and explains the key elements that were taken into consideration when defining the central rate of the lev and the kuna against the euro in the exchange rate mechanism.
- JEL Code
- F02 : International Economics→General→International Economic Order
F31 : International Economics→International Finance→Foreign Exchange
- 21 December 2017
- WORKING PAPER SERIES - No. 2118Details
- Abstract
- We study the relationship between debt and growth in EU countries in the years 1995-2015. We investigate the debt-growth nexus in two alternative empirical set-ups: the traditional cross-county panel regressions and mean group estimations. We find evidence of a positive long-run relationship between private sector indebtedness and economic growth, and a negative relationship between public debt and long-run growth across EU countries. However, the more immediate impact of private sector debt on growth is found to be negative, and positive for the public sector debt. We find no conclusive evidence for a common debt threshold within EU countries, neither for the private nor for the public sector, but some indication of a non-linear effect of household debt.
- JEL Code
- O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
N14 : Economic History→Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations→Europe: 1913?
H60 : Public Economics→National Budget, Deficit, and Debt→General
- 8 September 2008
- OCCASIONAL PAPER SERIES - No. 95Details
- Abstract
- This paper reviews financial stability challenges in the EU candidate countries Croatia, Turkey and the former Yugoslav Republic of Macedonia. It examines the financial sectors in these three economies, which, while at very different stages of development and embedded in quite diverse economic settings, are all in a process of rapid financial deepening. This manifests itself most clearly in the rapid pace of growth in credit to the private sector. This process of financial deepening is largely a natural and welcome catching-up phenomenon, but it has also increased the credit risks borne by the banking sectors in the three economies. These credit risks are compounded by the widespread use of foreign currency-denominated or -indexed loans, leaving unhedged bank customers exposed to potential swings in exchange rates or foreign interest rates. Moreover, these financial risks form part of a broader nexus of vulnerabilities in the economies concerned, in particular the external vulnerabilities arising from increasing private sector external indebtedness. That said, the paper also finds that the authorities in the three countries have taken several policy actions to reduce these financial and external vulnerabilities and to strengthen the resilience of the financial sectors.
- JEL Code
- F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation - Network
- Eurosystem Monetary Transmission Network
- 18 April 2007
- OCCASIONAL PAPER SERIES - No. 61Details
- Abstract
- Overall, the prospects for a continued and reasonably fast real convergence process between the EU 8 countries and the euro area are good. However, the continuation of the rapid progress made by many EU 8 countries in the past cannot be taken for granted. In fact, in order to ensure that fast economic growth in the EU 8 countries remains sustainable, it is crucial for these economies to take appropriate policy action. First it is important to recall that sound macroeconomic policies including credible monetary policy and appropriate fiscal policy are essential to ensure the appropriate framework conditions for further growth and convergence. Second, they need to address structural labour market problems, in particular by reducing regional and skill mismatches. Third, they must make further efforts to improve the business environment, in order to ensure that the capital accumulation process continues and R&D investments increase. Many of the above-mentioned facets of growth-enhancing policy will also help to ensure a continued inflow of foreign direct investment (FDI), which in turn is expected to help accelerate the convergence process.
- 30 October 2006
- WORKING PAPER SERIES - No. 687Details
- Abstract
- This paper analyzes the equilibrium level of private credit to GDP in 11 Central and Eastern European countries in order to see whether the high credit growth recently observed in some of these countries led to above equilibrium private credit-to-GDP levels. We use estimation results obtained for a panel of small open OECD economies (out-of-sample panel) to derive the equilibrium credit level for a panel of transition economies (in-sample panel). We opt for this (out-of-sample) approach because the coefficient estimates for transition economies are fairly unstable. We show that there is a large amount of uncertainty to determine the equilibrium level of private credit. Yet our results indicate that a number of countries are very close or even above the estimated equilibrium levels, whereas others are still well below the equilibrium level.
- JEL Code
- C31 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Cross-Sectional Models, Spatial Models, Treatment Effect Models, Quantile Regressions, Social Interaction Models
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 9 June 2005
- OCCASIONAL PAPER SERIES - No. 30Details
- Abstract
- Chapter 1 provides an overview and assessment of the price competitiveness and export performance of the euro area and the larger euro area countries, as well as an evaluation of how standard equations have been able to explain actual export developments. Chapter 2 carries out a constant market share analysis for the euro area and thereby sheds light on the reasons for movements in aggregate export market shares by looking at the sectoral and geographical composition of euro area exports. Chapter 3 looks at the evolution of the technological competitiveness of the euro area and major competitors
- JEL Code
- E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles