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In its first ten years (2014-2023), the banking union was successful in its prudential agenda but failed spectacularly in its underlying objective: establishing a single banking market in the euro area. This goal is now more important than ever, and easier to attain than at any time in the last decade. To make progress, cross-border banks should receive a specific treatment within general banking union legislation. Suggestions are made on how to make such regulatory carve-out effective and legally sound.
Since the second half of the nineties the euro area has been subject to a considerable accumulation of temporary and idiosyncratic price shocks. Core inflation indicators for the euro area are thus of utmost interest. Based on euro area-wide data core inflation in this paper is analyzed by means of an indicator derived from the generalized dynamic factor model. This indicator reveals that HICP inflation strongly exaggerated both the decline as well as the increase in the price trend in 1999 and 2000/2001. Our results reinforce those achieved by Cristadoro, Forni, Reichlin and Versonese (2001) based on euro area country data which indicates the robustness of the indicator. Klassifikation: C33, E31
Against the difficult background of analysing aggregated data in this paper core inflation in the euro area is estimated by means of the structural vector autoregressive approach. We demonstrate that the HICP sometimes seems to be a misleading indicator for monetary policy in the euro area. We furthermore compare our core inflation measure to the wide-spread "ex food and energy" measure, often referred to by the ECB. In addition we provide evidence that our measure is a coincident indicator of HICP inflation. Assessing the robustness of our core inflation measure we carefully conclude that it seems to be quite reliable. This Version: April, 2002 Revised edition published in: Allgemeinenes Statistisches Archiv, Vol 87, 2003. Klassifikation: C32, E31
This paper empirically tests the role of bank lending tightening on non-financial corporate (NFC) bond issuance in the eurozone. By utilizing a unique data set provided by the ECB Bank Lending Survey, we capture the "pure" credit supply effect on corporate external financing. We find that tightened credit standards positively affect the NFC bond issuance: A 1pp increase in banks reporting considerable tightening on loans leads to around a 7% increase in firms' bond issuance in the eurozone. Focusing on a spectrum of aspects contributing to bank credit tightening, we document that banks' balance sheet constraints, as well as the perception of risk lead to significantly higher NFC bond issuance. In addition, we show that stricter lending conditions, such as wider margins, higher collateral requirements and covenants significantly increase NFC bond issuance volumes too. Furthermore, the impact of bank credit tightening on firms' bond issuance is particularly observable in core eurozone countries and not in peripheral countries. This is partially due to the underdeveloped of debt capital markets in the peripheral countries.
In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB.We find that maximal insurance across this model range in terms of aMinimax policy comes at moderate costs in terms of lower expected performance. We extract priors that would rationalize the Minimax policy from a Bayesian perspective. These priors indicate that full insurance is strongly oriented towards the model with highest baseline losses. Furthermore, this policy is not as tolerant towards small perturbations of policy parameters as the Bayesian policy rule. We propose to strike a compromise and use preferences for policy design that allow for intermediate degrees of ambiguity-aversion.These preferences allow the specification of priors but also give extra weight to the worst uncertain outcomes in a given context. JEL Klassifikation: E52, E58, E61.
In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB.We find that maximal insurance across this model range in terms of aMinimax policy comes at moderate costs in terms of lower expected performance. We extract priors that would rationalize the Minimax policy from a Bayesian perspective. These priors indicate that full insurance is strongly oriented towards the model with highest baseline losses. Furthermore, this policy is not as tolerant towards small perturbations of policy parameters as the Bayesian policy rule. We propose to strike a compromise and use preferences for policy design that allow for intermediate degrees of ambiguity-aversion.These preferences allow the specification of priors but also give extra weight to the worst uncertain outcomes in a given context. JEL Klassifikation: E52, E58, E61
As of today, estimating interest rate reaction functions for the Euro Area is hampered by the short time span since the conduct of a single monetary policy. In this paper we circumvent the common use of aggregated data before 1999 by estimating interest rate reaction functions based on a panel including actual EMU Member States. We find that exploiting the cross-section dimen- sion of a multi-country panel and accounting for cross-country heterogeneity in advance of the single monetary policy pays off with regard to the estimated reaction functions' ability to describe actual interest rate dynamics. We retrieve a panel reaction function which is demonstrated to be a valuable tool for evaluating episodes of monetary policy since 1999. JEL - Klassifikation: E43 , E58 , C33