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AbstractCentral bank provisions may be used as a measure of the perceived risk of the balance sheet composition by a central bank. We identify three possible sources that may change the size of the provisions. These are: The length of the balance sheet, the central bank revenues, and measures of fiscal stress. Using data of the 11 founding members of the Eurosystem for the years 1999–2015, we are able to test each of the three determinants. We find that provisions are increased with the size of the balance sheet especially in the recent financial crisis. Moreover, provisions are increased at the cost of lower central bank revenues. While this holds for the pre‐crisis period this relationship seems to be less pronounced in the crisis period probably because of the more active collateral policy. Finally, central banks do not tend to lower provisions because of fiscal tensions. This is even more true in the crisis period.

This paper uses two-dimensional asymmetric Taylor reaction functions for 16 OECD-countries to account for diff erent reactions to the inflation rate and output by central banks before or after an election of the fiscal authorities in the respective country. Important for such an investigation is not only the period before or after an election takes place but also whether the inflation rate and output are below or above their target or potential value because this information shows whether the central bank systematically deviates from the Taylor rule. Using a Panel-GMM we observe that in the OECD-countries there are political business cycles in monetary policy with respect to the inflation and output response. However, the supporting time horizon differs between both exogenous indicators and state of variables. ; In diesem Papier wird eine zweidimensionale asymmetrische Taylor Reaktionsfunktion für 16 OECD-Länder geschätzt, um verschiedene Reaktionen auf die Inflationsrate und die Output-Lücke vor und nach Wahlen der nationalen Regierungen aufzeigen zu können. Wichtig für solch einen Vergleich sind nicht nur die Perioden vor und nach Wahlen, sondern auch ob die Inflationsrate und der Output ober- oder unterhalb des Ziels/Potenzials sind. Mit Hilfe einer Panel-GMM Schätzung wird gezeigt, dass politische Konjunkturzyklen in der Geldpolitik existieren. Allerdings hängt dieses Ergebnis von betrachteten Zeithorizont und Niveau der exogenen Variablen ab.

AbstractIn this paper, we study the impact of the coronavirus disease 2019 pandemic in estimated panel vector autoregression models for 92 countries. The large cross‐section of countries allows us to shed light on the heterogeneity of the responses of stock markets and nitrogen dioxide emissions as high‐frequency measures of economic activity. We quantify the effect of the number of infections and four dimensions of policy measures: (1) containment and closure, (2) movement restrictions, (3) economic support, and (4) adjustments of health systems. Our main findings show that a surprise increase in the number of infections triggers a drop in our two measures of economic activity. Propping up economic support measures, in contrast, raises stock returns and emissions and, thus, contributes to the economic recovery. We also document vast differences in the responses across subsets of countries and between the first and the second wave of infections.

In order to fight the economic consequences of the COVID-19 pandemic, monetary and fiscal policy announced a large variety of support packages which are often unprecedented in size. In this paper, we provide an empirical analysis of the responses of European financial markets to these policy announcements. The key contribution is a very granular set of policy announcements, both at the national and the European level. We also differentiate between the first announcement in a series of policies and the subsequent announcements because the initial steps were often seen as bad news about the state of the economy. In a panel model we find that monetary policy, inparticular through asset purchases, is effective in supporting the real economy and easing the pressure on governmental finances. Across all subsets of polices, it seems that monetary policy is more effective in supporting the stockmarket than national fiscal policy, though markets clearly distinguish between different types of policies.

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared. Using quarterly real-time data from 1999 to the beginning of 2019, we find that an estimated Orphanides-Rule performs best in nowcasts, while it is outperformed by an augmented Taylor-Rule when it comes to forecasts. However, also a no-change rule delivers good results for forecasts, which is hard to beat for most policy rules. ; In diesem Artikel vergleichen wir zwei Arten geldpolitischer Regeln - die Orphanides- und die Taylor-Regel - hinsichtlich ihrer Prognosefähigkeit des Leitzinses der Europäischen Zentralbank miteinander. Es werden die Standardregeln, geschätzte Regeln und erweiterte Regeln miteinander verglichen. Für Quartalsdaten in Echtzeit im Zeitraum 1999 bis Anfang 2019 ergibt sich, dass eine geschätzte Orphanides-Regel am geeignetsten im Nowcast ist, während diese Regel schlechter als erweiterte Taylor-Regeln im Falle von Zinsprognosen abschneidet. Zudem liefert eine Regel, die keine Änderungen des Zinssatzes annimmt, ebenfalls gute Vorhersagen, die für die meisten geldpolitischen Regeln schwer zu schlagen sind.

AbstractIs secular stagnation – a period of persistently lower growth such as that seen following the financial crisis of 2008–09 – a valid concern for euro‐area countries? We tackle this question using the well‐established Laubach‐Williams model to estimate the unobservable equilibrium real interest rate and compare it to the actual real rate. In light of the considerable increase in heterogeneity among EU member countries since the beginning of the financial crisis, we apply our approach to 12 euro‐area countries to provide country‐level answers to the question of secular stagnation. The presence of secular stagnation in a number of euro‐area countries has important implications for ECB decision‐making (such as, voting power in the Governing Council) and EU governance. Our results indicate that secular stagnation is not a significant threat to most euro‐area countries, with one possible exception: Greece.

We assess differences that emerge in Taylor rule estimations for the Fed and the ECB before and after the start of the subprime crisis. For this purpose, we apply an explicit estimate of the equilibrium real interest rate and of potential output in order to account for variations within these variables over time. We argue that measures of money and credit growth, interest rate spreads and asset price inflation should be added to the classical Taylor rule because these variables are proxies of a change in the equilibrium interest rate and are, thus, also ikely to have played a major role in setting policy rates during the crisis. Our empirical results gained from a state-space model and GMM estimations reveal that, as far as the Fed is concerned, the impact of consumer price inflation, and money and credit growth turns negative during the crisis while the sign of the asset price inflation coefficient turns positive. Thus we are able to establish significant differences in the parameters of the reaction functions of the Fed before and after the start of the subprime crisis. In case of the ECB, there is no evidence of a change in signs. Instead, the positive reaction to credit growth, consumer and house price inflation becomes even stronger than before. Moreover we find evidence of a less inertial policy of both the Fed and the ECB during the crisis.

We assess differences that emerge in Taylor rule estimations for the Fed and the ECB before and after the start of the subprime crisis. For this purpose, we apply an explicit estimate of the equilibrium real interest rate and of potential output in order to account for variations within these variables over time. We argue that measures of money and credit growth, interest rate spreads and asset price infl ation should be added to the classical Taylor rule because these variables are proxies of a change in the equilibrium interest rate and are, thus, also likely to have played a major role in setting policy rates during the crisis. Our empirical results gained from a state-space model and GMM estimations reveal that, as far as the Fed is concerned, the impact of consumer price inflation, and money and credit growth turns negative during the crisis while the sign of the asset price inflation coefficient turns positive. Thus we are able to establish significant differences in the parameters of the reaction functions of the Fed before and after the start of the subprime crisis. In case of the ECB, there is no evidence of a change in signs. Instead, the positive reaction to credit growth, consumer and house price inflation becomes even stronger than before. Moreover we find evidence of a less inertial policy of both the Fed and the ECB during the crisis.

We assess the differences that emerge in Taylor rule estimations for the ECB when using ex-post data instead of real time forecasts and vice versa. We argue that previous comparative studies in this field mixed up two separate effects. First, the differences resulting from the use of ex-post and real time data per se and, second, the differences emerging from the use of non-modified real time data instead of realtime data based forecasted values and vice versa. Since both effects can influence the reaction to inflation and the output gap either way, we use a more clear-cut approach to disentangle the partial effects. Our estimation results indicate that using real time instead of ex post data leads to higher estimated inflation coefficients while the opposite is true for the output gap coefficients. If real time data forecasts for the current period are used (since actual data become available with a lag), this empirical pattern is even strengthened in the sense of even increasing the inflation response but lowering the reaction to the output gap while the reverse is true if true forecasts of real time data for several periods are employed.

We assess the differences that emerge in Taylor rule estimations for the ECB when using ex-post data instead of real time forecasts and vice versa.We argue that previous comparative studies in this field mixed up two separate effects. First, the differences resulting from the use of ex-post and real time data per se and, second, the differences emerging from the use of non-modified real time data instead of real-time data based forecasted values and vice versa. Since both effects can influence the reaction to inflation and the output gap either way, we use a more clear-cut approach to disentangle the partial effects. Our estimation results indicate that using real time instead of ex post data leads to higher estimated inflation coefficients while the opposite is true for the output gap coefficients. If real time data forecasts for the current period are used (since actual data become available with a lag), this empirical pattern is even strengthened in the sense of even increasing the inflation response but lowering the reaction to the output gap while the reverse is true if ¿true¿ forecasts of real time data for several periods are employed.