30

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Područje politike
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Monetary Policy in an Era of Low Average Growth Rates

29-11-2018

Economic growth in the euro area has been sluggish since the onset of the global financial crisis of 2008. While some of this sluggishness reflected cyclical patterns, ongoing weak productivity growth and demographic factors point to slow average growth rates for the euro area in the coming decades. This will most likely translate into a lower equilibrium real interest rate. The ECB should follow the Federal Reserve in providing estimates to the public of average nominal interest rate it expects ...

Economic growth in the euro area has been sluggish since the onset of the global financial crisis of 2008. While some of this sluggishness reflected cyclical patterns, ongoing weak productivity growth and demographic factors point to slow average growth rates for the euro area in the coming decades. This will most likely translate into a lower equilibrium real interest rate. The ECB should follow the Federal Reserve in providing estimates to the public of average nominal interest rate it expects to set over the long term and that this is likely lower than average rates during the pre-crisis era. The ECB should continue advocating for growth-boosting structural reforms but should also consider advocating for higher immigration levels to improve Europe’s demographic profile and growth potential.

Vanjski autor

Professor Karl Whelan

Financing bank resolution: An alternative solution for arranging the liquidity required

21-11-2018

Liquidity in resolution is one of the unresolved elements of the Single Resolution Mechanism. Currently, with the Single Resolution Fund (SRF) and the Eurosystem, there are two potential sources of liquidity in resolution, which both have clear limitations in use and amounts. Straightforward solutions to give the SRF and/or Eurosystem more firepower in resolution go against the main objectives of the resolution mechanism (i.e. breaking the sovereign-bank nexus and avoiding use of taxpayers’ money ...

Liquidity in resolution is one of the unresolved elements of the Single Resolution Mechanism. Currently, with the Single Resolution Fund (SRF) and the Eurosystem, there are two potential sources of liquidity in resolution, which both have clear limitations in use and amounts. Straightforward solutions to give the SRF and/or Eurosystem more firepower in resolution go against the main objectives of the resolution mechanism (i.e. breaking the sovereign-bank nexus and avoiding use of taxpayers’ money). This paper proposes an ECB liquidity facility with an SRF-guarantee as an alternative solution for banks in resolution. The funds available should be broadly sufficient to address potential liquidity needs for resolution tools. The proposed solution primarily requires agreement on the ESM-backstop for the SRF, a firmer commitment for (possible) future contributions for the SRF as well as a change to the current emergency liquidity assistance or introduction of a new dedicated Transitional Liquidity Assistance by the Eurosystem.

Vanjski autor

W.P. De Groen, CEPS

Abundant Liquidity and Bank Lending Activity: an Assessment of the Risks

14-09-2018

This paper assesses the risks facing the euro area banking system, as it returns to normal financial conditions without ECB support. In the first part we argue that risks to bank lending mainly stem from the transmission of external monetary policy effects that may not be aligned with ECB policies. The second part of the paper therefore offers some ideas on the need to moderate spillover effects from outside monetary policies or events. We also review how far new prudential policies, regulatory measures ...

This paper assesses the risks facing the euro area banking system, as it returns to normal financial conditions without ECB support. In the first part we argue that risks to bank lending mainly stem from the transmission of external monetary policy effects that may not be aligned with ECB policies. The second part of the paper therefore offers some ideas on the need to moderate spillover effects from outside monetary policies or events. We also review how far new prudential policies, regulatory measures and/or policies can be used to mitigate those unfavourable risks. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs.

Vanjski autor

Andrew HUGHES HALLETT

Central Bank Communication at Times of Non-Standard Monetary Policies

14-09-2018

Communication is an important monetary policy tool, as central banks can use it to manage the expectations of economic agents. Communication becomes even more important in times of non-standard monetary policies due to increased levels of uncertainty and the introduction of new policy tools. In this paper, we summarise the literature on central bank communication in times of non-standard monetary policies, with a particular focus on forward guidance. This document was provided by Policy Department ...

Communication is an important monetary policy tool, as central banks can use it to manage the expectations of economic agents. Communication becomes even more important in times of non-standard monetary policies due to increased levels of uncertainty and the introduction of new policy tools. In this paper, we summarise the literature on central bank communication in times of non-standard monetary policies, with a particular focus on forward guidance. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.

Vanjski autor

Lukasz JANIKOWSKI, Andrzej RZONCA

When Communication becomes the Policy

14-09-2018

Non-standard policy measures are intended to work via financial markets. Their effectiveness thus depends on how ECB communication affects the expectations of market participants far into the future. Communication has become as important as the details of the policy measures itself. The success of communication is often measured by short term market reactions, increasingly using advanced statistical techniques to interpret them. But this ‘policy making by the markets’ lacks a strong anchor because ...

Non-standard policy measures are intended to work via financial markets. Their effectiveness thus depends on how ECB communication affects the expectations of market participants far into the future. Communication has become as important as the details of the policy measures itself. The success of communication is often measured by short term market reactions, increasingly using advanced statistical techniques to interpret them. But this ‘policy making by the markets’ lacks a strong anchor because financial markets often anticipate policy and the assessments of investors change all the time, often independently of monetary policy actions. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.

Vanjski autor

Daniel Gros

Excess Liquidity and Bank Lending Risks in the Euro Area

14-09-2018

Low interest rates and excess liquidity in the euro area, which exceeded €1,900 billion in September 2018, might create financial stability risks. We clarify the notion of excess liquidity and highlight that its current level is primarily the result of European Central Bank asset purchases. Overall, we conclude that financial stability risks in the euro area are low, but increased home bias and housing prices necessitate full attention from macroprudential authorities. Monetary policy tools are anyway ...

Low interest rates and excess liquidity in the euro area, which exceeded €1,900 billion in September 2018, might create financial stability risks. We clarify the notion of excess liquidity and highlight that its current level is primarily the result of European Central Bank asset purchases. Overall, we conclude that financial stability risks in the euro area are low, but increased home bias and housing prices necessitate full attention from macroprudential authorities. Monetary policy tools are anyway ill-suited to fostering financial stability objectives. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.

Vanjski autor

Zsolt DARVAS, David PICHLER

The effects and risks of ECB collateral framework changes

16-07-2018

During the crisis, the ECB modified its collateral framework to face increased liquidity needs of commercial banks. This has taken two forms: the minimum required rating for different classes of assets has been reduced and the haircut associated to these assets has evolved conditional on the default risks of these assets. The benefits in terms of cushioning a liquidity crisis and enhancing monetary policy transmission have most probably exceeded the costs in terms of riskier central bank balance ...

During the crisis, the ECB modified its collateral framework to face increased liquidity needs of commercial banks. This has taken two forms: the minimum required rating for different classes of assets has been reduced and the haircut associated to these assets has evolved conditional on the default risks of these assets. The benefits in terms of cushioning a liquidity crisis and enhancing monetary policy transmission have most probably exceeded the costs in terms of riskier central bank balance sheet and potential capital losses. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.

Vanjski autor

Christophe BLOT, Jérôme CREEL, Paul HUBERT (Sciences Po – OFCE)

ECB non-standard-policies and collateral constraints

16-07-2018

Collateral constitutes an indispensable lubricant for the financial system. Government bonds constitute the most important source of collateral, for use in inter-bank and repo transactions. But, the vast bond buying program of the ECB in the context of the Public Sector Purchase Programme has not led to any collateral scarcity. Banks still hold very large amounts of sovereign bonds and they have ample other collateral should they want to borrow more from the ECB for ‘standard’ monetary policy operations ...

Collateral constitutes an indispensable lubricant for the financial system. Government bonds constitute the most important source of collateral, for use in inter-bank and repo transactions. But, the vast bond buying program of the ECB in the context of the Public Sector Purchase Programme has not led to any collateral scarcity. Banks still hold very large amounts of sovereign bonds and they have ample other collateral should they want to borrow more from the ECB for ‘standard’ monetary policy operations. Banks tend to use less liquid assets as collateral with the ECB, but this does not mean necessarily more risk for the ECB for which liquidity is not important. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.

Vanjski autor

Daniel GROS, Willem Pieter de Groen (CEPS)

ECB non-standard monetary measures, collateral constraints and potential risks for monetary policy

02-07-2018

This paper takes a wide view of nonstandard measures in difficult situations. We explore how, and to what extent, prudential metrics written into the new prudential and surveillance regulations can be used as policy instruments. The paper does not try to reach a judgment on which measures will work best. Instead we explore how these policies work; why they depend on high quality collateral/assets; what happens if policymakers are driven to expand the bounds of “sufficient quality or liquidity”; how ...

This paper takes a wide view of nonstandard measures in difficult situations. We explore how, and to what extent, prudential metrics written into the new prudential and surveillance regulations can be used as policy instruments. The paper does not try to reach a judgment on which measures will work best. Instead we explore how these policies work; why they depend on high quality collateral/assets; what happens if policymakers are driven to expand the bounds of “sufficient quality or liquidity”; how new credit risks arise and for whom. Some of these risks are quite subtle, implicit or indirect. But they all reduce the effective-ness of the measures in question (a transmission problem). As a result, they require larger interventions to reach certain target values (a feasibility question, given the side effects). Thus, the new prudential regulation regimes offer several nonstandard policy instruments. But they depend of the availability of high quality and liquid collateral/assets. Poor collateral makes nonstandard measures less effective. Less credit and less cheap credit will be offered due to the increasing credit risks. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.

Vanjski autor

Andrew Hughes Hallett, Paul Fisher

Should central banks be concerned about virtual currencies?

02-07-2018

Virtual currencies have generated much discussion over the past few years with some believing they are an improvement on state-issued currencies and will end up replacing them. This paper argues this is extremely unlikely. Cryptocurrencies such as Bitcoin do not work well as money because of security weaknesses and the volatility of their price relative to traditional currencies. The theory that the private sector will choose to replace a state-backed currency with privately-issued currency also ...

Virtual currencies have generated much discussion over the past few years with some believing they are an improvement on state-issued currencies and will end up replacing them. This paper argues this is extremely unlikely. Cryptocurrencies such as Bitcoin do not work well as money because of security weaknesses and the volatility of their price relative to traditional currencies. The theory that the private sector will choose to replace a state-backed currency with privately-issued currency also has little historical backing. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.

Vanjski autor

Professor Karl Whelan

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