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THE ECB BLOG
27 July 2021
Upgrading economic governance in Europe
If we make the recovery fund work and if we embed the lessons from the pandemic in the EMU governance framework, we can emerge from the crisis with a stronger economy and greater social and political cohesion, says Executive Board member Fabio Panetta in The ECB Blog.
The ECB Blog
EXPLAINERS
28 July 2021
What is the PEPP?
The pandemic emergency purchase programme (PEPP) was introduced in March 2020 to counter the economic impact of the coronavirus crisis. It lowers borrowing costs and increases bank lending in the euro area to help people and businesses to weather the crisis. But how does it work?
Explainer
STRATEGY REVIEW
8 July 2021
Outcome of the ECB strategy review
Our new monetary policy strategy is a strong foundation that will help guide us in the conduct of monetary policy for years to come. It is the result of a thorough review launched in January 2020.
Find out more- 28 July 2021
- EURO AREA ECONOMIC AND FINANCIAL DEVELOPMENTS BY INSTITUTIONAL SECTOR (FULL)
- 27 July 2021
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 27 July 2021
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 27 July 2021
- MONETARY DEVELOPMENTS IN THE EURO AREAAnnexes
- 27 July 2021
- MONETARY DEVELOPMENTS IN THE EURO AREA
- 23 July 2021
- OTHER GOVERNING COUNCIL DECISIONEnglishOTHER LANGUAGES (22) +
- 23 July 2021
- PRESS RELEASEAnnexes
- 22 July 2021
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 22 July 2021EnglishOTHER LANGUAGES (22) +
- 14 July 2021
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the virtual Financial Statements series hosted by the Peterson Institute for International Economics
- 11 July 2021
- Speech by Christine Lagarde, President of the ECB, at the International Climate Change Conference in Venice
- 8 July 2021
- Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 8 July 2021
- 3 July 2021
- Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Petersberger Sommerdialog
- 13 July 2021
- Interview with Christine Lagarde, President of the ECB, conducted by Martin Arnold on 11 July 2021
- 10 July 2021
- Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Patrick Bernau and Dennis Kremer on 8 July and published on 10 July 2021
- 2 July 2021
- Interview with Christine Lagarde, President of the ECB, conducted by Marie Cécile Berenger
- 20 June 2021
- Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Martin Arnold on 14 June 2021
- 17 June 2021
- Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Paul Gordon on 17 June 2021
- 27 July 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECBDetails
- Summary
- If we make the recovery fund work and if we embed the lessons from the pandemic in the EMU governance framework, we can emerge from the crisis with a stronger economy and greater social and political cohesion, says Executive Board member Fabio Panetta in The ECB Blog.
- 14 July 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECBDetails
- Summary
- We have decided to launch a project to prepare for possibly issuing a digital euro. A digital euro will be successful if it adds value for people, merchants and financial intermediaries in the euro area, explains Executive Board member Fabio Panetta in The ECB Blog.
- 11 May 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECBDetails
- Summary
- Climate change and sustainability are global challenges that require global solutions, especially in the financial sector, writes Executive Board member Fabio Panetta. We need international disclosure standards and principles to categorise sustainable activities.
- 1 April 2021
- Blog post by Philip R. Lane, Member of the Executive Board of the ECBDetails
- Summary
- The recent volatility of inflation can largely be attributed to the nature of the pandemic shock, writes Chief Economist Philip R. Lane. The increase in inflation during early 2021 does not constitute the basis for a sustained shift in inflation dynamics.
- 25 March 2021
- Blog post by Fabio Panetta, Member of the Executive Board of the ECB, and Ulrich Bindseil, ECB Director General Market Infrastructure and PaymentsDetails
- Summary
- At the ECB we are committed to understanding people’s needs and ensuring the digital euro would be widely accepted, writes Executive Board member Fabio Panetta with Ulrich Bindseil in The ECB Blog.
- 28 July 2021
- WORKING PAPER SERIES - No. 2576Details
- Abstract
- Tight labour markets are usually accompanied by mounting wage pressures. Yet, in the past decade, wage growth has remained subdued despite the appearance of widespread labour shortages. This paper re-examines labour market conditions since 2007 through the lens of a novel indicator, relative labour shortages (RLS), based on data from a large representative business survey in Sweden. Four main results emerge from the analysis: (1), the time-series average of RLS suggested much weaker labour market conditions during the 2013–2019 recovery from the Great Recession and during the Covid-19 pandemic in 2020 than qualitative surveys or the vacancy-unemployment ratio. (2), the reason is that RLS contains a time-varying intensive margin of labour shortages not recorded in most surveys, which has been trending downwards since the Great Recession. (3), fixed-effects regressions with several aggregate-, sector, region and establishment-level controls confirm that RLS is strongly and positively correlated with annual wage growth at the establishment level. (4), sector-level wage Phillips curves show that the subdued level of RLS can help explain the sluggish wage growth in Sweden since the Great Recession.
- JEL Code
- C80 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
- 28 July 2021
- RESEARCH BULLETIN - No. 86Details
- Abstract
- Climate change is one of the most pressing issues of our time. The challenge for policymakers is that climate policies could have a negative impact on the economy in the short term. In this article we discuss how this trade-off between fighting climate change and ensuring a stable business cycle affects the design of environmental policies. We argue in favour of a time-varying carbon tax that is increased during booms and decreased during recessions.
- JEL Code
- Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 27 July 2021
- WORKING PAPER SERIES - No. 2575Details
- Abstract
- Using micro price data underlying the Harmonized Index of Consumer Prices in France, Germany and Italy, we estimate relative price trends over the product life cycle and show that minimizing price and mark-up distortions in the presence of these trends requires targeting a significantly positive inflation target. Relative price trends shift the optimal inflation target up from a level of zero percent, as suggested by the standard sticky price literature, to a range of 1.1%- 2.1% in France, 1.2%-2.0% in Germany, 0.8%-1.0% in Italy, and 1.1-1.7% in the Euro Area (three country average). Differences across countries emerge due to systematic differences in the strength of relative price trends. Other considerations not taken into account in the present paper may push up the optimal inflation targets further. The welfare costs associated with targeting zero inflation turn out to be substantial and range between 2.1% and 4.5% of consumption in present-value terms.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy - Network
- Price Micro Setting Analysis Network (PRISMA)
- 27 July 2021
- WORKING PAPER SERIES - No. 2574Details
- Abstract
- The US dollar plays a dominant role in the invoicing of international trade, albeit not an exclusive one as more than half of global trade is invoiced in other currencies. Of particular interest are the euro, with a large role, and the renminbi, with a rising role. These two currencies are well suited to contrast the roles of economic fundamentals and policies, as European policy makers have taken a neutral stance in contrast to the promotion of the international role of the renminbi by the Chinese authorities. We assess the drivers of invoicing using the most recent and comprehensive data set for 115 countries over 1999-2019. We find that standard mechanisms that foster use of a large economy's currency predicted by theory – i.e. strategic complementarities in price setting and integration in cross-border value chains – underpin use of the dollar and the euro for trade with the United States and the euro area. These mechanisms also support the role of the dollar, but not the euro, in trade between non-US and non-euro area countries, making the dollar the globally dominant invoicing currency. Fundamentals and policies have played a contrasted role for the use of the renminbi. We find that China's integration into global trade has further strengthened the dominant status of the dollar at the expense of the euro. At the same time, the establishment of currency swap lines by the People's Bank of China has been associated with increases in renminbi invoicing, with an adverse effect on dollar use that is larger than for the euro.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F31 : International Economics→International Finance→Foreign Exchange
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
- 26 July 2021
- WORKING PAPER SERIES - No. 2573Details
- Abstract
- We study the interaction between monetary and fiscal policies in a Ramsey-Sidrauski model augmented with environmental capital. Equilibrium solutions are studied through the “Green Golden Rule”. Despite the non-separability of money in utility and intertemporally non-separable preferences, money is environmentally neutral. Policy impacts the environment via the marginal rate of transformation rather than the marginal rate of substitution between consumption and environment. Fiscal policies, lump sum and distortionary, under a balanced budget, are also environmentally non-neutral. Only under a non-balanced budget, when deficits are monetized, is money environmentally non-neutral. In alternative approaches (Cash-in-Advance, Transactions Costs), money is environmentally non-neutral.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
- 26 July 2021
- WORKING PAPER SERIES - No. 2572Details
- Abstract
- The secular decline in the equilibrium real interest rate observed over the past decades has materially limited the room for policy-rate reductions in recessions, and has led to a marked increase in the incidence of episodes where policy rates are likely to be at, or near, the effective lower bound on nominal interest rates. Using the ECB's New Area-Wide Model, we show that, if unaddressed, the effective lower bound can cause substantial costs in terms of worsened macroeconomic performance, as reflected in negative biases in inflation and economic activity, as well as heightened macroeconomic volatility. These costs can be mitigated by the use of nonstandard instruments, notably the joint use of interest-rate forward guidance and large-scale asset purchases. When considering alternatives to inflation targeting, we find that make-up strategies such as price-level targeting and average-inflation targeting can, if they are well-understood by the private sector, largely undo the negative biases and heightened volatility induced by the effective lower bound.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 26 July 2021
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 14Details
- Abstract
- This article assesses the economic costs and benefits of the Basel III finalisation package for the euro area and shows that the transitory costs of the reform are outweighed by its permanent long-term benefits. Implementing EU-specific modifications to the Basel III reform, such as the small and medium-sized enterprise (SME) supporting factor, credit valuation adjustment (CVA) exemptions and discretion with regard to the operational risk capital charge, reduce the already moderate transitory costs of the reform, although they also reduce its long-run benefits. Approaches that, in addition, modify the implementation of the output floor fail to further reduce the short-term economic costs of the reform while again decreasing its long-term benefits.
- JEL Code
- 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
- 23 July 2021
- MEP LETTER
- 23 July 2021
- MEP LETTER
- 23 July 2021
- OTHER PUBLICATION
Interest rates
| Marginal lending facility | 0.25 % |
| Main refinancing operations (fixed rate) | 0.00 % |
| Deposit facility | − 0.50 % |
Inflation rate
Inflation dashboardReference rates
| USD | US dollar | 1.1810 | |
| JPY | Japanese yen | 129.98 | |
| GBP | Pound sterling | 0.85503 | |
| CHF | Swiss franc | 1.0806 |
Financial stability
Our tasks Institutional framework Financial Stability Review Macroprudential policy measuresMarket operations
Open market operations Asset purchase programmes Lendings of holdings under PSPPNOT AN EXPERT? CHECK EXPLAINER
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