Claus Brand
Monetary Policy
- Division
Monetary Policy Strategy
- Current Position
-
Head of Section
- Fields of interest
-
Macroeconomics and Monetary Economics,Mathematical and Quantitative Methods,Financial Economics
- Education
- 1995-1999
Doctorate in Monetary Economics, Universität GH Essen, Germany
- 1990-1995
Diploma in Economics, Freie Universität Berlin, Germany
- Professional experience
- 2020
Head of Strategy Issues, Directorate General Monetary Policy, ECB
- 2016-2020
Adviser, Directorate General Monetary Policy, ECB
- 2015
Consultant at World Bank (Vietnam) and at South East Asian Central Banks Research and Training Centre (Malaysia)
- 2012-2014
Head of Policy Assessment, Directorate Monetary Policy, ECB
- 2009-2012
Counsellor to the Executive Board, ECB
- 1999-2009
(Principal) Economist - Directorate Monetary Policy, ECB
- 1999
Economist - Industrial Bank of Japan
- Awards
- 2001
Preis der Sparkasse Essen für Wirtschaftswissenschaften
- Teaching experience
- 1995-1999
Macroeconomics, Universität GH Essen, Germany
- 23 October 2024
- WORKING PAPER SERIES - No. 2994Details
- Abstract
- We construct monetary policy indicators from high-frequency asset price changes following policy announcements, emphasising the concentration of asset price responses along specific dimensions and their leptokurtic distribution. Traditionally, these dimensions are identified by rotating principal components based on economic assumptions that overlook information in excess kurtosis. We employ Varimax rotation, leveraging excess kurtosis without using economic restrictions. Within a set of euro-area risk-free assets Varimax validates policy news along dimensions previously derived from structural identification approaches and rejects evidence of macroinformation shocks. Yet, once adding risky assets Varimax identifies only one risk-free factor in medium- to long-term yields and instead points to additional risk-shift factors.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
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
C46 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Specific Distributions, Specific Statistics
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
- 8 February 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2024Details
- Abstract
- Financial markets and analysts significantly underestimated the pace and size of the recent increases in the key ECB interest rates. This box measures the size and dynamics of policy expectation errors. Based on information from the ECB’s Survey of Monetary Analysts, it suggests that these expectation errors were driven mainly by revisions to macroeconomic expectations, indicating that analysts perceived a broadly consistent policy reaction to macroeconomic developments.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
- 7 February 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2024Details
- Abstract
- The natural rate of interest is defined as the real rate of interest that is neither expansionary nor contractionary. r* is unobservable and its estimation is fraught with a host of measurement and model-specification challenges. A wide range of estimates obtained from a suite of models and approaches suggests that cyclical measures of euro area r* have been edging higher recently. Yet slow-moving estimates anchored to long-run economic trends are unlikely to have risen measurably.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 9 August 2023
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2023Details
- Abstract
- This article presents a model-based assessment of the short to medium-term economic impact of carbon pricing aimed at mitigating climate change. It addresses the high level of uncertainty in gauging the effects of carbon price increases by employing a suite of macroeconomic models. Under the main scenario, the loss in euro area annual GDP growth is contained and the inflation impact is modest, implying a limited output/inflation trade-off for monetary policy. The scenario supports the transition to a low-carbon economy, but the implied reduction in carbon emissions makes only a limited contribution to achieving the EU’s intermediate emission reduction target for 2030. Accordingly, reaching the EU’s climate goals will require a mixture of ambitious carbon pricing, additional regulatory action and technological innovation.
- JEL Code
- C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
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
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
- 25 May 2023
- THE ECB BLOGDetails
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 13 January 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2021Details
- Abstract
- Understanding the expectations of households, firms and financial markets regarding monetary policy and macroeconomic developments is important for the conduct of monetary policy. Surveys can play an important role in understanding expectations. The ECB Survey of Monetary Analysts (SMA) brings together information on financial sector expectations of monetary policy and macroeconomic developments in one coherently structured and regularly updated survey. The objective of the SMA is to “gather regular, comprehensive, structured and systematic information on market participants’ expectations”. The ECB launched the SMA as a pilot project in April 2019 and, after concluding the pilot phase, has published aggregate results since June 2021. This article looks at the structure of the survey and the rationale behind it and explains what role it plays in understanding changes in market participants’ expectations of euro area monetary policy and the macroeconomy.
- JEL Code
- E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
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
- 18 November 2021
- WORKING PAPER SERIES - No. 2612Details
- Abstract
- We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*), and term premia. Similar to Bauer and Rudebusch (2020, AER), π* and r* constitute a time-varying trend for the nominal short-term rate in our model, rendering estimated term premia more stable than standard yield curve models operating with time-invariant means. In line with the literature, our r* estimates display a distinct decline over the last four decades.
- JEL Code
- C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 275Details
- Abstract
- This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across countries, and documents the flatness of the Phillips curve in the euro area. In this context, it is stressed that labour market structures and trend labour market outcomes are primarily determined by national economic policies. The report then recalls that, in many circumstances, inflation and employment move together and pursuing price stability is conducive to supporting employment. However, in response to economic shocks that give rise to a temporary trade-off between employment and inflation stabilisation, the ECB’s medium-term orientation in pursuing price stability is shown to provide flexibility to contribute to the achievement of the EU’s full employment objective. Regarding the conduct of monetary policy in a low interest rate environment, model-based simulations suggest that history-dependent policy approaches − which have been proposed to overcome lasting shortfalls of inflation due to the effective lower bound on nominal interest rates by a more persistent policy response to disinflationary shocks − can help to bring employment closer to full employment, even though their effectiveness depends on the strength of the postulated expectations channels. Finally, the importance of employment income and wealth inequality in the transmission of monetary policy strengthens the case for more persistent or forceful easing policies (in pursuit of price stability) when interest rates are constrained by their lower bound.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 269Details
- Abstract
- The ECB’s price stability mandate has been defined by the Treaty. But the Treaty has not spelled out what price stability precisely means. To make the mandate operational, the Governing Council has provided a quantitative definition in 1998 and a clarification in 2003. The landscape has changed notably compared to the time the strategy review was originally designed. At the time, the main concern of the Governing Council was to anchor inflation at low levels in face of the inflationary history of the previous decades. Over the last decade economic conditions have changed dramatically: the persistent low-inflation environment has created the concrete risk of de-anchoring of longer-term inflation expectations. Addressing low inflation is different from addressing high inflation. The ability of the ECB (and central banks globally) to provide the necessary accommodation to maintain price stability has been tested by the lower bound on nominal interest rates in the context of the secular decline in the equilibrium real interest rate. Against this backdrop, this report analyses: the ECB’s performance as measured against its formulation of price stability; whether it is possible to identify a preferred level of steady-state inflation on the basis of optimality considerations; advantages and disadvantages of formulating the objective in terms of a focal point or a range, or having both; whether the medium-term orientation of the ECB’s policy can serve as a mechanism to cater for other considerations; how to strengthen, in the presence of the lower bound, the ECB’s leverage on private-sector expectations for inflation and the ECB’s future policy actions so that expectations can act as ‘automatic stabilisers’ and work alongside the central bank.
- 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
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 30 July 2021
- WORKING PAPER SERIES - No. 2578Details
- Abstract
- We study the macroeconomic effects of central bank digital currency (CBDC) in a dynamic general equilibrium model. Timing and information frictions create a need for inside (bank deposits) and outside money (CBDC) to finance production. To steer the quantity of CBDC, the central bank can set the lending and deposit rates for CBDC as well as collateral and quantity requirements. Less restrictive provision of CBDC reduces bank deposits. A positive interest spread on CBDC or stricter collateral or quantity constraints reduce welfare but can contain bank disintermediation, especially if the elasticity of substitution between bank deposits and CBDC is small.
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 27 March 2019
- WORKING PAPER SERIES - No. 2257Details
- Abstract
- We estimate the natural rate of interest for the US and the euro area in a semi-structural model comprising a Taylor rule. Our estimates feature key elements of Laubach and Williams (2003), but are more consistent with using conventional policy rules: we model inflation to be stationary, with the output gap pinning down deviations of inflation from its objective (rather than relative to a random walk). We relax some constraints on the correlation of latent factor shocks to make the original unobserved-components framework more amenable to structural interpretation and to reduce filtering uncertainty. We show that resulting natural rate metrics are more consistent with estimates from structural models.
- JEL Code
- C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 31 January 2019
- WORKING PAPER SERIES - No. 2232Details
- Abstract
- Focussing on repo specialness premia, using ISIN-specific transaction-by-transaction data of one-day maturity repos, we document a gradual shift from cash- to securities-driven transactions in euro area repo markets over the period 2010-2018. Compared to earlier studies focussing only on specific sub-periods or market segments we extend, illustrate, and validate evidence on financial frictions that are relevant in driving repo premia: controlling for a comprehensive range of bond-market specific characteristics, we show that repo premia have been systematically affected by fragmentation in the sovereign space, bank funding stress, and safe asset scarcity. These channels exhibit very strong country-specific differences, as also reflected by large discrepancies in country-specific interest rates on General Collateral. To ensure robustness of our empirical findings, we apply panel econometric and data mining approaches in a complementary and mutually informative way.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
C38 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Classification Methods, Cluster Analysis, Principal Components, Factor Models
- 19 December 2018
- OCCASIONAL PAPER SERIES - No. 217Details
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
- 20 July 2006
- WORKING PAPER SERIES - No. 657Details
- Abstract
- We analyse high-frequency changes in the euro area money market yield curve on dates when the ECB regularly sets and communicates decisions on policy interest rates to construct different indicators of monetary policy news relating to policy decisions and to central bank communication. The indicators show that ECB communication during the press conference may result in significant changes in market expectations of the path of monetary policy. Furthermore, our results suggest that these changes have a significant and sizeable impact on medium to long-term interest rates.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 1 September 2003
- WORKING PAPER SERIES - No. 254Details
- Abstract
- This paper analyses the information content of M1 for euro area real GDP since the beginning of the 1980s and reviews theoretical arguments on why real narrow money should help predict real GDP. We find that, unlike in the U.S., in the euro area, M1 has better and more robust forecasting properties for real GDP than yield spreads. This property persists when one controls for a number of other influences. We also evaluate the out-of-sample forecasting performance of different classes of VAR models comprising real M1, GDP and other indicators, using as benchmark a simple univariate model. As a result, only VARs in first differences are able to outperform the benchmark.
- JEL Code
- E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
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 - Network
- Background study for the evaluation of the ECB's monetary policy strategy
- 28 May 2002
- OCCASIONAL PAPER SERIES - No. 3Details
- Abstract
- This paper documents the analytical work that was carried out for the 2001 review of the assumption for the trend in M3 income velocity used to calculate the reference value for M3 growth. We analyse the medium-term trend in velocity using univariate time series tools and different money demand models. In addition, some cross-checking is carried out to address data compilation issues related to the accession of Greece in 2001 and to different weighting schemes used to aggregate historical euro area data. It is found that the trend decline in M3 income velocity over the medium term is within a range of 1/2% to 1% per year.
- 1 November 2000
- WORKING PAPER SERIES - No. 39Details
- Abstract
- In order to assess the importance of monetary and financial developments for key macroeconomic variables in the euro area a money demand system for M3 is estimated adopting a structural cointegrating VAR approach. While maintaining a good statistical representation of the data, long-run relationships are based on economic theory. By using generalised response profiles the dynamics of the money demand system is investigated without any further identifying assumptions. Error bounds of the profiles are derived using bootstrap simulations.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
- 2018
- Credit and Capital MarketsThe Swiss Sovereign Money Initiative
- 2010
- Journal of the European Economic AssociationThe impact of ECB monetary policy decisions and communication on the yield curve
- 2004
- Applied EconomicsA money demand system for euro area M3
- 2004
- Review in EconomicsNarrow Money and the business cycle: Theoretical aspects and euro area evidence
- 2001
- Physica-VerlagMoney Stock Control and Inflation Targeting in Germany