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Magdalena Grothe
International & European Relations
- Division
International Policy Analysis
- Current Position
-
Senior Lead Economist
- Fields of interest
-
Financial Economics,International Economics,Macroeconomics and Monetary Economics
- Education
- 2024
Habilitation in Economics and Finance, University of Łódź, Poland
- 2005-2008
PhD in Finance, University of Cologne, Germany
- 2003-2005
MSc in Economics, University of Cologne, Germany
- 1999-2004
MSc in International Economics, University of Łódź, Poland
- Professional experience
- 2022-
Senior Lead Economist - International Policy Analysis Division, Directorate General International & European Relations, European Central Bank
- 2024
Visiting staff (3 months) - Global Issues Division, Bank of Canada
- 2020-2021
Lead Economist - International Policy Analysis Division, Directorate General International & European Relations, European Central Bank
- 2015-2020
Lead Financial Stability Expert - Secretariat to the European Systemic Risk Board, European Central Bank
- 2018
Member of an Expert Panel of the National Science Centre, Poland
- 2017-2018
Visiting staff within the Schuman Programme (7 months) - Risk Control Division, Deutsche Bundesbank
- 2009-2015
Economist - Capital Markets and Financial Structure Division, Directorate General Monetary Policy, European Central Bank
- Teaching experience
- 2013-2018
Guest lectures at the University of Łódź and Warsaw School of Economics on financial market analysis and systemic risk assessment, Poland
- 16 May 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2024Details
- Abstract
- Implied equity market volatility has been low in recent quarters, in both absolute and relative terms, despite tighter monetary policy, rising geopolitical tensions and a balance of risks to economic growth tilted to the downside. This box discusses several factors that may have contributed to the low levels of implied equity market volatility. It describes how progress in bringing inflation down without a deep economic contraction has supported investor optimism and highlights how increasingly common short volatility strategies may also have suppressed implied equity market volatility. The box then examines the divergence of implied equity market volatility from the implied volatility in interest rate markets and discusses possible implications for financial stability. Elevated implied interest rate market volatility could point to downside macro-financial risks that seem not fully priced in by equity investors. Subdued implied equity market volatility – despite broader uncertainties – might suggest an underestimation of risks in equity markets and excessive risk-taking. Consequently, adverse economic surprises or geopolitical shocks could lead to significant market corrections. Large exposures in volatility instruments could, in turn, increase the likelihood of a disorderly correction.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 11 January 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2023Details
- Abstract
- The US Treasury securities market is the largest and most liquid in the world. Recently, however, its liquidity has declined owing to a combination of factors, including monetary policy tightening and elevated uncertainty about inflation and growth. At the same time, leveraged funds have built up unusually large net short positions in the US Treasury futures market. This box provides empirical evidence that the impact of a US monetary policy shock on domestic and global bond markets may vary depending on conditions in the US Treasury market. Specifically, the results suggest that the effect of a US monetary policy shock might be stronger when market liquidity is low or when net short positions of leveraged funds are large.
- JEL Code
- E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
F3 : International Economics→International Finance
G1 : Financial Economics→General Financial Markets
- 2 November 2023
- WORKING PAPER SERIES - No. 2860Financial shock transmission to heterogeneous firms: the earnings-based borrowing constraint channelDetails
- Abstract
- We study the heterogeneous impact of jointly identified monetary policy and global riskshocks on corporate funding costs. We disentangle these two shocks in a structural BayesianVector Autoregression framework and investigate their respective effects on funding costsof heterogeneous firms using micro-data for the US. We tease out mechanisms underlyingthe effects by contrasting financial frictions arising from traditional asset-based collateralconstraints with the recent earnings-based borrowing constraint hypothesis, differentiatingfirms across leverage and earnings. Our empirical evidence strongly supports the earnings-basedborrowing constraint hypothesis. We find that global risk shocks have stronger andmore heterogeneous effects on corporate funding costs which depend on firms’ positionwithin the earnings distribution.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
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
- 25 May 2022
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2022Details
- Abstract
- House prices increased substantially in advanced economies during the pandemic, fuelling concerns about possible price reversals and their implications for financial stability. Shifts in housing preferences, possibly reflecting a desire for more space coupled with less need for commuting due to teleworking modalities, and low interest rates have been important drivers of such recent strong house price growth across advanced economies. In the current low interest rate environment, increased sensitivity of house price growth to changes in real interest rates makes substantial house price reversals more likely. An abrupt repricing in the housing market – if the demand for housing were to go into reverse, for example, with a return to pre-pandemic work modalities, or real interest rates were to rise significantly – could produce spillovers to the wider financial system and economy.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
R30 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→General
- 23 March 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 2, 2022Details
- Abstract
- Notwithstanding the recent pick-up in corporate spreads in some markets, global corporate bond prices stand close to historical highs amid relatively low credit risk premia, particularly in lower-rated segments. At the same time, the COVID‑19 pandemic has increased the vulnerability and indebtedness of many firms around the world, with corporate credit ratings remaining below pre‑pandemic levels and some firms exhibiting relatively weak profitability. The model-based valuation analysis presented in this box suggests that the strong overall decline in global corporate bond spreads since the peak of the pandemic has been only partly driven by the market’s assessment of improving credit quality and could, to a large extent, be related to the strength of investors’ risk appetite. Based on analysis of bond-level valuations in the US corporate market, the box also shows that market-wide risk-off shocks have the potential to significantly increase corporate spreads and expected default probabilities, particularly for the weakest firms.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
- 16 November 2021
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2021Details
- Abstract
- Fragilities created by the interaction of stretched valuations and corporate balance sheet vulnerabilities may represent a risk to financial stability. Corporate asset prices have soared at the same time as the pandemic shock has prompted an increase in the vulnerability and indebtedness of many corporates. In the current environment, where balance sheet fragilities depend on policy support and uncertainty about the recovery is still elevated, corporate vulnerabilities could re-emerge and stock and bond market prices may be more sensitive to reversals in global risk appetite. This box examines the increased sensitivity of US corporate markets to risk-off shocks when corporate vulnerabilities are high and considers the implications from a euro area perspective.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
- 19 May 2021
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2021Details
- Abstract
- US equity market prices have surged over the last year, prompting concerns about stretched valuations and the potential risk of market corrections. For example, US equity prices could decline substantially if US Treasury yields increased on expectations of tighter monetary policy without significantly stronger real growth. In view of these developments, this box examines the implications of a possible correction in US stock prices for euro area financial conditions and financial stability. The results show that spillovers to euro area equity and corporate bond markets could be substantial, implying a broader tightening effect on euro area financial conditions.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 17 April 2020
- WORKING PAPER SERIES - No. 2393Details
- Abstract
- This paper proposes a set of indicators relevant for the risk characteristics of covered bonds, as based on granular publicly available transparency data. The indicators capture various aspects of cash flow risks related to the issuer, the cover pool and the payment structure. They offer unified risk metrics for the European covered bond universe, which ensures comparability across covered bonds issued by different issuers and rated by different credit rating agencies. The availability of granular risk indicators adds to the overall transparency of the market in the context of risk monitoring.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G24 : Financial Economics→Financial Institutions and Services→Investment Banking, Venture Capital, Brokerage, Ratings and Ratings Agencies
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C30 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→General
- 25 August 2017
- WORKING PAPER SERIES - No. 2096Details
- Abstract
- This paper proposes a framework for monitoring vulnerabilities related to the residential real estate sector in a cross-country context. The framework might be useful for complementing or cross-checking signals available from existing approaches. It takes into account three dimensions of real estate sector vulnerabilities (i.e. valuation, household indebtedness and the bank credit cycle) and enables monitoring across countries in a simple and informative way. Indicators are derived from the early warning literature and policy publications. They are aggregated in a modelfree way to a vulnerability measure, explicitly capturing the level and the dynamics of vulnerabilities. The measure proves to be a significant predictor of historical real estate crises, with a better forecasting performance than the majority of advantageously in-sample calibrated model-based estimates. The monitoring framework allows for a simple and transparent analysis across different dimensions, provides a cross-check of consistency of signals from several indicators, and accounts for the developments in terms of the levels and dynamics. In view of its good forecasting performance, it is a useful complement of model-based toolkits for analysing vulnerabilities in the residential real estate sector.
- 6 November 2015
- WORKING PAPER SERIES - No. 1865Details
- Abstract
- This paper analyses the predictive power of market-based and survey-based inflation expectations for actual inflation. We use the data on inflation swaps and the forecasts from the Survey of Professional Forecasters for the euro area and United States. The results show that both, market-based and survey-based measures have a non-negligible predictive power for inflation developments, as compared to statistical benchmark models. Therefore, for horizons of one and two years ahead, market-based and survey-based inflation expectations actually convey information on future inflation developments.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
- 28 April 2014
- WORKING PAPER SERIES - No. 1671Details
- Abstract
- This paper analyses price formation in medium- to longer-term maturity segments of euro area and US inflation-linked and nominal bond markets around the releases of important economic indicators. We compare the pre-crisis and crisis periods, controlling for liquidity effects observed in financial markets. The results allow us to draw conclusions about the anchoring of inflation expectations in the two currency areas before and during the crisis. We find a somewhat stronger anchoring of inflation expectations in the euro area than in the United States. During the crisis, the degree of anchoring of inflation expectations did not change in the euro area, but it decreased to some extent in the United States.
- JEL Code
- 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
G01 : Financial Economics→General→Financial Crises
- 16 December 2013
- WORKING PAPER SERIES - No. 1623Details
- Abstract
- This paper contributes new evidence on market pricing of rating changes. We examine the relation between spreads and ratings for a very large and comprehensive sample of corporate bonds, which allows us to test for country- and industry-specific effects, as well as to explore the differences between the calm and distressed market conditions. The results show that the effects of rating actions on market prices are significant and depend on the current state of the market. While during favourable market conditions rating actions are not crucial for market pricing, they become very significant in the periods of crisis.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 1 June 2012
- WORKING PAPER SERIES - No. 1440Details
- Abstract
- This paper quantifies liquidity and credit premia in German and French government bond yields. For this purpose, we estimate term structures of government-guaranteed agency bonds and exploit the fact that any difference in their yields vis-`a-vis government bonds can be attributed to differences in liquidity premia. Adding the information on risk-free rates, we obtain model-free and model-based gauges of sovereign credit premia, which are an important alternative to the information based on CDS markets. The results allow us to quantify the price impact of so-called
- JEL Code
- 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
G01 : Financial Economics→General→Financial Crises
- 14 January 2011
- OCCASIONAL PAPER SERIES - No. 122Details
- Abstract
- This paper provides an assessment of the impact of the covered bond purchase programme (hereafter referred to as the CBPP) relative to its policy objectives. The analysis presented on the impact of the CBPP on both the primary and secondary bond markets indicates that the Programme has been an effective policy instrument. It has contributed to: (i) a decline in money market term rates, (ii) an easing of funding conditions for credit institutions and enterprises, (iii) encouraging credit institutions to maintain and expand their lending to clients, and (iv) improving market liquidity in important segments of the private debt securities market. The paper also provides an overview of the investment strategy of the the Eurosystem with regard to the CBPP portfolio.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
L63 : Industrial Organization→Industry Studies: Manufacturing→Microelectronics, Computers, Communications Equipment
L86 : Industrial Organization→Industry Studies: Services→Information and Internet Services, Computer Software
O3 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
- 21 April 2010
- WORKING PAPER SERIES - No. 1177Details
- Abstract
- In their seminal paper French and Roll (1986) postulate that public information affects prices before anyone can trade on it. In contrast, several models assuming heterogeneous investors show that public news releases are directly followed by high trading volume. Empirical evidence on this question is still mixed, primarily due to the lack of sufficiently precise data. This paper examines the process of price adjustment to public news in an electronic limit order market, based on very precise information from the largest European bond futures market. The results show that the price response to public news is gradual and accompanied by trading. Good (bad) news releases are followed by a sequence of positive (negative) returns and a large buying (selling) activity in the first seconds after the news release.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
- 2023
- Journal of Financial Economics, Vol. 149, pp. 536-556; previous version: ESRB WP 131
- 2023
- Gospodarka Narodowa / The Polish Journal of Economics, Vol. 314(2), pp. 1-10
- 2023
- International Monetary Fund Working Paper No. 2023/196, also available as ECB WP 2860 and SUERF Policy Brief 902
- 2022
- S. Boubaker, D. Khuong Nguyen (eds.), "Financial Transformations Beyond the COVID-19 Health Crisis", World Scientific
- 2022
- Committee on the Global Financial System Paper No. 67, Bank for International Settlements
- 2022
- European Systemic Risk Board Working Paper 131
- 2022
- VoxEU
- 2022
- Advisory Scientific Committee of the European Systemic Risk Board, report
- 2020
- European Systemic Risk Board, report
- 2020
- Journal of Banking and Finance, Vol. 112; previous version: ECB WP 2096
- 2020
- Gospodarka Narodowa / The Polish Journal of Economics, Vol. 302(2), pp. 5-24
- 2018
- International Journal of Financial Research, Vol. 9(1), 171–188; previous version: ECB WP 1865
- 2016
- European Systemic Risk Board, report
- 2016
- European Systemic Risk Board, report
- 2015
- Journal of Empirical Finance, Vol. 33, 160–173; previous version: ECB WP 1440
- 2015
- Łukowski, P., Gemel, A. and Żukowski, B. (eds.), "Cognition, Meaning and Action. Lodz-Lund Studies in Cognitive Science", Wydawnictwo Uniwersytetu Łódzkiego - Columbia University Press
- 2009
- VMV MünsterLiquidity risk in periods of intensive information flow