4 August 2020

My aims in this blog post are twofold. First, I will compare Eurostat’s flash estimate of Q2 GDP (published last Friday) to the June Eurosystem staff projections.[1] Second, I will discuss the role of the pandemic emergency purchase programme (PEPP) in supporting the euro area economy and protecting medium-term price stability.

28 September 2016

The ECB, like other major central banks, conducts research for two main reasons. First, thorough analysis forms the basis for our decisions in all policy areas – be it monetary policy or financial stability, banking supervision and macroprudential policy.

Second, by publishing papers, our researchers create links to the academic community, sparking discussion and debate on topics of relevance to the ECB. This feeds back into the research conducted by our staff, further strengthening the foundations on which future ECB decisions are made.

This has become all the more important as complex and new issues require sound analytical work. The effectiveness of non-standard measures and how monetary policy interacts with other policies (fiscal and structural) are relatively new issues that highlight how the value of good research has, if anything, increased.

Our Occasional Paper Series (OPS) disseminates work carried out by, as a rule, ECB staff on subjects that relate to the main tasks and functions of the ECB and the ESCB. Occasional Papers (OPs) are addressed to a wide audience, including other policy-makers, financial analysts, academics, the media and the interested general public. Understanding the papers will normally require some prior knowledge of the topic.

Prepared by Nicola Benatti, Vasco Botelho, Agostino Consolo, António Dias da Silva and Malgorzata Osiewicz[1]

Published as part of the ECB Economic Bulletin, Issue 5/2020.

This box provides an overview of the impact of the coronavirus (COVID-19) pandemic on euro area labour markets by examining high-frequency indicators. The first part of the box analyses information from Indeed’s daily job postings and LinkedIn’s daily hiring rates for the five largest euro area countries. The number of job postings from Indeed can be used as a proxy for changes in labour demand. The LinkedIn hiring rate provides information both at the aggregate and sectoral levels about the number of job hires in the euro area. The second part of the box illustrates how the LinkedIn hiring rate can be used to perform a nowcasting of the job finding rate and make an assessment of the unemployment rate, thereby providing more timely information about labour market developments than that...

Prepared by Vasco Botelho, Agostino Consolo and António Dias da Silva

Published as part of the ECB Economic Bulletin, Issue 5/2020.

This box analyses labour market developments in the euro area since the onset of the coronavirus (COVID-19) pandemic. The containment measures implemented from mid-March resulted in a sharp fall in euro area real GDP in the first quarter of 2020.[1] Business and consumer survey data indicate that the fall deepened in April and May. However, employment and unemployment do not appear to have been significantly affected. In this regard, the reaction of the euro area labour market to the COVID-19 pandemic appears in sharp contrast with that observed in the United States, where unemployment increased rapidly. This box examines the discrepancy between business and consumer survey indicators and the main headline labour market indicators for the euro area. In addition, we discuss the possible effects of lockdown measures on unemployment...

Data for cost of borrowing and deposit interest rates for corporations (Chart 1)

The composite cost-of-borrowing indicator, which combines interest rates on all loans to corporations, remained broadly unchanged in June 2020. The interest rate on new loans of over €1 million with a floating rate and an initial rate fixation period of up to three months showed no change at 1.23%. The rate for new loans of the same size with an initial rate fixation period of over three months and up to one year increased by 10 basis points to 1.17%. This increase was due to developments in two euro area countries and was driven by the weight effect. The rate for new loans of over €1 million with an initial rate fixation period of over ten years decreased by 6 basis points to 1.39%, driven by the weight effect. In the case of new loans of up to €250,000 with a floating rate and an initial rate fixation period of up to three months, the average rate charged showed no change at 1.87%. As...

Prepared by John Hutchinson and Simon Mee

Published as part of the ECB Economic Bulletin, Issue 5/2020.

Since March 2020 the severity of the economic and financial implications stemming from the coronavirus (COVID-19) crisis has become increasingly apparent. The ECB has responded with a decisive policy package that is designed to be targeted and proportionate to the unprecedented scale of the crisis as well as temporary, as the emergency and its aftermath are expected to be reabsorbed over time. These measures have supported liquidity and funding conditions in the euro area economy, averted the most adverse feedback loops between the real economy and financial markets, and shored up confidence. They are also expected to significantly contribute to ensuring that inflation in the euro area moves towards levels that are below, but close, to 2% in a sustained manner.

Prepared by Gianluca Persi

Published as part of the ECB Economic Bulletin, Issue 5/2020.

US dollar funding conditions started to become tense around the end of February 2020 when supply-demand imbalances led to rising funding premia amid volatile financial markets. This box focuses on these tensions in the foreign exchange (FX) swap market, where market participants lend funds in two currencies (e.g. the euro and the US dollar) to each other with the commitment to swap these funds back at a later date and at a pre-agreed exchange rate. The box provides evidence on the positive impact of the swap lines between central banks on the functioning of the EUR/USD FX swap market. These central bank swap lines enable the Eurosystem to provide US dollars to euro area banks.[1] The enhancement of these swap lines and the subsequent supply of US dollars via more frequent liquidity-providing operations not only helped banks to satisfy their immediate US dollar funding...

Prepared by Gianluca Persi

Published as part of the ECB Economic Bulletin, Issue 5/2020.

US dollar funding conditions started to become tense around the end of February 2020 when supply-demand imbalances led to rising funding premia amid volatile financial markets. This box focuses on these tensions in the foreign exchange (FX) swap market, where market participants lend funds in two currencies (e.g. the euro and the US dollar) to each other with the commitment to swap these funds back at a later date and at a pre-agreed exchange rate. The box provides evidence on the positive impact of the swap lines between central banks on the functioning of the EUR/USD FX swap market. These central bank swap lines enable the Eurosystem to provide US dollars to euro area banks.[1] The enhancement of these swap lines and the subsequent supply of US dollars via more frequent liquidity-providing operations not only helped banks to satisfy their immediate US dollar funding...

Incoming information since the last monetary policy meeting in early June signals a resumption of euro area economic activity, although the level of activity remains well below the levels prevailing before the coronavirus (COVID-19) pandemic and the outlook remains highly uncertain. Headline inflation is being dampened by lower energy prices and price pressures are expected to remain very subdued on account of the sharp decline in real GDP growth and the associated significant increase in economic slack. The ECB’s monetary policy measures are gradually making their way through to the euro area economy, providing crucial support to the recovery and helping to offset the pandemic-related downward shift in the projected path of inflation. At the same time, the outlook is surrounded by high uncertainty and subject to downside risks. Against this background, the Governing Council decided to leave the overall monetary policy stance unchanged and to reconfirm the full set of its...

Money is an integral part of our daily lives: we earn it, we save it and we spend it.

Money is also at the heart of central banking. Central banks conduct monetary policy with the aim of maintaining price stability – this means preserving the value of money by keeping inflation under control.

Inflation is generally linked to increases in the amount of money in the economy. Reliable data on money and credit (lending) are therefore essential for monetary policy. Central banks collect and publish a broad range of monetary statistics, using them as one of the key elements to support their decision-making on monetary policy. In turn, monetary policy, affects the “price” of money in the economy – i.e. the interest rates on deposits and loans of households and companies.

This interactive publication looks at money and credit from the perspective of central bank statistics. It explains how the ECB defines money for statistical purposes, what types...

Labour supply developments are a major determinant of potential output and are therefore also relevant for monetary policy. Labour supply developments in the euro area are strongly affected by population ageing, among other things.[1] Against this background, it is crucial to have a good understanding of how demographic changes in the various working-age cohorts, together with structural factors such as policy changes, will affect the labour market. Looking ahead, this understanding will be relevant when assessing the potential growth outlook, even though uncertainty has considerably increased recently due to the coronavirus (COVID-19) pandemic.

With the ageing of the baby boom generation, the population share of the older working-age cohort, i.e. those between 55 and 74 years, has been gradually increasing. This would suggest a decline in the overall labour force participation rate, given that the participation rate of these older workers has usually been considerably...