Statistical Notice 2023/11
Statistical Notices update the definitions and guidance contained in the Banking Statistics Yellow Folder
Financial institutions
The bright side of the doom loop: banks’ sovereign exposure and default incentives
The feedback loop between sovereign and financial sector insolvency has been identified as a key driver of the European debt crisis and has motivated an array of policy proposals. We revisit this “doom loop” focusing on governments’ incentives to default. To this end, we present a simple 3-period model with strategic sovereign default, where debt is held by domestic banks and foreign investors. The government maximizes domestic welfare, and thus the temptation to default increases with externally-held debt.
Global and local drivers of Bitcoin trading vis-à-vis fiat currencies
We analyse the drivers of Bitcoin transactions against 44 fiat currencies in the largest peer-to-peer crypto exchanges. Momentum and volatility in the cryptoasset market, as well as volatility and liquidity in global financial markets do matter for Bitcoin trading. There is suggestive evidence of a global crypto cycle driven by speculative motives. However, in emerging and developing economies (EMDEs), Bitcoin seems to offer also transactional benefits, since trading increases when the value of the domestic currency is unstable.
The bright side of the doom loop: banks’ sovereign exposure and default incentives
The feedback loop between sovereign and financial sector insolvency has been identified as a key driver of the European debt crisis and has motivated an array of policy proposals. We revisit this “doom loop” focusing on governments’ incentives to default. To this end, we present a simple 3-period model with strategic sovereign default, where debt is held by domestic banks and foreign investors. The government maximizes domestic welfare, and thus the temptation to default increases with externally-held debt.
Global and local drivers of Bitcoin trading vis-à-vis fiat currencies
We analyse the drivers of Bitcoin transactions against 44 fiat currencies in the largest peer-to-peer crypto exchanges. Momentum and volatility in the cryptoasset market, as well as volatility and liquidity in global financial markets do matter for Bitcoin trading. There is suggestive evidence of a global crypto cycle driven by speculative motives. However, in emerging and developing economies (EMDEs), Bitcoin seems to offer also transactional benefits, since trading increases when the value of the domestic currency is unstable.
Rent inflation in the euro area
This box describes recent developments in housing rents in the euro area, also comparing them with developments in the United States. In the post-COVID period, increases in euro area rents have been moderate, despite a notable pick-up since mid-2022. This stands in contrast to the United States, where rent inflation has been a key driver of the post-pandemic inflation surge. Such differences are linked not only to measurement issues, but also to structural features of the housing market and regulatory specificities.
Industry structure and the real effects of monetary policy
This box studies how the transmission of monetary policy is affected by the growing service intensity of the euro area economy. The results show that higher service intensity dampens the impact of monetary policy on economic activity. At the same time, this dampening effect is moderate: we estimate that the increase in the service intensity observed since the introduction of the euro has reduced the real impact of monetary policy by less than 10%.
Living in a world of disappearing nature: physical risk and the implications for financial stability
The loss of biodiversity and the degradation of natural ecosystems pose a significant threat to the broader economy and financial stability that central banks and financial supervisors cannot ignore. To gain further insights into the implications of nature and ecosystem service degradation for financial stability, this study assesses the dependencies of euro area non-financial corporations and banks on different ecosystem services. The study then develops a method to capture banks’ credit portfolio sensitivity to possible future changes in the provision of ecosystem services.
IFDP Paper: Committing to Grow: Privatizations and Firm Dynamics in East Germany
Ufuk Akcigit, Harun Alp, André Diegmann, and Nicolas Serrano-VelardeThis paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates.
The effects of labor income risk heterogeneity on the marginal propensity to consume
Using detailed micro-data, this paper documents that households with lower income risk (and higher income levels) exhibit a higher Marginal Propensity to Consume (MPC) in response to transitory income shocks, all else being equal. This finding is particularly significant among unconstrained households and supported by models with precautionary saving only if designed to account for the empirically observed negative correlation between income levels and income risk.
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