European Central Bank

Inflation narratives and expectations

12/01/2025 European Central Bank Central banks

I study how demand-supply narrative disagreement between general and specialized newspapers can explain households’ absolute gap in inflation expectations with experts. I measure inflation narratives via a Causality Extraction algorithm that can identify causal relationships between events in a text and, hence, extract the perceived triggers of inflation. Causal relations can explain why narratives affect people’s beliefs and cannot be captured by dictionary methods, topic models, and word embeddings.

Inflation narratives and expectations

12/01/2025 European Central Bank Central banks

I study how demand-supply narrative disagreement between general and specialized newspapers can explain households’ absolute gap in inflation expectations with experts. I measure inflation narratives via a Causality Extraction algorithm that can identify causal relationships between events in a text and, hence, extract the perceived triggers of inflation. Causal relations can explain why narratives affect people’s beliefs and cannot be captured by dictionary methods, topic models, and word embeddings.

Monetary transmission with frequent policy events

11/27/2025 European Central Bank Central banks

We empirically examine the role of both official monetary policy announcements and policymakers’ speeches in the transmission of monetary policy to financial markets and the real economy in the euro area. Using intraday data covering a broad cross-section of financial assets, we construct the Euro Area Extended Monetary Policy Event-Study Database (EA-EMPD). We refine the identification of monetary policy surprises by exploiting granular, quote-level data on individual participants’ bid and ask submissions.

Monetary transmission with frequent policy events

11/27/2025 European Central Bank Central banks

We empirically examine the role of both official monetary policy announcements and policymakers’ speeches in the transmission of monetary policy to financial markets and the real economy in the euro area. Using intraday data covering a broad cross-section of financial assets, we construct the Euro Area Extended Monetary Policy Event-Study Database (EA-EMPD). We refine the identification of monetary policy surprises by exploiting granular, quote-level data on individual participants’ bid and ask submissions.

What safe haven after the April US tariff announcement? Implications for euro area financial stability

11/26/2025 European Central Bank Central banks

Trade turmoil in April 2025 saw a marked change in cross-asset behaviour compared with typical patterns. Notably, the US dollar depreciated strongly while US Treasury yields rose – the opposite of what usually happens in a risk-off environment. This prompted discussions as to whether the safe-haven properties of US dollar-denominated assets might be changing. This is particularly important for euro area financial stability since euro area investors hold US dollar-denominated securities in an amount equivalent to €6 trillion, which represents a significant share of their portfolios.

Inflation risk and heterogeneous trading down

11/25/2025 European Central Bank Central banks

I examine how households adjust the quality of their purchases in response to adverse economic shocks. Using household scanner data from Germany, I document heterogeneous responses across income levels. Higher-income households tend to reduce the quality of the goods they purchase, whereas lower-income households, who typically consume lower-quality goods, show a limited propensity to trade down, likely due to a limited ability to do so. To assess the equilibrium effects of an aggregate shift in demand toward lower-quality varieties, I implement a shift-share research design.

Inflation risk and heterogeneous trading down

11/25/2025 European Central Bank Central banks

I examine how households adjust the quality of their purchases in response to adverse economic shocks. Using household scanner data from Germany, I document heterogeneous responses across income levels. Higher-income households tend to reduce the quality of the goods they purchase, whereas lower-income households, who typically consume lower-quality goods, show a limited propensity to trade down, likely due to a limited ability to do so. To assess the equilibrium effects of an aggregate shift in demand toward lower-quality varieties, I implement a shift-share research design.

Systemic risks in linkages between banks and the non-bank financial sector

11/25/2025 European Central Bank Central banks

Linkages between euro area banks and entities in the non-bank financial intermediation (NBFI) sector may lead to the emergence of systemic risk in at least two fields. First, the banking sector receives short-term deposit, repo and debt securities liabilities from NBFI entities. Such liabilities may be prone to flight risk and difficult to substitute. Second, euro area banks provide credit to NBFI entities which follow leveraged investment strategies.

Walking the talk? Green politicians and pollution patterns

11/20/2025 European Central Bank Central banks

Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline.

Walking the talk? Green politicians and pollution patterns

11/20/2025 European Central Bank Central banks

Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline.

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