European Central Bank

This paper examines the impact of natural gas market shocks on gas market dynamics, inflation expectations and realized inflation in the Euro Area using a BVAR model. Our contribution lies in a novel identification strategy that distinguishes between various types of shocks of unprecedented detail, leverages weekly rather than monthly data, and extends the analysis to both market-based headline and core inflation expectations.

We study how physical climate risk shapes bank lending activity and credit quality by combining high-resolution Copernicus flood geospatial maps with loan-level AnaCredit data. We exploit four major European floods (2021–2024) in a spatial regression discontinuity design comparing firms located just inside versus just outside flood boundaries (within 300–500 meters). We find that immediately after floods there is an increase by about 3.5 to 5% in lending, driven by liquidity demand, followed by a contraction of similar magnitude in the subsequent quarter.

We study how physical climate risk shapes bank lending activity and credit quality by combining high-resolution Copernicus flood geospatial maps with loan-level AnaCredit data. We exploit four major European floods (2021–2024) in a spatial regression discontinuity design comparing firms located just inside versus just outside flood boundaries (within 300–500 meters). We find that immediately after floods there is an increase by about 3.5 to 5% in lending, driven by liquidity demand, followed by a contraction of similar magnitude in the subsequent quarter.

Using who-to-whom data for the last quarter of 2024, I build networks of financial interconnections in the euro area countries. After representing them in chord diagrams, I consider centrality metrics and find that banks dominate, with four exceptions: Cyprus, Ireland, Luxembourg and Malta. In these countries, other financial institutions and investment funds are at the core, with limited links to domestic sectors and strong ones with the rest of the world.