|
on European Economics |
|
Issue of 2021‒11‒01
eight papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Massimiliano Affinito (Bank of Italy); Fabiana Sabatini (Bank of Italy); Massimiliano Stacchini (Bank of Italy) |
| Abstract: | We analyse whether and to what extent both firm and bank soundness are associated with the use of collateral in bank lending, and whether these relationships changed during the global financial crisis and the euro-area sovereign debt crisis. By using a large dataset of 2 million observations at bank and firm level covering the years 2007-13, we find that the degree of collateralization is higher for firms that are financially stressed and have low capitalization and that it increases further for these borrowers during downturns. In addition, we find that collateral policies are tighter at sounder banks, that is, at banks that are more capitalized and have a lower burden of bad loans. This result is consistent with the existence of a negative link between bank soundness and risk-taking in bank lending. |
| Keywords: | bank-lending channel, collateral, financial crises. |
| JEL: | G01 G21 E5 E51 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1352_21&r= |
| By: | Bennani, Hamza; Burgard, Jan Pablo; Neuenkirch, Matthias |
| JEL: | E44 E52 E58 G21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242327&r= |
| By: | Cardani, Roberta (European Commission); Croitorov, Olga (European Commission); Giovannini, Massimo (European Commission); Pfeiffer, Philipp (European Commission); Ratto, Marco (European Commission); Vogel, Lukas (European Commission) |
| Abstract: | The COVID-19 pandemic led to a sharp contraction of economic activity in the euro area (and worldwide). Its anatomy differs strongly from other crises in recent history. We analyse the short-term economic effects of the COVID-19 shock through the lens of an estimated DSGE model. We augment the canonical DSGE set-up with ‘forced savings’ (lockdowns, social distancing), labour hoarding (short-time work) and liquidity-constrained firms to capture salient demand and supply effects of the COVID shock and the containment and stabilisation policies. Shock decompositions with the estimated model show the dominant role of 'lockdown shocks' ('forced savings', labour hoarding) in explaining the quarterly pattern of real GDP growth in 2020, complemented by a negative contribution from foreign and investment demand particularly in 2020q2 and a negative impact of persistently higher (precautionary) savings. The initial inflation response has been modest compared to the severity of the recession. |
| Keywords: | COVID-19, estimated DSGE model, Euro Area, recession, forced savings |
| JEL: | C11 E1 E20 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrs:wpaper:202110&r= |
| By: | Diana Bonfim; Sujiao Zhao; Miguel A. Ferreira; Francisco Queiró |
| Abstract: | We show that banks’ lending exposure to firms with government procurement contracts can amplify the diabolic loop between sovereigns and banks. Using the fiscal austerity measures implemented during the 2010-2011 European sovereign debt crisis as a shock to government procurement, we find that banks with higher exposure to these firms reduced lending significantly more than banks with lower exposure, controlling for firm-specific credit demand. The reduction in credit supply is economically as important as the effect of banks’ sovereign debt holdings, and affected both firms with and without government contracts. Firms with lending relationships with affected banks experienced lower sales growth, assets growth, employment growth, and investment. This decrease in real economic activity is likely to reduce tax revenue, further amplifying the diabolic loop. |
| JEL: | G01 G20 G31 H57 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w202109&r= |
| By: | Alessandro Mistretta (Bank of Italy) |
| Abstract: | This work analyses the effects of the slowdown that has hit Germany since 2018 on the Italian economy using data from Banca d’Italia’s Survey of Inflation and Growth Expectations. First, we briefly argue that these two economies are highly interconnected and describe the slowdown that has hampered the German economy. Using a difference-in-differences strategy, we show that since 2018, when the German economy weakened, Italian companies’ sentiment and assessment whose sales were oriented towards the German market was comparatively worse than that of other companies. This finding suggests that there is a transmission link between these two economies. Finally, using a forecasting model, we provide a quantification of these effects that finds that it would have been contemporaneous and relevant for GDP, lagging for the total investment. In contrast, we do not find any significant employment effect. |
| Keywords: | Business cycle, Synchronization, Transmission, Survey |
| JEL: | E2 E32 F15 F44 L6 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1346_21&r= |
| By: | Gavresi, Despina; Litina, Anastasia |
| Abstract: | This paper explores the interplay between past exposure to macroeconomic shocks and pop-ulist attitudes. We document that individuals who experienced a macroeconomic shock during their impressionable years (between 18 and 25 years of age), are currently more proneto voting for populist parties, and manifest lower trust both in national and European institutions. We use data from the European Social Survey (ESS) to construct the differentialindividual exposure to macroeconomic shocks during impressionable years. Our findings sug-gest that it is not only current exposure to shocks that matters (see e.g., Guiso et al. (2020))but also past exposure to economic recessions, which has a persistent positive effect on therise of populism. Interestingly, the interplay between the two, i.e., past and current exposure to economic shocks, has a mitigating effect on the rise of populism. Individuals who wereexposed to economic shocks in the past are less likely to manifest populist attitudes whenfaced with a current crisis, as suggested by the experience-based learning literature. |
| Keywords: | Macroeconomic Shocks, Trust, Attitudes, Populism |
| JEL: | D72 E60 F68 P16 Z13 |
| Date: | 2021–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110215&r= |
| By: | Hennig, Jan-Luca; Stadler, Balazs |
| JEL: | J16 J18 J31 J52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242354&r= |
| By: | Mariano Graziano (Bank of Italy); David Loschiavo (Bank of Italy) |
| Abstract: | The Covid-19 pandemic led to a large and immediate decline in households’ aggregate spending and a surge in bank and postal deposits; although little is known about how this was distributed. This paper overcomes the lack of timely micro-data on households’ liquidity by looking at supervisory data on deposits, introducing a new method to estimate the trend in liquidity distribution and the percentage of liquidity-poor households. We find that in 2020 there was a decrease both in the degree of deposit inequality among Italian households and in the share of liquidity-poor households, alongside government support measures that allowed some households at the bottom of the liquidity ladder to save out of their declining income. The increase in households’ liquidity improved their ability to repay debts and this could help spending patterns to rebound once confidence about the economic outlook is restored. Despite this, households with insufficient liquidity buffers still constitute a large share of population, making their debt repayment capacity dependent on the strength of the economic recovery. |
| Keywords: | liquidity, distribution, financial poverty |
| JEL: | D14 E21 E6 E66 H3 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_642_21&r= |