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on European Economics |
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Issue of 2026–03–09
thirteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Ms. Laura Valderrama; Mr. Richard Varghese |
| Abstract: | This paper applies network analysis to examine the impact of non-bank financial institutions (NBFIs) and financial market stress on contagion risk within the interbank network. Using network-based simulations on euro area banks’ supervisory data, we find that banks’ strong capital and liquidity buffers significantly reduce contagion through interbank exposures: base-line scenarios show only modest capital losses and no cascading defaults. In contrast, stress originating from NBFIs under heightened market volatility markedly amplifies systemic risk. These findings highlight NBFIs and market volatility as key amplifiers of financial stress in the euro area. Our findings call for integrating contagion models into system-wide stress testing and designing macroprudential policies that encompass the entire financial ecosystem. Such policies should account for amplification risks from banks’ NBFI exposures when calibrating buffers and identifying systemic institutions. |
| Keywords: | Systemic Risk; Network Analysis; Interconnectedness; NBFIs; Market Risk |
| Date: | 2026–02–20 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/033 |
| By: | Anyfantaki, Sofia; Migiakis, Petros; Petroulakis, Filippos; Giannakidis, Haris; Malliaropulos, Dimitris |
| Abstract: | Using granular security-level data from bond funds domiciled in the US and the euro area, we identify a market-based risk-taking channel of monetary policy transmission via the credit-risk and the maturity structure of bond funds’ portfolios. We measure credit risk at the fund level as the weighted average credit rating of the fund’s bond holdings. We find that accommodative monetary policies by the Fed and the ECB are associated with increased risk in bond funds’ portfolios. Interestingly, risk-taking is more pronounced for funds with longer-term holdings relative to short-term ones and unconventional monetary policy exerts stronger market-based risk-taking effects than interest rate policy. Finally, we find that Fed’s monetary policy has a stronger impact on funds’ risk-taking behaviour than the ECB’s, highlighting the dominant role of US monetary policy in global financial markets. JEL Classification: E52, G12, G15, G20 |
| Keywords: | investment funds, monetary policy, non-bank financial intermediation, risk-taking channel |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263196 |
| By: | Michał Brzoza-Brzezina (Narodowy Bank Polski); Rodolfo Rigato (European Central Bank) |
| Abstract: | We study the distributional consequences of the recent inflationary surge and the subsequent monetary policy response in the euro area. Using an estimated two-asset Heterogeneous Agent New Keynesian model with an overlapping generations structure, we analyze the macroeconomic shocks driving inflation between 2021 and 2022. We find that these shocks generated substantial redistribution from young and poor households toward older and wealthier ones. By keeping interest rates unchanged until mid-2022, monetary policy largely offset these distributional effects. A policy response based solely on a standard Taylor rule would have failed to mitigate the redistribution. |
| Keywords: | Monetary policy, Redistribution, HANK, OLG, Euro area, Great Inflation |
| JEL: | E31 E52 E58 D31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nbp:nbpmis:382 |
| By: | Bletzinger, Tilman; Martorana, Giulia; Mistak, Jakub |
| Abstract: | Financial Conditions Indices (FCIs) are a widely used tool for assessing the broader monetary policy stance beyond the central bank’s direct control. This paper presents a novel vector autoregressive (VAR) model that includes key macroeconomic variables and maps financial variables into a single index, named Macro-Finance FCI. The VAR coefficients and the FCI weights are estimated jointly in one step, ensuring a model-consistent microfinance feedback. The model-implied long-run mean of the index provides a neutral benchmark to which financial conditions converge when inflation is at target and output is at potential. For the euro area, the proposed FCI incorporates nine asset prices – including risk-free rates, sovereign spreads, risk assets, and the exchange rate – and assigns a dominant role to nominal interest rates. It outperforms existing indices in out-of-sample forecasts of inflation and output. A structural identification of supply, demand, and financial shocks indicates that financial conditions require up to one year to transmit to the real economy and almost up to two years to inflation. JEL Classification: C32, E44, E52 |
| Keywords: | financial conditions index, monetary policy, structural macro-finance VAR |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263193 |
| By: | Andre, Peter; Schaffranka, Claudia; Weber, Michael |
| Abstract: | This paper examines the persistent upward bias in euro area households' inflation perceptions and expectations, even when realized inflation is near the ECB's target. It discusses behavioural and informational drivers of this bias, its implications for consumption, wage setting, and monetary policy transmission, and the challenges it poses for ECB communication and credibility. The study concludes that improved monitoring and household-oriented communication are essential. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 26 February 2026. |
| Keywords: | Inflation Expectations, Monetary Policy, ECB |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewh:337489 |
| By: | Maciej Albinowski |
| Abstract: | I investigate differences in the incidence of part-time employment between Central and Eastern European (CEE) countries that have joined the EU since 2004 and Western European countries. I estimate employees’ probabilities of working part time based on observable characteristics, including capital income and market hourly wages. While labour force structure and economic development help explain more than half of the East-West gap in voluntary part-time employment, the remaining unexplained gap amounts to 10.6 percentage points for women and 1.0 percentage point for men. I find that progressivity in personal income taxation is a significant predictor of voluntary part-time employment, but has a limited impact on the unexplained East-West gap, reducing it by 0.7 percentage points for women and by 0.3 percentage points for men. The perceived importance of work and leisure time also have predictive power overall, but these social values do not explain the East-West gap. Moreover, full-time employees in CEE countries do not report stronger preferences for part-time employment than their Western European counterparts, suggesting that differences in working hours norms may play a more important role than hours constraints imposed by firms. Finally, evidence from German reunification supports the view that informal institutions may play a more important role than formal institutions, as the unexplained East-West gap in voluntary part-time employment gradually narrowed over time. |
| Keywords: | Part-time employment, Labour supply, Working hours, Working hours norms |
| JEL: | J22 O52 P30 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ibt:wpaper:wp012026 |
| By: | Behn, Markus; Lo Duca, Marco; Perales, Cristian |
| Abstract: | Using information from the ECB’s Bank Lending Survey, we examine how the implementation of borrower-based macroprudential measures (BBMs) between 2009-Q1 and 2023-Q3 affected mortgage lending standards in a sample of 15 euro area countries. We find that banks generally tightened credit standards around the implementation of BBMs, with the strongest effect occurring contemporaneously. Such tightening of credit standards is observed for different types of BBMs, including limits on loan-to-value or debt-service-to-income ratios and maturities. We also find mild evidence that legally binding measures imply a stronger tightening of credit standards than measures in the form of non-binding recommendations. Finally, this tightening is more pronounced in cases where mortgage loan growth or real estate price growth is high, consistent with BBMs effectively smoothing the credit cycle. JEL Classification: G21, G28, G51 |
| Keywords: | borrower-based measures, credit standards, macroprudential policy, mortgages |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263190 |
| By: | Giuseppe Croce; Lavinia Stendardo d'Astuto |
| Abstract: | This work aims to test the hypothesis that a larger spread of WFH can improve the efficiency of matching between vacancies and job seekers in the labour market. Although this idea has recently been raised in literature, to the best of our knowledge this is the first empirical study to investigate it. The analysis is based on EU-LFS microdata on workers in European countries for the period 2010-2024. Firstly, we show evidence on the diffusion of WFH across European countries and on trends in cross country Beveridge curves since 2019. Secondly, we estimate the matching efficiency and its variations over time for each country, then we run panel regressions of matching efficiency over a number of control variables including a set of indicators of labour market mismatch. The results show that an increase in the share of WFH has a positive effect on matching, albeit only weakly significant and, as expected, limited to the post-pandemic years. Separate estimates for clusters of countries confirm our main result for countries where the share of workers working from home is above the median. Although our analysis provides only preliminary evidence without addressing the issue of endogeneity, it paves the way to promising future research. |
| Keywords: | Work from home; Beveridge curve; Mismatch; Matching efficiency |
| JEL: | J61 J63 J64 O33 R23 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp271 |
| By: | Boriana Goranova; Santiago Calvo Ramos |
| Abstract: | This Economic Brief analyses the effects of population ageing on public expenditure on health care in the EU. Health care expenditure projections show ageing will put upward pressure on public finances in the EU. The 2024 Ageing Report projects an increase in public spending on health care in the EU that may range from 4% to 20% by 2070. More critically, one third of the increase will occur already in the next ten years. In parallel, ageing will reduce the financial contribution base for sustaining of and investing in EU health systems. Other factors such as technological progress, AI and climate change will also have an impact on expenditure. Structural reforms accompanied by well-targeted investments need to be deployed in a timely manner to alleviate the effects of ageing on health care systems. The academic literature and recent EU experiences both suggest structural reforms with the largest potential to do so include improving budgeting governance, rebalancing towards primary care and prevention, integrating care (including with long-term care), improving hospital efficiency, benchmarking performance, cost-effective purchasing and workforce planning. Such reforms are supported at EU level, notably through the European Semester, and by EU funding, including the Recovery and Resilience Facility as well as structural funds and other EU instruments. |
| Keywords: | fiscal sustainability, health, healthcare reforms, public spending, ageing, demographics. |
| JEL: | H51 I18 J11 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:088 |
| By: | Jan LukÅ¡iÄ; Jörg Peschner; Giuseppe Piroli |
| Abstract: | We find that patents registered by multinational enterprises (MNEs) in tax havens help avoid taxes in the EU but fail to increase the total factor productivity (TFP) of EU-located group members. We conclude that many of those patents' prime purpose is not to make technology available and then diffuse it smoothly within the group. It is rather to avoid taxes in the EU by shifting profits to low-tax offshore entities. We suggest that implementing a comprehensive system of withholding taxes on outbound royalty payments could reduce profit-shifting associated with patents, thereby fostering more innovative and efficient uses of intellectual property. |
| Keywords: | Multinational enterprises, taxes, TFP, innovation. |
| JEL: | D24 F38 H21 H25 O32 |
| Date: | 2026–01–04 |
| URL: | https://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2026_04 |
| By: | Paradowska, Monika |
| Abstract: | In light of growing geopolitical volatility, the energy transition, and rapid digitalization, urban mobility emerges as a critical vector of the European Union's strategic resilience. This article presents the Homo Urbanus Mobilitatis Sustinens (HUMS) model as a novel conceptual framework that integrates behavioural and geo-economic dimensions of resilience. Grounded in systems thinking and behavioural public policy, HUMS redefines mobility practices as forms of behavioural capital - a systemic resource that underpins Europe's open strategic autonomy. By extending resilience theory beyond technological infrastructures, the model positions mobility as a cognitive, social, and institutional process of adaptive learning within complex socio-technical systems. Developed through conceptual synthesis and informed by empirical insights from the NCN MINIATURA 6 project (2022-2023), HUMS links micro-, meso-, and macro-levels of analysis. As a normative and diagnostic tool, it offers a foundation for designing urban mobility policies where behavioural, infrastructural, and governance components coalesce to advance behavioural sovereignty and long-term adaptive capacity in the EU. |
| Keywords: | HUMS, Strategic Resilience, Behavioural Capital, Urban Mobility, Open Strategic Autonomy, Systems Thinking, Behavioural Public Policy, Geo-Economics, European Union |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:opodis:337458 |
| By: | Testori Giulia (European Commission - JRC); Franklin Rachel; Saraceno Pier (European Commission - JRC); Pertoldi Martina; Perea Milla Fernandez Daniel; Stut Martijn; Dijkstra Lewis (European Commission - JRC) |
| Abstract: | "The EU is experiencing significant demographic transformations, including population decline, ageing, and uneven migration trends, with rural and remote regions facing the greatest challenges. This report provides policymakers, regional stakeholders, and EU-level representatives with a comprehensive resource to navigate these shifts. It offers in-depth data, a taxonomy and policy fiches to categorize demographic challenges and options to align policy responses with regional characteristics and demographic trends. This contribution highlights potential policies approaches in the fields of economics, infrastructure, environment and energy, housing, education, services and health, emphasizing the need for evidence-based, place-sensitive and targeted interventions. A novel thematic analysis of cohesion policy funds allocation contributing to address demographic change highlighting its critical role in addressing disparities ensuring that they do not deepen regional inequalities is proposed. ""Territories and demographic change"" moreover highlights how strategic planning, administrative capacity and peer learning are key to foster cross-regional collaboration and innovative solutions. A key message is that by integrating demographic considerations into territorial policies, the EU can transform demographic challenges into opportunities, promoting sustainable growth, resilience, and social cohesion across all regions." |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc143332 |
| By: | Hugo Bailly (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Deloitte Economic Advisory) |
| Abstract: | The transition to a low-carbon economy requires substantial investment to replace the production technologies and infrastructure reliant on fossil fuels. In addition to regulation and carbon pricing, a range of financial policies has been proposed to accelerate green investment. This article evaluates the implications of three of them - direct green investment subsidies, green public guarantees, and capital market deepening - in terms of emission reduction, economic activity, and public debt. The analysis relies on a stock-flow consistent, input-output model of the EU economy, which explicitly incorporates industries' marginal abatement costs, intersectoral input-output linkages, and investment financing channels. Model simulations reveal that direct subsidies are the most effective tool for achieving significant emission reductions; however, they also result in substantial increases in the debt-to-GDP ratio. In contrast, public guarantees and equity market development tend to strengthen public finances and economic activity but yield only moderate emission cuts. The results further suggest that combining policies can effectively balance emission mitigation and economic activity without compromising public finance sustainability. |
| Keywords: | Energy transition, Green financial policies, Ecological macroeconomics, Stock-flow consistent modelling, Input-output modelling |
| Date: | 2026–02–22 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-05522653 |