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on European Economics |
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Issue of 2026–05–04
eight papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Nico Petz (Oesterreichische Nationalbank); Thomas Zörner (Oesterreichische Nationalbank (OeNB)) |
| Abstract: | This paper analyzes business cycle synchronization and the Phillips curve (PC) relationship in Central, Eastern, and Southeastern European (CESEE) economies relative to the euro area. We find an overall increase in business cycle synchronicity, particularly among Euro adoption candidates, with notable heterogeneities during the early 2000s, the global financial crisis, and the euro crisis. Using a Kalman filter to extract business cycles and various measures of synchronicity, we show that CESEE EU countries align more closely with the euro area than non-EU countries. The unemployment-inflation relationship, analyzed with time-varying parameter (TVP) models, reveals a steepening of the Phillips curve post-COVID-19, with negative slope coefficients across all countries. We observe a growing convergence of the PC slope toward the euro area, especially in candidate countries. These results highlight the role of EU membership in fostering economic synchronization and emphasize the importance of considering time-varying dynamics in assessing economic convergence amid major shocks. |
| Keywords: | Business cycle alignment, synchronization, EMU, euro area, CESEE, time-varying parameter model |
| JEL: | C22 E32 F15 F45 O47 |
| Date: | 2025–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:267 |
| By: | Cristina Conflitti; Daniel Enderle (Vienna University of Economics and Business); Ludmila Fadejeva (Latvijas Banka, Monetary Policy Department); Erwan Gautier; Alex Grimaud (Oesterreichische Nationalbank); Eduardo Gutiérrez (Banco de España); Valentin Jouvanceau; Jan-Oliver Menz; Alari Paulus (Eesti Pank); Pavlos Petroulas; Pau Roldan-Blanco; Elisabeth Wieland |
| Abstract: | We use CPI micro data for nine euro area countries to document new evidence on consumer price stickiness in the euro area during the 2021-2024 inflation cycle. In 2022, the monthly frequency of price changes reached 12%, compared with an average of 8% over 2010–2019, roughly a fourpercentage- point increase; it then fell quickly in 2023 and more slowly in 2024, ending close to its pre-pandemic level. The decline in the frequency of price changes was faster for food and nonenergy industrial goods (NEIG) than for services, where frequencies remained elevated in 2024. The overall frequency rose mainly because there were more price increases, while the magnitude of the average size of the price increases or decreases changed only marginally during the surge. Products with a larger imported-energy cost share responded more strongly, and hazard-rate evidence shows that the probability of price adjustments increases with the gap between actual and optimal prices, consistent with state-dependent pricing and a steepening of the Phillips curve. To illustrate the implications of this state dependence, a macro model suggests that peak inflation would have been almost 1 percentage point lower if the frequency had not responded to the inflation surge. |
| Keywords: | Price rigidity, euro area, inflation surge, micro price data |
| JEL: | E31 E52 F33 L11 |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:273 |
| By: | Giannoulakis, Michael |
| Abstract: | This chapter investigates the interconnectedness of non-performing loans (NPLs) across 30 European economies, including the UK, using the Diebold–Yilmaz spillover index. Employing a linear VAR model of order 2 and Lanne–Nyberg variance decomposition on 12-period-ahead forecast errors over 2010Q1–2022Q2, the analysis reveals a persistently high total spillover index, indicating strong cross-country linkages in NPL dynamics. The results uncover an important asymmetry: economies that emerged from the global financial crisis in a relatively resilient position often act as net transmitters of NPL spillovers, while more vulnerable banking systems typically absorb them as receivers. This finding challenges the conventional view that fragility is the primary source of contagion, instead highlighting the role of resilient systems in propagating shocks through regional financial networks. The paper contributes to understanding the interplay between macroeconomic stability and credit risk transmission, with implications for European financial stability policy and cross-border supervision. |
| Keywords: | NPL; credit risk; spillovers; financial crisis |
| Date: | 2025–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:gpe:wpaper:51103 |
| By: | Michael Pfarrhofer (Vienna University of Economics and Business); Anna Stelzer (Oesterreichische Nationalbank) |
| Abstract: | We assess asymmetries, nonlinearities and state dependencies in dynamic responses of the euro area to monetary policy shocks. The dataset includes macroeconomic, financial, and survey-based variables measuring credit conditions and bank lending transmission channels. These data are observed at different frequencies. We propose a multivariate nonparametric mixed-frequency model, and discuss how to compute dynamic causal effects in a nonlinear context. The results suggest limited effects of expansionary policy shocks whereas contractionary shocks yield responses in line with theory. There is little variation over the business cycle and in distinct periods such as at the effective lower bound. |
| Keywords: | nonlinear structural inference, mixed frequency data, Bayesian nonparametrics, credit channel |
| JEL: | C32 E32 E52 |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:276 |
| By: | Alessandra Agati (European Central Bank); Michael Sigmund (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division) |
| Abstract: | We analyze the impact of negative reference rates on the interest behavior of more than 500 Austrian banks from 2009Q1 to 2021Q4. Using panel vector error correction analysis with the Engle-Granger procedure in two steps, we establish a cointegration vector that links bank-specific lending rates, deposit rates, the 3-month Euribor, and the ECB Deposit Facility Rate. We propose two hypotheses to evaluate the effects of negative 3-month Euribor on this vector. Firstly, we explore how an Austrian Supreme Court decision enforcing a zero-lower bound on household deposits could decrease the lending-deposit rate spread. Secondly, we examine the emergence of two “true prices” for loans and deposits due to the negative 3-month Euribor. This is linked to an Austrian Supreme Court decision mandating the transmission of negative reference rates to bank-specific lending rates, potentially affecting cointegration with the 3-month Euribor. Our findings show a significant spread reduction after the introduction of negative reference rates, primarily driven by changes in the cointegration relationship between bank-specific lending rates and the 3-month Euribor. Additionally, by including the ECB Deposit Facility in our cointegration model, we capture the direct impact of the Targeted Long-term Refinancing Operations on the lending rate |
| Keywords: | Interest rate setting; panel cointegration; negative interest rate environment |
| JEL: | C33 G21 E58 E43 |
| Date: | 2025–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:261 |
| By: | Zsofia Döme (Financial Market Authority Liechtenstein); Michael Sigmund (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division) |
| Abstract: | Since 2014, several countries have implemented the Basel III countercyclical capital buffer (CCyB) to enhance the banking sector’s resilience against risks arising from excessive credit growth. We analyze the CCyB decision-making process of macroprudential authorities across Europe. Our findings indicate that macroprudential authorities neither follow the Basel Committee on Banking Supervision (BCBS) guide, based on the credit-to-GDP gap, nor do they rely on the variables recommended by the European Systemic Risk Board when setting the CCyB rate. However, we demonstrate that had the BCBS CCyB guide been applied prior to the global financial crisis of 2007–2008, capital reserves within the European banking sector would have been sufficient to cover the 240 billion euros in government support used to stabilize financial institutions. Our results show that CCyB decision rates are predominantly influenced by a positive cycle-neutral CCyB approach and the funding structure of banking supervision. |
| Keywords: | Countercyclical capital buffer; Macroprudential policies; Financial cycles |
| JEL: | E32 E58 E61 G21 G28 |
| Date: | 2025–10–23 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:269 |
| By: | Guido Ascari (De Nederlandsche Bank); Alexandre Carrier (European Central Bank); Emanuel Gasteiger (TU Wien); Alex Grimaud (Oesterreichische Nationalbank); Gauthier Vermandel (Banque de France) |
| Abstract: | We study monetary policy in an environment where price and wage Phillips curves exhibit true curvature. To this end, we propose a New Keynesian (NK) model with endogenous adjustment of price and wage setting frequencies, moving beyond the quasilinear structure of standard nonlinear NK Phillips curves (NKPC). Using euro area data from 1999Q1 to 2024Q4, we estimate and simulate the non-linear model, analyzing the recent inflation surge and the implications of state-dependent prices andwages for monetary policy. Unlike conventional models, our framework does not attribute inflation dynamics primarily to exogenous supply shocks. Instead, the impact of shocks depends on their timing, size, and the business cycle. Consequently, the inflation–output stabilization trade-off is state-dependent: monetary policy is more effective in curbing inflation, and supply shocks have larger effects during periods of high inflation. |
| Keywords: | New Keynesian Phillips Curve, non-linearity, inflation, monetary policy |
| JEL: | C51 E31 E47 E52 |
| Date: | 2025–12–09 |
| URL: | https://d.repec.org/n?u=RePEc:onb:oenbwp:270 |
| By: | Jost, Thomas; Seitz, Franz |
| Abstract: | Die europäischen Regeln zur Begrenzung der Staatsverschuldung haben sich nicht bewährt. Das Regelwerk ist zu komplex, die Überwachung und Durchsetzung unterliegt politischen Einflussnahmen und eine wirkungsvolle Sanktionierung von Regelverstößen findet nicht statt. Wir analysieren vor diesem Hintergrund die generelle Effektivität fiskalischer Regeln. Dafür werten wir zunächst die Literatur zu diesem Thema aus. Daran anschließend stellen wir die Chronologie der Fiskalregeln in der EU seit Ende der 1980er Jahre dar und gehen dabei auch auf die jüngste Reform des Stabilitäts- und Wachstumspaktes ein. Nach diesen Ausführungen leiten wir eine einfache Regel in Übereinstimmung mit dem Vertrag über die Arbeitsweise der EU (AEUV) her, die dann für Simulationsrechnungen generell und mit den aktuellen Regelungen verwendet wird. Diese Regel setzt am Kernproblem der zu hohen Staatsverschuldung an, bewahrt die fiskalische Souveränität der Mitgliedsländer, ist transparent und kontrollierbar und entkoppelt der Geldpolitik von der Fiskalpolitik. Die Regel ist flexibel und prinzipiell in der Lage, übermäßig hohe Schuldenquoten innerhalb eines überschaubaren Zeitraums abzubauen. |
| Abstract: | European rules on limiting government debt have not proven effective. The rules are too complex, monitoring and enforcement are subject to political influence, and there are no effective sanctions for violations. Against this backdrop, we analyze the overall effectiveness of fiscal rules. To do so, we first evaluate the literature on this topic. This is followed by a chronology of fiscal rules in the EU since the late 1980s, including the most recent reform of the Stability and Growth Pact. Based on these findings, we derive a simple rule in accordance with the Treaty on the Functioning of the European Union (TFEU), which is then used for simulation exercises in general and with the current regulations. This rule addresses the core problem of excessive public debt, is transparent as well as controllable and decouples monetary policy from fiscal policy. The rule is flexible and, in principle, capable of reducing excessively high debt ratios within a manageable period of time. |
| Keywords: | Konvergenzkriterien, Staatsverschuldung, Fiskalregeln, Stabilitäts- undWachstumspakt |
| JEL: | E62 E65 F45 H63 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:hawdps:340155 |