We distinguish the announcement effects of conventional and unconventional monetary policy measures on macroeconomic variables using a high‐frequency data set that measures the impact of the European Central Bank's monetary policy decisions. For the period 2002 to 2019, we show that conventional and unconventional monetary policy measures differ considerably in their impact on inflation. While conventional

In response to severe fiscal consolidation policies implemented after the Great Recession and the euro area sovereign debt crisis, many have questioned the effectiveness of fiscal consolidations in reducing the burden of public debt. This paper revisits this fundamental policy debate qualitatively and quantitatively, studying conditions under which primary budget balance changes can successfully reduce

U.S. and European research suggests that firms tend to overpay when acquiring cross‐border targets. Our research focuses on an Asian setting. We find that Japanese acquirers pay significantly higher premiums for cross‐border targets than for domestic ones. We also find that, in the case of acquisitions of domestic firms, acquirers that are laden with debt or that have higher market‐to‐book ratios (which

A broad perspective on the sectoral composition of the domestic borrower and recipients of capital flows is needed to deepen the understanding of the mechanisms through which cross‐border capital flows interact with credit provision. Exploring this detail reveals stark differences across (i) credit measures that include only lending by banks and those that encompass all lenders (ii) the sum of all

This paper shows that bilateral currency crises reduce bilateral trade up to 50% after controlling for the depreciation rate. Using a trade model, these reductions are connected to the welfare costs of currency crises. The results show that a single currency crisis can result in welfare reductions through changes in international trade corresponding to more than 10% (and up to 41%) of the costs of

We compute steady‐state economic growth—defined as the rate of growth that the economy would converge to in the absence of new shocks. As we show, this rate can be computed in real‐time by means of a parsimonious time‐varying parameter (TVP) vector autoregression model. Our procedure offers a relatively agnostic estimation of benchmark equilibrium growth rates. Estimates show that the steady‐state

This paper proposes a simple but comprehensive structural vector autoregressive model to examine the underlying factors of oil price dynamics. The distinguishing feature is to explicitly assess the role of expectations about future aggregate demand and oil supply in addition to the traditional realized aggregate demand and supply factors. Our empirical analysis shows that identified future demand and

The COVID‐19 pandemic is a global crisis like no other in modern times, and there is a growing apprehension about handling potentially contaminated cash. This paper is the first empirical attempt in the literature to investigate whether the risk of infectious diseases affects demand for physical cash. Since the intensity of cash use may influence the spread of infectious diseases, this paper utilizes

This paper investigates empirically the linkages between corporate debt overhang and investment activity at the firm level for a cross section of large‐sized emerging market and developing economies. It analyzes the extent to which investment may be discouraged by high levels of debt that put at risk future profits, as well as firm dimensions that may sharpen the debt‐investment link. Using balance

The global financial crisis triggered discussions about what factors constitute a stable mortgage finance system. This paper contributes to these discussions by empirically analysing the Swiss mortgage finance system from a macroeconomic and banking sector balance sheet perspective. Our analysis is based on a novel and near‐comprehensive data set of mortgage bond (Swiss Pfandbrief) issuances over the

This paper asks whether a textbook Phillips curve can explain the behavior of core inflation in the euro area. A critical feature of the analysis is that we measure core inflation with the weighted median of industry inflation rates, which is less volatile than the common measure of inflation excluding food and energy prices. We find that fluctuations in core inflation since the creation of the euro

This study investigates the apparent lack of insurance against country‐specific risk observed internationally. Using a sample of 21 emerging and 21 advanced economies over the period 1980–2014, I document new evidence from international co‐movements of prices and quantities suggesting that risk sharing is worse in emerging economies than in advanced economies. I then extend a standard international

This study applies the spatial Durbin model to analyse the extent to which international trade and geographical proximity affect the stability of African sovereign‐debt markets. Using sovereign credit default swap spreads, our empirical findings show that it is not only a country's macroeconomic fundamentals that influence its likelihood of default but also contagion from other countries. Trade linkages

Procyclicality of fiscal policy is a common feature in emerging markets, by contrast with high‐income economies, and leads to greater business‐cycle amplitudes. We investigate potential causes of fiscal procyclicality, including a host of economic and institutional variables of especial import in emerging markets. We employ dynamic panel methods in a large sample of countries to investigate what factors

1 INTRODUCTION According to Jean Monnet, one of the founding fathers of the European integration after World War II, Europe always needs a crisis to make progress in integration. The COVID‐19 crisis seems to deliver a perfect case to go forward. The pandemic represents an exogenous shock for all EU member countries. But the impact is asymmetric. Countries with already high public debt before the crisis

Using local projection and event studies, this paper investigates the nonlinear effects of U.S. monetary policy shocks on financial‐asset prices in 10 advanced economies from 1990 to 2014. The international asset prices show evidence of the asymmetric or state‐dependent propagation of U.S. monetary shocks. Moreover, the results indicate that the nature of the nonlinearity in the propagation of the

The correlation between stock and bond returns, which went from positive in the 1980–1990s to negative in the 2000–2010s, is analysed with a model that simultaneously determines the price of stocks and bonds as dependent on the real interest rate, economic growth and inflation. The analysis finds that the structural reversal of the correlation in the United States and Germany largely depends on the

This paper characterizes trends of the shares of the U.S. dollar, the euro, and total foreign currencies in international debt denomination over the last two decades. We find that countries with a high output growth trend, greater financial development, better fiscal conditions, and more investment opportunities tend to decrease the extent of their reliance on the dollar, but increase that on the euro

Exchange rate volatility is a stated concern for policymakers in many emerging market economies. This paper investigates whether exchange rate volatility impacts the commitment to inflation targeting monetary policy by analyzing thirteen emerging market economies and nine advanced economies from 2000 to 2016. Using a dynamic panel threshold regression model, the response of the domestic target interest

This study examines how excessive growth in credit, housing and international capital flows, referred to as credit, housing and capital booms, can serve as an early warning signal (EWS) for an impending banking crisis. We examine 56 sample countries that comprise 32 advanced countries and 24 emerging countries. We have two novel results. The first supports the “more booms, stronger warning signal”

We examine the sensitivity of corporate investment to stock‐market valuations (measured by Tobin's q) and internal funds (measured by cash flow) in a setting that captures the unique country institutional characteristics of the Middle East and North Africa region. We report a higher sensitivity of investments to cash flow than Tobin's q. However, both sensitivities are unaffected by the country institutional

Bank competition in Japan is weakening. This study theoretically analyzes the supply side of the bank loan market to examine how this weak banking competition influences the effectiveness of monetary policies. In a Cournot game, there are efficient banks, and inefficient banks that must pay a risk premium in the call market. Less competitive banks either go out of business or merge with efficient banks

This paper compiles a novel data set of time‐varying measures of government‐consumption cyclicality for a panel of 46 African economies between 1960 and 2014. Government consumption has, generally, been highly procyclical over time in this group of countries. However, sample averages hide serious heterogeneity across countries with the majority of them showing procyclical behaviour despite some positive

A large share of global trade being priced and invoiced primarily in U.S. dollar rather than the exporter's or the importer's currency has important implications for the transmission of shocks. We introduce this “dominant‐currency pricing” (DCP) into ECB‐Global, the ECB's macroeconomic model for the global economy. To our knowledge, this is the first attempt to incorporate DCP into a major global macroeconomic

In the context of debates about the euro exchange rate's (EXR) impact on Germany's (DE) trade surplus, we estimate a multiregion macroeconomic model (1999–2018) and provide a counterfactual in which we simulate the shocks of the estimated model in an alternative setting with freely floating nominal EXRs. The results suggest a reduction of the DE trade surplus by up to 1.3% of gross domestic product

Sovereign and bank risk can feed into each other and trigger destabilizing dynamics. In this paper, I use euro‐area countries’ credit default swap data to study what factors and shocks underlie bouts of enhanced correlation between bank and sovereign risk. Sovereign risk pass‐through, where sovereign instability undermines domestic banks’ health, is stronger than bank risk pass‐through, where bank

Using industry‐level data for all U.S. states obtained from the U.S. Bureau of Economic Analysis, this paper examines the impact that unconventional monetary policy has had on six U.S. industries. The results indicate that the impact varies across the industries analysed. The results show that total wages and salaries increased the most in the finance sector. However, the strongest impact on total

This paper analyzes the drivers of net private capital flows to emerging market economies (EMEs), focusing in particular on the policies of the Federal Reserve. We argue that the role of the Federal Reserve in EME capital flows has been smaller than popularly believed. We first show that the run‐up in capital flows to EMEs predated the loosening of Fed policy, while flows slowed substantially between

This study develops three novel housing risk factors to explore the sources of risk in US state‐level housing markets. The asset‐pricing models enrich our investigations into housing markets from three perspectives: housing boom–bust, volatile–calm, and factors’ time‐varying impact regimes. The findings indicate that state‐level housing returns all show significant exposure to systemic risk of housing

We study the dynamic connectedness and predictive causality between oil prices and exchange rates. Our sample includes six important oil‐producing and six net importing countries. Our results show that for the first set of countries, oil prices are net spillover receivers from exchange rate markets. Similarly, there is evidence of bidirectional Granger causality, which is detected for longer time periods

This paper proposes a new method for detecting abnormal movements of short‐term interest rates by using permutation entropy (PE) as a complementary early‐warning signal. Empirical results have shown that the PEs of the US T‐Bill rates plunged below the thresholds of normal movements before the financial crisis of 2007–2009, and the PE of 3‐month Euribor similarly dropped before the European sovereign

This paper revisits the issue of cross‐country spillovers from fiscal consolidations using an innovative empirical methodology. We find evidence in support of fiscal spillovers in ten euro area countries. Fiscal consolidation in one country not only reduces domestic output (direct effect) but also reduces the output of other member countries (indirect/spillover effect). Fiscal spillovers are larger