The national segmentation of euro area bank balance sheets during the financial crisis

Colangelo, Antonio; Giannone, Domenico; Lenza, Michèle; Pill, Huw; Reichlin, Lucrezia

doi:10.1007/s00181-016-1221-2

Cited by 8 publications

(12 citation statements)

References 23 publications

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“…During the sovereign debt turmoil the market for high-quality collateral, mainly in the form of government bonds, became increasingly segmented along national borders. Domestic banks in fiscally stressed countries increased their holdings of domestic sovereign bonds considerably (Ongena et al, 2016;Colangelo et al 2017). These findings have confirmed the need to break the doom loop between banks and sovereigns and to put in place homogeneous financial and regulatory rules (Colliard, 2015), and have thus vindicated the decision in 2012 to create a Single Supervisory Mechanism (SSM) for 19 euro area countries.…”

Section: New Prudential Frameworkmentioning

confidence: 79%

Foreword ‒ The Crisis, Ten Years After: Lessons Learnt for Monetary and Financial Research

Beyer¹,

Cœuré²,

Mendicino³

2017

Ecostat

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Ten years after the global and European financial crises, significant progress has been made both in financial and economic research to address the shortcomings of mainstream modelling frameworks used to inform monetary and financial policymaking. This article first reviews the progress made in the field of econometric modelling, namely more elaborated financial sectors, partial non-linearity, addressing the effective lower bound for interest rates, and dealing with heterogeneity across countries and economic agents. We then describe how such progress has helped assessing the impact of unconventional monetary policy and the interaction between monetary and prudential policies, also building on the extensive use of micro-data. We conclude that more research remains needed on the transmission of negative rates and their financial stability repercussions, and to understand better central bank communication (including forward guidance on monetary policy) by introducing elements of bounded rationality. Research remains also needed on building models with more heterogeneous agents, given the relevance of heterogeneity for the transmission of monetary policy and the rising importance of inequality in the broader policy discussion.

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Section: New Prudential Frameworkmentioning

confidence: 79%

Foreword ‒ The Crisis, Ten Years After: Lessons Learnt for Monetary and Financial Research

Beyer¹,

Cœuré²,

Mendicino³

2017

Ecostat

View full text Add to dashboard Cite

show abstract

“…Finally, Colangelo et al (2017) and Battistini et al (2014) also built empirical macroeconomic models to study the sovereign-bank nexus in the euro area. Colangelo et al (2017) employ the VAR methodology and report that after 2011 banks tended to increase the home bias in their government bond portfolios.…”

Section: Related Literaturementioning

confidence: 99%

Unconventional Monetary Policy Shocks in the Euro Area and the Sovereign-Bank Nexus

2020

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“…3 A similar approach has been used in recent works by Giannone et al (2014) and Colangelo et al (2017) in studying the response of monetary policy to the crisis.…”

Section: Introductionmentioning

confidence: 99%

Financial and fiscal interaction in the Euro Area crisis: This time was different

Caruso

Reichlin

Ricco

2019

European Economic Review

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This paper highlights the anomalous characteristics of the Euro Area 'twin crises' by contrasting the aggregate macroeconomic dynamics in the period 2009-2013 with the business cycle fluctuations of the previous decades. We report three novel stylised facts. First, the contraction in output was marked by an anomalous downfall in private investment and an increase in households' savings, while consumption and unemployment followed their historical relation with GDP. Second, households' and financial corporations' debts, and house prices deviated from their precrisis trends, while non-financial corporations' debt followed historical regularities. Third, the jumps in the public deficit GDP and debt-GDP ratios in 2008-2009 were unprecedented and so was the fiscal consolidation that followed. Our analysis points to the financial nature of the crisis as a likely explanation for these facts. Importantly, the 'anomalous' increase in public debt is in large part explained by extraordinary measures in support of the financial sector, which show up in the stock-flow adjustments and reveal a key interaction between the fiscal and the financial sectors. AbstractThis paper highlights the anomalous characteristics of the Euro Area 'twin crises' by contrasting the aggregate macroeconomic dynamics in the period 2009-2013 with the business cycle fluctuations of the previous decades. We report three novel stylised facts. First, the contraction in output was marked by an anomalous downfall in private investment and an increase in households' savings, while consumption and unemployment followed their historical relation with GDP. Second, households' and financial corporations' debts, and house prices deviated from their pre-crisis trends, while non-financial corporations debt followed historical regularities. Third, the jumps in the public deficit-GDP and debt-GDP ratios in 2008-2009 were unprecedented and so was the fiscal consolidation that followed. Our analysis points to the financial nature of the crisis as a likely explanation for these facts. Importantly, the 'anomalous' increase in public debt is in large part explained by extraordinary measures in support of the financial sector, which show up in the stock-flow adjustments and reveal a key interaction between the fiscal and the financial sectors. JEL classification: C11, C32, C54, E52, E62, F45.

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The national segmentation of euro area bank balance sheets during the financial crisis

Cited by 8 publications

References 23 publications

Foreword ‒ The Crisis, Ten Years After: Lessons Learnt for Monetary and Financial Research

Foreword ‒ The Crisis, Ten Years After: Lessons Learnt for Monetary and Financial Research

Unconventional Monetary Policy Shocks in the Euro Area and the Sovereign-Bank Nexus

Financial and fiscal interaction in the Euro Area crisis: This time was different

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