The sharp rise in interest rates since 2021 has not been matched by equal increases in household savings rates in advanced economies. This column uses transaction-level data from Iceland to study how changes in interest rates affect household deposit holdings. It shows that for the average household, low-yield deposits barely respond to interest rate differentials, […]
Classifying loans as fixed-rate or floating-rate fails to fully capture their distinct sensitivity to changes in ECB policy rates. This column analyses the maturity of the relevant risk-free rates used to price new loans to see if it affects their short-term interest rate sensitivity. In countries where new loans were priced using shorter-term risk-free rates, […]
Global financial stocks slid on Friday as a rout in U.S. regional banking shares heightened concerns about credit quality and mounting risks in the sector. The banking sector’s exposure in two recent U.S. auto bankruptcies has rekindled concerns about lending standards more than two years after Silicon Valley Bank’s failure, when high interest rates drove paper losses on […]
Bank lending is a key channel through which monetary policy affects the real economy. This column explores how the effects of monetary policy on credit are shaped by bank specialisation in borrower industries and size categories. Analysing granular loan data reveals that such specialisation is widespread among euro area banks. Moreover, higher specialisation is typically […]
Surveys with information provision experiments have become popular in economics. This column introduces an information provision experiment in a model of rational inattention – where information requires paying attention, which is costly – to study the implications of experimental findings for behaviour outside the survey. It highlights that the balance of two counteracting effects, attention-in-daily-life […]
The dollar index, which measures the greenback’s strength against a basket of six currencies, rose 0.3% to as much as 98.91 The U.S. dollar rose to its strongest in more than two months in early Asian trading on Wednesday as risks around the U.S. government shutdown intensified, sparking fresh investor worries and boosting demand for […]
Rising interest rates expose the interaction between hidden losses on long-duration assets and flighty uninsured deposits. This column uses confidential data for 139 euro area banks to analyse this mechanism. It estimates that unrealised losses on loans and bonds held at amortised cost averaged about 30% by September 2023, and were largest for smaller retail […]
Dollar on course to end week flat against EUR; lower against JPY, GBP The dollar was largely steady against the euro and British pound on Friday as traders trimmed wagers on monetary policy easing by the U.S. Federal Reserve following hotter-than-expected wholesale inflation data. The Japanese yen, meanwhile, firmed broadly following surprising strong economic growth […]
The presence of directors on the boards of competing firms (‘interlocking directorates’) raises concerns about collusion. This column studies the Italian corporate loan market and exploits a reform that prohibited directors of Italian banks from sitting on multiple boards simultaneously. Comparing treated and control loans before and after the policy, it shows that the ban […]
Understanding how households interpret macroeconomic policy is vital to the effectiveness of central banks. This column demonstrates that the reactions of individual households frequently contradict standard theoretical playbooks. Using euro area survey data, the authors find that households interpret policy through a lens shaped by recent crises – such as the energy shock following Russia’s […]
