CNB Research News

Does Macroprudential Policy Leak? Evidence from Shadow Bank Lending in EU Countries

Economic Modelling, 2024, Vol. 132, pp. 1-13.

Holding the Economy by the Tail: Analysis of Short- and Long-run Macroeconomic Risks

Empirical Economics, 2024, Vol. 66(4), pp. 1443-1489.

Economic Policy Uncertainty in Europe: Spillovers and Common Shocks

This paper proposes a novel approach to decompose the Economic Policy Uncertainty indices of European countries into the common and country-specific components using the time-varying total connectedness. Then, by employing a Bayesian panel VAR model, we assess how common and country-specific uncertainty shocks influence economic activity, prices, and monetary policy, with the shocks identified using zero and sign restrictions. Our results reveal that only common shocks have significant effects on all macroeconomic variables. This result is robust across alternative samples and structural identifications. Therefore, our findings imply that policymakers should focus on uncertainty shocks that are synchronized across countries.

Geopolitical Risks and Their Impact on Global Macro-Financial Stability: Literature and Measurements

Our paper reviews how geopolitical risks (GPR) impact macro-financial stability. We examine existing measures of geopolitical tensions and show that GPR causes episodic spikes in economic and financial uncertainty, especially during major events. Two main transmission channels are identified: the financial channel, which increases uncertainty and risk aversion, affecting investment and capital flows; and the real economy channel, which disrupts global trade, supply chains, and commodity markets. Event study analyses using data from recent decades confirm these patterns, highlighting the importance of event-specific responses to mitigate GPR's effects on financial and economic systems.

LUCI: Your Best Friend for Measuring Labor Market Tightness

Which labour market variable best captures labour market developments? To address this, we introduce the Labour Utilization Composite Index (LUCI), which represents the overall cyclical position of the labour market. The LUCI is defined as the first generalized dynamic principal component of the cyclical parts of selected labour market variables, filtered using a multivariate approach to separate trends and noise. Besides indicating labour market tightness, the LUCI serves as a measure of economic slack, aiding in estimating price and wage Phillips curves. It also enables the construction of a 'supercyclical inflation' measure, distinguishing between demand- and supply-driven inflation pressures, thus enhancing the analytical toolkit of the CNB's Monetary Department.

The Mirage of Falling R-stars

Was the decline in real interest rates early in this century driven by a diminishing natural real interest rate, or have we observed a long sequence of shocks that have pushed market rates below the equilibrium level? In this paper we show on a sample of 12 open economies that once we account for equilibrium real exchange rate appreciation/depreciation, the natural real interest rate in the 2000s and 2010s is no longer found to be declining to near or below zero. The explicit inclusion of equilibrium real exchange rate appreciation in the identification of the natural rate is the main deviation from the Laubach-Williams approach. On top of that, we use a full-blown semi-structural model with a monetary policy rule and expectations. Bayesian estimation is used to obtain parameter values for individual countries.

Origins of Post-COVID-19 Inflation in Central European Countries

This paper analyses the post-pandemic surge in inflation in Czechia, Hungary, Poland, and Slovakia using a Bayesian structural vector autoregressive model. The findings reveal that foreign demand and supply shocks significantly contributed to inflation after 2020, with domestic factors explaining cross-country differences. Supply-side shocks were the main domestic driver in all countries, while domestic demand played a smaller role. Exchange rate shocks were significant only in Hungary, and monetary policy shocks have had minimal impact on inflation since 2022. The decomposition of core inflation further highlights the predominance of domestic factors.

A Heterogeneous Agent Model of Energy Consumption and Energy Conservation

In this paper, the authors investigate whether inflation-targeting monetary policy affects households' incentives to build resilience against energy price shocks. They modify a stylized heterogeneous agent New Keynesian model with search and matching frictions in the labor market and nominal asset holdings to include energy in consumption and production, and energy conservation capital, so that energy price fluctuations affect both the supply and demand side of the economy. In such a framework, the authors study the responses of energy conservation to monetary policy, rising energy prices, and their interaction.

Green Transformation: Summary of Objectives and Importance of Critical Minerals

This article presents what specific goals have been agreed in this area and how successfully they are being met. The green transformation will require significant investments in new technologies and is, to some extent, conditional on the availability of "critical materials", which are an essential part of the clean energy transition. The article points out that effective recycling and innovation in clean energy materials are key to alleviating the pressure to extract natural resources and thus to reducing environmental and geopolitical risks.

Blockchain Use Cases Outside of Digital Currencies

The blockchain technology originally came into the limelight because of its association with Bitcoin. Still, the technology goes far beyond transacting crypto assets. In this review, to get a better perspective on the opportunities offered by blockchains, we discuss several examples of those blockchain applications that are unrelated to digital currencies.

The Dichotomy of Real Economic Developments in the Euro Area

This article focuses on the clear difference in the rate of economic growth between the large economies of the southern and western euro area and Germany in recent years. The article sees the primary source of this in the exceptional vulnerability of the German growth model and the combination of specific shocks that have hit the European economy particularly hard in recent years.

Israeli Monetary Policy – Past and Present

This thematic article focuses on the Israeli central bank's response to the economic impact of Israel's war with Hamas since last October. In addition to reviewing recent actions taken by the central bank, the article also explores long-term trends in the Israeli monetary policy framework and the Bank of Israel's responses to the Covid-19 pandemic and the recent surge in inflation.