ECB Euro liquidity lines (214 KB)
S. Albrizio, I. Kataryniuk, L. Molina, y J. Schäfer
Central bank liquidity lines gained momentum since the global financial crisis and were used extensively throughout the pandemic. US dollar swap lines are well studied, but much less is known about the effects of liquidity lines in euros. Do ECB euro liquidity lines decrease Euro funding costs in the targeted economies? And are there positive spillbacks for the Euro Area Economies? Our paper answers these questions by studying the direct and indirect effects of ECB liquidity lines. We use a difference-in-differences strategy to show that the announcement of ECB euro liquidity lines has a direct positive signalling effect since the premium paid by foreign agents to borrow euros in FX markets decreases up to 76 basis points relative to currencies not covered by these facilities. Additionally, the paper provides suggestive evidence that these facilities generate positive spillbacks to the euro area since domestic bank equity prices increase by 6.7% in euro area countries highly exposed via banking linkages to countries whose currencies are targeted by liquidity lines.
This paper analyses the contribution of import competition to the regional divergence among US metropolitan areas over recent decades. It documents that the sharp rise in imports of Chinese manufacturing goods had a significant effect on the spatial skill polarisation and the divergence of college wage premium among local labor markets. The effects of the China trade shock were systematically different depending on the skill intensity of local services. Among regions with skill-intensive services, a higher exposure to import competition in manufacturing increased the number and wages of college-educated workers. The negative effects of the China shock concentrated in exposed regions with a low density of college-educated workers. The heterogeneous effects of import competition explain one third of the spatial skill polarisation and one fourth of the divergence in college wage premium. It is shown that the contribution of the trade shock operates through the reallocation of workers across sectors and regions. Using a novel measure of ‘labor market exposure’ to the China shock, the author shows that service industries expand when local manufacturers face import competition. High human capital regions exposed to the China shock undergo a faster transition from manufacturing to skill-intensive service industries and attract college-educated workers from other locations.
Firm level heterogeneity in the impact of the COVID-19 pandemic (150 KB)
A. Fernandez Cerezo, B. Gonzalez, M. Izquierdo and E. Moral Benito
We explore the heterogeneity across firms in the impact of and response to the COVID-19 shock using a survey conducted in November 2020 matched to balance-sheet information on firm characteristics. According to our results, the impact of the COVID-19 shock was larger in the case of small, young and less productive firms located in urban areas. Moreover, these firms resorted relatively more to public-guaranteed loans, tax deferrals, and furlough schemes (ERTEs). More indebted companies, which were not hit relatively harder by the shock, also perceived public-guaranteed loans as very useful. Firms consider that uncertainty represents a key hindrance to the recovery while the announcement of the effectiveness of the Pfizer vaccine on November 9th 2020 increased significantly firms' subjective recovery expectations.
Fed’s financial stability concerns and monetary policy (319 KB)
Klodiana Istrefi, Florens Odendahl and Giulia Sestieri
Even though the Fed does not have an explicit financial stability objective extending beyond its supervisory responsibilities, the public speeches of Fed officials, during the period 1997 to 2013, reveal that a higher speaking time or a higher negative tone on Financial Stability topics correlate with a more accommodative monetary policy stance. In contrast, communication on Housing topics correlates with a tighter policy stance. These results are mainly driven by the information in speeches of regional Fed presidents.
New Dimensions of Regulatory Complexity and their Economic Cost. An Analysis using Text Mining (425 KB)
Juan de Lucio and Juan S. Mora-Sanguinetti
Spain has adopted 386,850 new norms since the beginning of the democratic period (1979-2020) and its rate of adoption has quadrupled since 1978 (12,250 new regulations were published in the year 2020). Notwithstanding, in addition to the problems that may arise from the "quantity” of regulations, the legal framework can also be complex due to “qualitative” reasons such as (1) the linguistic ambiguity of the norms or (2) their relational structure (i.e. references between legal documents). Our article innovates by analysing these new dimensions of complexity at the regional level using text mining and explores their relationship with productivity (as a relevant economic variable) and with judicial efficacy (as a relevant institutional-structural variable).
Market polarization and the Phillips curve (542 KB)
Javier Andrés, Óscar Arce y Pablo Burriel
The Phillips curve has flattened out over the last decades. We develop a model that rationalizes this phenomenon as a result of the observed increase in polarization in many industries, a process along which a few top firms gain an increasing share of their industry market. In the model, firms compete à la Bertrand and there is exit and endogenous market entry, as well as optimal up and downgrading of technology. Firms with larger market shares find optimal to dampen the response of their price changes, thus cushioning the shocks to their marginal costs through endogenous countercyclical markups. Thus, regardless of its causes (technology, competition, barriers to entry, etc.), the recent increase in polarization in many industries emerges in the model as the key factor in explaining the muted responses of inflation to movements in the output gap witnessed recently.