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ChaMP Research Network

The Challenges for Monetary Policy Transmission in a Changing World (ChaMP) Research Network aims to improve our understanding of how monetary policy transmits to the European economy amid unprecedented shocks, structural changes and shifting inflation dynamics.

Motivation and general purpose

In 2023 the Heads of Research of the European System of Central Banks agreed to establish ChaMP – a network focused on the challenges facing monetary policy.

The ChaMP Research Network seeks to revisit our knowledge of monetary transmission channels in the euro area in the context of unprecedented shocks, multiple ongoing structural changes, the extension of the monetary policy toolkit and the dramatic turnaround from too low to too high inflation over the last decade and a half.

The network’s primary objective is to understand how the factors mentioned above have affected the strength, speed and heterogeneity (across Member States) of monetary policy transmission in the euro area and the European Union, while also potentially identifying new transmission channels. The ambition is to put particular emphasis on the last stage of monetary policy transmission, i.e. the consequences for how businesses set their prices and for inflation more broadly.

Research priorities

The ChaMP Research Network is divided into two workstreams, with workstream 1 focusing on transmission via the financial system and workstream 2 working on transmission via the real economy. There is also scope for “bridge projects” between the workstreams, exploring interactions between these two dimensions of monetary transmission.

Workstream 1 – transmission via the financial system

Workstream 1 has three main priority areas of research:

  • Transmission of monetary policy via banks to corporations

    The newly available loan-level AnaCredit dataset for bank credit to non-financial corporations, together with other data sources, is used to investigate unexplored aspects of the bank lending channel. This includes country specificities and other heterogeneities, banking market competition, loan and securities portfolio composition, technology adoption, etc.

  • Transmission of monetary policy via banks to households

    The goal here is to improve our knowledge about the less-explored transmission via household lending (mortgages and consumer credit), analysing datasets available at the national level.

  • Transmission of monetary policy via non-banks

    The focus of this area is to analyse how the growing presence of non-bank financial intermediaries (NBFIs) may influence monetary transmission, for example via credit substitution between banks and NBFIs or via NBFI portfolio recomposition.

Workstream 2 – transmission via the real economy

Workstream 2 has two broad priority areas of research:

  • Transmission of monetary policy via production networks

    While the primary focus is on the transmission of monetary policy, the interaction of monetary policy with financial, real and (energy) price shocks may also be considered. In the current context of high inflation, a very uncertain geopolitical situation, climate change-related natural disasters and evolving global and regional supply chains, a better understanding of how (monetary policy) shocks propagate through or are amplified by production networks is highly relevant to policymaking. For example, the production network approach allows us to examine how the transmission of monetary policy is affected by supply shocks, as well as supply constraints and their easing.

  • Monetary policy transmission and structural changes

    On the one hand, the network investigates whether structural changes such as digitalisation, servitisation, sector reallocation, (de)globalisation, climate change and decarbonisation affect monetary transmission channels. On the other, it also studies how monetary policy affects the structural transformation of the euro area economy, for instance by influencing the sectoral reallocation of resources, the rate of innovation, productivity or competition.

Organisation

ChaMP is governed by a leadership team of senior representatives (coordinators and advisors) of nine National Central Banks and the ECB.

Chair and coordinators
Chair

Philipp Hartmann, Deputy Director General in the ECB’s Directorate General Research

Coordinators

Diana Bonfim, Team Lead in the Financial Intermediation Division of the Economics and Research Department of the Banco de Portugal, and ECB (part-time)

Margherita Bottero, Head of the Money and Credit Unit at the Monetary Analysis Division of the Directorate General for Economics, Statistics and Research of the Banca d’Italia

Emmanuel Dhyne, Head of the Competitiveness and Structural Issues Unit within the Economics and Research Department of the Nationale Bank van België/Banque Nationale de Belgique

Maria T. Valderrama, Head of the Monetary Policy Section of the Oesterreichische Nationalbank

Network secretaries
  • Melina Papoutsi, ECB
  • Gonzalo Paz-Pardo, ECB
Project Management Office

Raquel Gil-Antona, ECB

Network advisors
  • Carlo Altavilla, ECB
  • Guido Ascari, De Nederlandsche Bank
  • Björn Imbierowicz, Deutsche Bundesbank
  • Angela Maddaloni, ECB
  • Laura Moretti, Central Bank of Ireland
  • Galo Nuño, Banco de España
  • Gabriel Smagghue, Banque de France
Academic consultants
  • Vasco Carvalho, University of Cambridge, Economics Department
  • Hans Degryse, KU Leuven, Department of Accountancy, Finance, and Insurance
  • Mishel Ghassibe, CREI and Barcelona School of Economics
  • Refet S. Gürkaynak, Bilkent University, Department of Economics
  • Vasso Ioannidou, City University of London, Bayes Business School
  • Nicola Pavanini, Tilburg University, Department of Finance
  • Elisa Rubbo, University of Chicago, Booth School of Business
  • Paolo Surico, London Business School, Economics Department

Publications and findings

Working papers

Workstream 1
13 September 2024

The transmission of monetary policy to credit supply in the euro area
Banco de España

Miguel García-Posada and Peter Paz, both Banco de España

Abstract

We present empirical evidence on the transmission of monetary policy to banks’ credit standards (i.e. loan approval criteria) in loans granted to non-financial corporations (NFCs) in the euro area. To this end, we use a confidential survey in which banks are asked about developments in their respective credit markets, coupled with banks’ balance sheets and high-frequency monetary policy shocks. First, we find that poorly capitalized banks are more likely to tighten their credit standards in loans to NFCs. Second, these banks have tended to tighten their credit standards more in loans to SMEs than in loans to large firms during the current restrictive monetary phase. Third, the transmission of monetary policy to credit standards in loans to NFCs is stronger in poorly capitalized banks. Fourth, the relationship between monetary policy and credit standards is driven by large contractionary monetary policy shocks, which reveals important asymmetries in the bank lending channel. Finally, a tightening of the monetary policy stance also increases rejection rates in loans to NFCs, to a greater extent in poorly capitalized banks.

Workstream 2
1 August 2024

Anatomy of the Phillips Curve: micro evidence and macro implications
Nationale Bank van België/Banque Nationale de Belgique

  • Luca Gagliardone, New York University
  • Mark Gertler, New York University and NBER
  • Simone Lenzu, New York University, Stern School of Business
  • Joris Tielens, Economics and Research Department, Nationale Bank van België/Banque Nationale de Belgique and KU
Abstract

We develop a bottom-up approach to estimating the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the relevant real activity variable. Using quarterly micro data on prices, costs, and output from the Belgian manufacturing sector, we estimate dynamic pass-through regressions that identify the degrees of nominal and real rigidities in price setting. Our estimates imply a high slope for the marginal cost-based Phillips curve, which contrasts with the low estimates of the conventional unemployment or output-based formulations in the literature. We reconcile the difference by demonstrating that, although the pass-through of marginal cost into inflation is substantial, the elasticity of marginal cost with respect to the output gap is low, at least for pre-pandemic data. We also illustrate the advantage of a marginal cost-based Phillips curve for characterizing the transmission of supply shocks to inflation.

April 2024

A Heterogeneous Agent Model of Energy Consumption and Energy Conservation
Česká národní banka

Volha Audzei, Ivan Sutóris

Abstract

In this paper, we investigate whether inflation-targeting monetary policy affects households’ incentives to build resilience against energy price shocks. We utilize a stylized heterogeneous agent New Keynesian model with search and matching frictions in the labor market and nominal asset holdings. We modify the model 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, we study the responses of energy conservation to monetary policy, rising energy prices, and their interaction. We find that monetary policy influences energy intensity of consumption through both the intertemporal elasticity of substitution and labor market allocations. Our model predicts that a weaker policy response to rising energy prices is beneficial in terms of welfare to firm owners, borrowers and workers despite higher consumer price inflation. Such a policy stimulates energy conservation, and results in lower energy intensity and higher resilience against energy price fluctuations. We further find that a policy of looking through energy prices does not yield welfare benefits as it underreacts to consumer prices initially, but overreacts in later periods. Ramsey optimal policy predicts a strong immediate rise in the policy rate with a decline afterwards.

Conferences and workshops

Workstream 1
14/15 April 2025

Workshop, Deutsche Bundesbank, Eltville

13/14 February 2025

Workshop, Central Bank of Ireland, Dublin

9 October 2024

Workshop, Banco de Portugal, Lisbon

21 June 2024

Workshop, Banca d'Italia, Rome

24 April 2024

Workshop, European Central Bank, Frankfurt am Main

31 October 2023

Workshop, Banco de Portugal, Lisbon

Workstream 2
25 October 2024

Workshop, Banco de España, Madrid

24 April 2024

Workshop, European Central Bank, Frankfurt am Main

2 February 2024

Workshop, Oesterreichische Nationalbank, Vienna

25 October 2023

Workshop, Nationale Bank van België/Banque Nationale de Belgique, Brussels