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Nick Ligthart
- 20 December 2019
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2019Details
- Abstract
- On 30 October 2019 the ECB implemented a two-tier system under which a portion of credit institutions’ excess liquidity holdings with the Eurosystem are exempt from remuneration at negative rates. The aim of the two-tier system is to support the bank-based transmission of monetary policy in preserving the overall positive contribution of negative rates to the accommodative stance of monetary policy. With the introduction of the two-tier system banks holding less excess liquidity than their exemption allowance increased their excess liquidity holdings by borrowing from banks exceeding their exemption allowances. The bulk of banks’ increased borrowing in the money market occurred via secured transactions. Although the increase in trading activity temporarily coincided with higher money market rates, experience with the two-tier system over its first month shows that money market rates were only marginally affected and remain well aligned with the policy rate.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G1 : Financial Economics→General Financial Markets
- 21 March 2019
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 2, 2019Details
- Abstract
- On 27 February 2019, the European Commission published its annual assessment of macroeconomic imbalances and the progress made with structural reforms based on the country-specific recommendations as adopted in July 2018. According to the Commission, the number of countries experiencing imbalances has increased to 13 overall, from 11 in 2018. Despite the persistence of excessive imbalances in some Member States, the excessive imbalance procedure has never been triggered since the introduction of the macroeconomic imbalance procedure in 2012. Persistent macroeconomic imbalances – whether excessive or not – leave Member States vulnerable to adverse macroeconomic shocks and tend to increase the probability of recessions, which often carry high social and economic costs. Debt levels are still historically high in some Member States, for both government and private debt, which makes responding to a downturn or to negative shocks more difficult. To support rebalancing and avoid new imbalances in cost competitiveness across the EU, accelerating growth in unit labour costs in some countries has to be carefully monitored. Reforms remain crucial to address these imbalances, and progress on recommended reforms is assessed annually by the Commission. The Commission assessment again finds only limited progress on recommended reforms. In addition, progress with reforms has been uneven, and is particularly lacking in the areas of product markets and public finances. Further reforms to improve the investment environment are essential to stimulate well-targeted investment that improves productivity, potential growth and resilience.
- JEL Code
- E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
F02 : International Economics→General→International Economic Order