Research

Debt Supply, Convenience Yields, and Spillovers Across the Euro Area, with Matthieu Bellon, Matthias Gnewuch and Yerbolat Rakhmetov (in progress)

Abstract: Several euro-area countries sell sovereign bonds at a yield below the risk-free rate plus default risk premium. This difference, coined the convenience yield, arises because of a strong demand for the services provided by safe assets and is expected to decline when bond supply increases. Bonds issued by different sovereigns might be perceived as close substitutes, implying that a country's convenience yield could decline both with the supply of its own debt and with other countries' debt supply. In this paper, we quantify this elasticity of substitution and estimate spillovers among euro-area convenience yields originating from changes in individual countries' debt supply. We exploit high-frequency market reactions to debt issuance announcements to identify country-specific debt supply shocks. We find that an increase in the supply of German or French debt reduces yields across the euro area. Spillovers are close to unity for low-risk countries, indicating a high degree of debt substitutability, but weaker for riskier and smaller countries. These estimates are informative both about the effectiveness of asymmetric QT as well as about the benefits of joint EU debt issuance.

New-Keynesian Models, Liquidity and Money (in progress)

Abstract: This article introduces monetary aggregates into a New-Keynesian framework, addressing recent empirical evidence such as the existence of a stable money demand and of distinct liquidity conditions at the onset of the 2008 and 2020 crises. By developing a DSGE model, the study explores the role of bank reserves and credit in influencing inflation and output, emphasizing the potential role of well-defined money balances for forecasting. Figures comparing the 2008 and 2020 scenarios highlight differences in the banking sector's response to liquidity expansions, well captured by the behavior of monetary aggregates.

Ongoing project on the impact of structural supply-side variables on inflation (a long term view), with Boris Hofmann and Deniz Igan (in progress)

Ongoing project on corporate bond convenience yields, with Thiago Fauvrelle, Boris Hofmann, Max Riedel and Mathias Skrutkowski (in progress)