Research

Abstract: We study the impact of cyclical systemic risks on banks’ profitability in the euro area within a panel quantile local projection setting, with the ultimate goal to inform the calibration of the Countercyclical Capital buffer (CCyB). Compared to previous studies, we augment our model to control for unobserved bank-specific characteristics and year-fixed effects and find a lower degree of heterogeneity in the estimated effects across the conditional distribution of bank returns on assets. We propose a simple yet intuitive framework to calibrate the CCyB through the cycle, including the so called "positive neutral" rate. The model suggests a target positive neutral rate for the euro area ranging from 1.1% to 1.8%. Furthermore, the calibrated CCyB rates are consistent with the evolution of domestic cyclical systemic risks in the countries considered. The results further show that the adoption of a positive neutral CCyB approach allows for an earlier and more gradual build-up of the buffer, but does not lead to higher CCyB requirements at the peak of the cycle. Importantly, a positive neutral CCyB strategy would have implied that most euro area countries would have had a positive CCyB in place at the onset of the COVID-19 pandemic.

Abstract: Macroprudential policy has become an essential component of central banks' toolkits around the globe. Despite the widespread adoption of these measures, the mechanisms through which they  influence the macroeconomy and their implications for monetary policy remain relatively unexplored. This paper contributes to the gradually emerging body of research surrounding the macroeconomic effects of macroprudential policy in two aspects. Firstly, I provide evidence on the transmission channels of macroprudential policy by estimating a structural Bayesian panel VAR model tailored to the Euro area. The findings indicate that macroprudential policy exerts a dampening effect on median GDP growth, curbs overall inflation, and tempers growth in residential real estate prices, while also proving effective in mitigating systemic risk. Secondly, I extend the analysis beyond the median effect and estimate the impact of macroprudential tightening on the tail of the GDP growth distribution. I am retrieving the macroprudential policy shocks from the panel VAR model and estimate their effect on the conditional GDP growth distribution in a quantile local projection framework. I find that macroprudential policy decreases downside risk to GDP growth by lifting up the lower tail of the conditional GDP growth distribution in the medium- to long-term, while slightly depressing the right tail of the distribution at short- to medium-term horizons.

Abstract: We apply the growth-at-risk model of Adrian et al. (2019) to the German commercial real estate (CRE) market. We derive a distribution for CRE price growth four quarters ahead conditional on macro-financial variables. This approach allows us to make probability statements about the downside risk to future CRE price growth, which serve as an input to financial stability analyses. We find that the conditional distribution has shifted strongly to the left since the COVID-19 pandemic, in line with deteriorating macroeconomic conditions, an increase in long-term interest rates and a decline in the net initial yield, resulting in lower expected CRE price growth rates across the entire distribution.