European Central Bank - DG Macroprudential Policy & Financial Stability
Contact: spyros (dot) palligkinis (at) ecb (dot) europa (dot) eu
Trust and the household-bank relationship, with Miguel Ampudia (coming soon)
Assessing the financial vulnerability of euro area households (latest version at SSRN)
This paper introduces a micro-simulation framework that studies the financial vulnerability of euro area households. The framework updates micro-level household balance sheet data using macro-level information on unemployment, wages, inflation and market prices. Importantly, new mortgage contracts are created and existing ones are gradually repaid, while other balance sheet items are updated under a static balance sheet assumption. I show the use of the framework by (i) now-casting financial vulnerability indicators of euro area households in 2016, (ii) assessing this vulnerability under the most recent baseline and adverse macroeconomic scenario of the European Banking Authority, and (iii) assessing the impact of the capped LTV ratios on household financial distress.
Sectoral sales of government securities during the ECB’s asset purchase programme, with Ramón Adalid (latest version at SSRN)
The transmission channels of quantitative easing programmes partly depend on which sectors sell the securities that the central bank purchases. This note examines the behaviour of the main euro area sectors in response to the public sector leg of the ECB’s extended asset purchase (APP) programme. For each sector we compare realised net flows of government securities to those that would have occurred in the absence of the programme. We find that most sales are attributable to sectors other than euro area banks, with non-euro area residents standing out as the most responsive sector. We discuss the implications of this finding for the transmission of the QE policy in the euro area.
- Featured at ECB Economic Bulletin, Issue 4 / 2017: Which sectors sold the government securities purchased by the Eurosystem? (link)
The Luxury of Bequest (latest version at SSRN)
Retired households with higher permanent income exhibit higher saving rates, a fact that cannot be accounted for by standard saving-consumption models. I provide evidence that this behavior can be explained in the context of a life-cycle portfolio choice model that features bequest as a luxury good. Households choose to save at the risk-free rate, invest in a risky asset or purchase life insurance. The luxury good property is governed by the degree of relative risk aversion of the bequest function, which is lower than the one of the utility of consumption. I structurally estimate the preference parameters of the model, matching simulated moments to their empirical counterparts in a representative survey. I find that the coefficients of risk aversion differ in the predicted direction and the difference is statistically significant. When compared to a standard model, the luxury-of-bequest specification generates increased saving rates for the income-rich, improved average profiles and a more realistic wealth distribution.
Runge-Kutta Methods for Fuzzy Differential Equations (2009), with Geogios Papageorgiou and Ioannis Famelis. Applied Mathematics and Computation, 209(1), 97-105. (link)
Financial stability implications of crypto-assets (2018), with Mitsutoshi Adachi, Simon Kördel, Spyros Palligkinis, Lea Steininger and Anton van der Kraaij, Box 4 at Financial Stability Review , European Central Bank, May 2018, 69-72 (link)
Leveraged loans: a fast-growing high-yield market (2018), with Claudiu Moldovan, Box 5 at Financial Stability Review , European Central Bank, May 2018, 74-78 (link)
Cross-border bank consolidation in the euro area (2017), with Philipp Hartmann, Ivan Huljak, Agnese Leonello, David Marqués, Reiner Martin, Diego Moccero, Alexander Popov and Glenn Schepens, Special Feature at Financial integration in Europe, European Central Bank, 41-64. (link)
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