The Macroeconomic Effects of the Euro Area's Fiscal Consolidation 2011-2013: A Simulation-Based Approach

We simulate the Euro Area's fiscal consolidation between 2011 and 2013 by employing two DSGE models used by the ECB and the European Commission, respectively. The cumulative multiplier amounts to 0.7 and 1.0 in the baseline, but increases to 1.3 with a reasonably calibrated financial accelerator and a crisis-related increase of the share of liquidity constrained households. In the latter scenario, fiscal consolidation would be largely responsible for the decline in the output gap from 2011-2013. Postponing the fiscal consolidation to a period of unconstrained monetary policy (until after the economic recovery) would have avoided most of these losses.Wir simulieren die Haushaltskonsolidierung im Euroraum im Zeitraum 2011 bis 2013 mit Hilfe von zwei DSGE Modellen der EZB und der Europäischen Kommission. Der kumulative Multiplikator beträgt 0.7 bzw. 1.0 in der Basislinie, steigt aber auf 1.3, wenn die Modelle um einen plausibel kalibrierter Finanzakzelerator erweitert und der Anteil liquiditätsbeschränkter Haushalte krisenbedingt erhöht wird. Im letzteren Szenario trägt die Haushaltskonsolidierung die maßgebliche Verantwortung für die Verschlechterung der Produktionslücke im Zeitraum 2011 bis 2013. Wäre die Haushaltskonsolidierung erst in einer Phase mit uneingeschränktem geldpolitischen Handlungsspielraum vorgenommen worden (d.h. nach der Erholung der Wirtschaft) hätte der Großteil der BIP-Verluste verhindert werden können

Bank Risk and Monetary Policy

We find evidence of a bank lending channel for the euro area operating via bank risk. Financial innovation and the new ways to transfer credit risk have tended to diminish the informational content of standard bank balance-sheet indicators. We show that bank risk conditions, as perceived by financial market investors, need to be considered, together with the other indicators (i.e. size, liquidity and capitalization), traditionally used in the bank lending channel literature to assess a bank’s ability and willingness to supply new loans. Using a large sample of European banks, we find that banks characterized by lower expected default frequency are able to offer a larger amount of credit and to better insulate their loan supply from monetary policy changes

Bad loans and entry into local credit markets

Consiglio Nazionale delle Ricerche - Biblioteca Centrale - P.le Aldo Moro, 7, Rome / CNR - Consiglio Nazionale delle RichercheSIGLEITItal