To: Investment Team
From: Senior Economist (Eurozone)
Date: 2026-07-25
Subject: Analysis of Recent ECB and National Central Bank Research
I have filtered the latest research window to highlight the publications with the most significant implications for our macro forecasts and portfolio positioning.
1. Bank deposit pricing in the euro area [6]: This research documents a low and asymmetric pass-through of policy rates to sight deposits. This suggests that the ECB’s monetary transmission mechanism remains impaired, as banks maintain higher margins, potentially delaying the impact of policy shifts on aggregate consumption.
2. Barriers to a European Banking Union [15]: The paper quantifies persistent frictions in cross-border lending that hinder efficient credit allocation across the bloc. This indicates that structural fragmentation remains a significant drag on Eurozone GDP and prevents the "convergence" of growth rates between the core and periphery.
3. Measuring geoeconomic tension: an LLM approach [14]: The ECB has developed a high-frequency index of geopolitical tension using Large Language Models to analyze local-language news. This provides us with a more granular, real-time tool to quantify "geopolitical risk" and its immediate correlation with Eurozone asset volatility.
4. **Geoeconomics and
The paper analyzes how import tariffs impact manufacturing sectors based on their position within a production network. It identifies both supply-side and demand-side channels that lead to sectoral output contractions.
We find that whether US import tariffs have supply-side effects or demand-side effects on US manufacturing sectors depends on where the affected sectors are located in the US production network. Using local projections in a panel of US manufacturing sectors, we find that US import tariffs —including the 2018-19 tariff hikes— led to sectoral output contractions via two different channels: (1) Tariff increases act as negative supply shifters for sectors that use goods from tariff-facing sectors as input in production and thus face rising input costs. (2) Tariff increases act as negative demand s
The study utilizes an agent-based framework to evaluate the effectiveness of releasable macroprudential capital buffers in mitigating tail risks. It focuses on the interaction between heterogeneous agents to understand endogenous credit cycles.
This paper develops an agent-based framework (DeTail) to assess the state-contingent tail effects of releasable macroprudential capital buffers. The model features heterogeneous firms, households, and banks, and a single central bank, all interacting in a fully integrated, stock-flow consistent framework which generates endogenous credit cycles. Using this approach, we evaluate how time-varying capital requirements affect the time-varying distributions of credit growth, firm and household default rates, and bank losses along the credit cycle. Policy experiments show that releasing capital buff
This research examines the relationship between macroprudential policy frameworks and long-term productivity growth. It argues that stability-oriented regulations can complement rather than hinder economic efficiency.
The study investigates the behavioral responses of the banking sector to escalating international trade tensions. It focuses on how financial institutions adjust credit allocation and lending standards in response to trade-induced risks.
The paper analyzes the contraction of bank branch networks across ten CESEE countries, noting a decline of over 30% since 2013. It identifies market consolidation as a primary driver of closures, while local economic growth and profitability act as mitigating factors.
We study the evolution of bank branch networks in ten CESEE countries between 2013 and 2021. Using a manually compiled dataset of all branches and their geocoordinates, we document a decline exceeding 30%, with substantial heterogeneity across and within countries. We show that banking market consolidation is a key driver of closures, while profitability and local economic growth mitigate them. Branches in highly urban or very rural areas close more often. Competitive effects are nonlinear: moderate clustering lowers closure risk, but intense competition increases it. These patterns differ mar
This study examines the transmission of policy rates to sight deposit rates in the euro area from 2007 to 2024. The findings reveal low and asymmetric pass-through that has diminished over time, supported by an equilibrium model of depositor price sensitivity.
We investigate the supply and demand drivers of bank deposit pricing in the Euro area during the period 2007–2024. We document that the pass-through of policy rates to sight deposit rates is low, asymmetric, varies across the monetary policy regimes, and decreases over time. We build and estimate an equilibrium model of bank deposit markets, and find that the price sensitivity of depositors exhibits large heterogeneity between households and firms, across countries, and over time. Our estimates suggest that rate-sensitive depositors increasingly switched to alternative, higher-yielding savings
The paper analyzes the macroeconomic transmission of US-China tariffs using a multi-sector New Keynesian model. It finds that reciprocal tariffs create asymmetric inflationary burdens and spillovers through complex input-output production networks.
We study the short-run macroeconomic transmission of a US–China tariff war in an open economy multi-sector New Keynesian model with input–output linkages, sectoral nominal rigidities, and heterogeneous currency invoicing. A reciprocal 10 percentage-point tariff increase generates asymmetric incidence: the tariff-imposing country bears more of the inflationary burden, while the targeted country experiences the larger output contraction. Production networks amplify this contraction by propagating the shock beyond the directly tariffed bilateral margin. Currency invoicing further shapes transmiss
The paper analyzes how tightening the EU Emissions Trading System incentivizes high-emission firms to improve efficiency without sacrificing output. It highlights a stronger impact on power producers compared to manufacturing firms and examines the role of green takeovers.
We show that an unexpected tightening of the EU Emissions Trading System led high-emission-intensity firms to cut emissions relative to low-intensity peers within the same industry, without reducing output, thereby improving emission efficiency. Effects are stronger for power producers than for manufacturing firms. Examining mergers and acquisitions (M&As), we find that high-intensity manufacturing firms acquire more green targets after the tightening than low-intensity firms, with no change in the overall number of acquisitions, indicating a shift in focus rather than activity. Finally, w
The study investigates the determinants of consumer behavior in the euro area regarding the adoption of Chinese e-commerce platforms. It focuses on the drivers of cross-border digital trade and consumer spending patterns.
This research examines the intersection of geoeconomics and global trade policy, tracing the evolution of globalization. It argues that trade policy is increasingly utilized as a strategic instrument to achieve specific geopolitical objectives.
We study the role of geoeconomics in shaping globalisation and trade policy. We first review the evolution of world trade since the end of World War II, highlighting the drivers of globalisation and its economic consequences. We then synthesise recent research on geoeconomics, which analyses how countries use trade policy as a tool to pursue geopolitical objectives. Against this background, we argue that the gradual shift in geoeconomic power from the United States toward China since the 2000s has been driving a fragmentation in world trade along geopolitical lines. We provide conceptual polic
The paper evaluates the efficacy of current macroeconomic models in the face of increasing global volatility and structural shifts. It argues for the integration of more flexible frameworks to better capture uncertainty and its impact on policy forecasting.
The paper develops a general equilibrium framework to analyze the trade-off between bank liquidity holdings and risk-taking incentives. It argues that liquidity requirements serve as a tool to mitigate moral hazard inherent in leveraged financial intermediation.
We develop a general equilibrium theory of financial intermediation and its implications for liquidity regulation. The model is built around an agency problem arising from leveraged intermediation: banks finance loan origination with deposits and face moral hazard in risk management, while holding cash mitigates these incentives at the cost of foregone investment returns. Liquidity demand therefore emerges endogenously from incentive considerations rather than from exposure to exogenous funding shocks. In equilibrium, financial experts choose between allocating equity to the banking sector rel
The paper examines the impact of temporary migration on macroeconomic fluctuations and stabilization policies within the EU using a DSGE model. It finds that endogenous labor mobility responds to market conditions and exchange rate shifts, serving as a critical mechanism for cross-country adjustment.
This paper studies how temporary migration affects macroeconomic fluctuations and the conduct of stabilisation policies using a two-country DSGE model with search-and-matching frictions and endogenous cross-border labour mobility. The analysis shows that migration responds endogenously to both labour market conditions and exchange rate movements, making it an important channel of cross-country adjustment. Labour mobility alters the transmission of shocks in three main ways. First, it redistributes adjustment to productivity shocks across regions, smoothing output fluctuations in receiving econ
The paper develops a novel index to quantify geoeconomic and geopolitical tensions within the euro area using Large Language Models to analyze multilingual newspaper data. It aims to provide a systematic narrative of tension sources and their evolution over the last twenty-five years.
We construct an index of geopolitical and geoeconomic tension for the euro area using Large-Language Models (LLMs) that prompt a large dataset of European, local-language newspaper articles. The resulting LLM Geoeconomic and Geopolitical Tension (LGPT) index and its subindices seek to provide an accurate narrative of tensions and their sources over the past quarter century. The multilingual LLM approach allows for a separation between geopolitical and geoeconomic tensions and for granularity in the identification of the source of such tensions including trade, energy and finance. This lends it
This study analyzes barriers to cross-border bank lending within the euro area and their impact on credit allocation and GDP. The findings highlight how obstacles to relationship formation and loan pricing hinder the effectiveness of the banking union.
We quantify barriers to cross-border bank lending to firms within the euro area and their consequences for credit allocation and output. Using loan-level data from the European credit registry (AnaCredit) and group structures (RIAD),we estimate barriers to relationship formation, loan pricing, and banks’ branching decisions at the country-pair level. We find that barriers to cross-border relationships between banks and firms and cross-border bank entry are large while wedges on interest rates and loan quantities are comparatively small. The estimated wedges are strongly associated with differe
The research examines the integration of climate-related risks and uncertainties into the ECB's collateral framework. It focuses on how the central bank adjusts its asset eligibility and haircuts to account for the green transition.
The paper analyzes how supply disruptions in the Gulf region propagate beyond immediate energy price spikes to affect broader economic stability. It examines the resulting impact on global trade flows and the subsequent inflationary pressures on the eurozone economy.