To: Investment Committee
From: Senior Eurozone Economist
Date: July 19, 2026
Subject: Strategic Briefing – Recent ECB/NCB Research
I have filtered the recent research output to highlight the publications with the highest materiality for our current macro projections and portfolio positioning.
1. Measuring geoeconomic tension: a large-language-model approach for the euro area [11]
The ECB is now utilizing LLMs to quantify geopolitical risk in real-time via local-language media, creating a high-frequency index of tension. This suggests the ECB is integrating "geoeconomic noise" more formally into its forecasting, which may lead to more reactive policy shifts in response to trade volatility.
2. Bank deposit pricing in the euro area [3]
The research confirms a persistent, asymmetric lag in the pass-through of policy rates to sight deposits (2007–2024). For our outlook, this implies that banks maintain significant net interest margin (NIM) cushions even in restrictive cycles, potentially delaying the transmission of monetary tightening to the real economy.
3. Barriers to a European Banking Union [12]
Using AnaCredit data, the ECB quantifies how cross-border lending barriers continue to distort credit allocation and dampen aggregate output. This underscores the structural fragility of the Eurozone's financial integration, suggesting that "fragmentation risk" remains a primary headwind for convergence.
4. Tariffs, production networks, and spillovers: the case of a US-China trade war [4]
This model highlights how input-output linkages amplify the shocks of trade wars beyond the targeted sectors. It warns that Eurozone production networks are highly susceptible to indirect spillovers, meaning trade tensions between superpowers act as a systemic tax on EU industrial productivity.
5. How banks have adjusted their lending in response to trade tensions [1]
This study provides empirical evidence on how banks proactively tighten credit standards for firms exposed to trade volatility. This creates a "double hit" for exporters: they face both higher tariff costs and reduced access to working capital, accelerating the risk of corporate defaults in trade-heavy sectors.
6. Beyond energy prices: the ripple effects of Gulf supply disruptions [14]
The analysis moves past simple headline inflation to show how Gulf disruptions trigger broader supply-chain shocks. This indicates that energy shocks are more "sticky" and systemic than previously modeled, likely forcing the ECB to maintain a higher "neutral" rate to combat supply-side inflation.
Synthesis:
The research indicates a pivot toward "geoeconomic" risk management, where trade tensions and geopolitical volatility are viewed as systemic shocks to both credit availability and production networks. Consequently, we should expect the ECB to prioritize financial stability and "fragmentation" monitoring over a simple return to historical inflation targets.
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.