Documents European Central Bank 237 results

"The coronavirus (COVID-19) pandemic almost certainly affected potential output negatively via various channels, affecting the trends of total factor productivity, capital and labour. Quantitative estimates show that euro area potential growth will likely stall or even decline in 2020 and the pace of the recovery is highly uncertain, as it depends on whether the shock is temporary or persistent. Comprehensive policy measures are playing a crucial role in preventing hysteresis in the euro area economy and long-term economic scarring."

"This box summarises the findings of an ad hoc ECB survey of leading euro area companies that looks at the long-term effects of the coronavirus (COVID-19) pandemic on the economy. While precipitating the largest short-term decline in economic activity for centuries, the COVID-19 pandemic has also brought about changes in the way businesses operate and consumers behave, some of which are likely to outlive the present crisis. These may in turn influence aggregates such as output, employment and prices – and the relationship between them – in the long term.[1].."

"The sudden and deep recession triggered by the outbreak of the coronavirus (COVID-19) has warranted adjusting the standard tools used for forecasting euro area real GDP growth in real time. The severe economic consequences of COVID-19 have played havoc with established statistical and economic relationships.[1] Hence, standard short-term forecasting models have been able to capture neither the extent of the contraction observed in the first two quarters of 2020 – with quarter-on-quarter declines of 3.7% and 11.7% in the first and the second quarters, respectively – nor the rebound in the third quarter – with an increase of 12.5%. These exceptional dynamics have required an update of the set of tools typically used to forecast euro area real GDP growth in real time. This box describes four approaches developed by ECB staff to account for the specific characteristics and implications of the COVID-19 pandemic..."

"The euro area labour market has been severely hit by the coronavirus (COVID-19) pandemic and associated containment measures. Employment and total hours worked declined at the sharpest rates on record. Unemployment increased more slowly and to a lesser extent, reflecting the high take-up rate of job retention schemes and transitions into inactivity. The labour market adjustment occurred primarily via a strong decline in average hours worked. In addition, the labour force declined by about 5 million in the first half of 2020, which is half a million more than its increase between mid-2013 and the fourth quarter of 2019..."

"Digitalisation – the diffusion of digital technologies leading to a digital economy – is “virtually everywhere”. It transforms patterns of consumption and production, business models, preferences and relative prices, and thereby entire economies, making it an important issue from a central banking perspective. Some of the key effects of digitalisation relevant to monetary policy relate to output and productivity, labour markets, wages and prices.

The impact of digitalisation on the economy is a function, inter alia, of national economic structure and economic policies, institutions and governance. However, it is not clear whether digitalisation is going to deepen differences between countries or reduce them. It is nevertheless interesting to note that the degree of digitalisation varies across the euro area and EU countries and only a few are as digitalised as the most digital countries in the world.

This article mainly summarises and updates the evidence on the euro area and the EU digital economy, including international comparisons.[1] It documents the growth of the digital economy, measured in terms of value added based on the System of National Accounts, the diffusion of digital technologies as captured by suitable indicators, and the impact of digital technologies on the economic environment in which monetary policy operates through their effects on productivity, labour markets and inflation.[2].."

"The confluence of the economic consequences of and policy responses to the coronavirus (COVID-19) pandemic poses challenges for interpreting labour market developments – including wage developments. For instance, the substantial changes observed in recent quarters in hours worked per person employed, together with the widespread application of short-time work schemes and issues related to their statistical recording, complicate the interpretation of wage indicators such as “compensation per hour” or “compensation per employee”.[1] The ECB indicator of negotiated wage rates captures the outcome of collective bargaining processes and is not directly affected by these special factors.[2] It also tends to be published around one month earlier than wage indicators based on quarterly national accounts. It should be noted, however, that the pandemic may also have had an impact on the indicator properties of negotiated wages, as it has led to fewer wage agreements being concluded than under normal circumstances. This box considers what role the indicator of negotiated wage rates can play in assessing and forecasting wage developments at the current juncture..."

"This box studies the relative impact on inflation of pandemic-induced demand and supply constraints for key advanced economies outside the euro area by using granular data on consumption expenditures and prices and a structural Bayesian Vector Autoregression (BVAR) framework. It finds that during the initial phase of the pandemic, consumer price inflation was driven more by demand-sensitive components and less by supply-sensitive ones. The structural analysis confirms a dominant role for demand shocks in the pandemic. It concludes that the impact of pandemic-related supply constraints on inflation appears limited to date. Yet, more granular analysis is needed to assess the consequences of the pandemic for the drivers of inflation."

"The box provides an analysis of the recent increase in inflation differentials in the euro area countries and its impact on price competitiveness. To a certain extent, inflation differentials are normal in a currency union, insofar as they reflect temporary adjustments to shocks or are associated with catching-up processes. However, in other cases, inflation differentials may reflect persistent diverging cost developments, possibly related to a spillover of energy and/or food price shocks into labour cost differentials, or structural challenges such as nominal and real rigidities in product and labour markets. In such cases, inflation differentials may cause significant shifts in price competitiveness that need to be addressed by structural policies and/or countercyclical fiscal policy. Several euro area countries with legacy external imbalances have improved their price competitiveness in recent years when compared with the pre-pandemic period, while others have recorded considerable losses in price competitiveness."

"This article considers how climate change will affect potential output – the highest level of production that an economy can sustain over the long run without driving up inflation. Higher temperatures and changing rainfall patterns are likely to negatively affect certain sectors, notably agriculture and tourism, and impair workers' productivity. The green transition involves the reallocation of capital and labour across businesses and sectors. In the long run, the impact on potential output depends on the success of that reallocation and on the rate of progress of green innovation."

"This box examines the drivers of intra-country regional differences in the economic impact of the coronavirus (COVID-19), as observed in the four largest euro area economies during the initial phase of the pandemic. More specifically, it discusses how the interaction between government containment measures, sectoral structure and trade linkages helps explain the intra-country regional variations in the labour market impact of the pandemic. It finds that the different economic impact across regions cannot be explained solely by the spread of infections, a region's economic structure is also a key determinant. Moreover, the trade relations of a region, both within and across countries, are found to be an important indirect channel through which coronavirus-related disturbances affect regional economic activity, highlighting vulnerabilities which may arise from disruptions to highly integrated EU supply chains."