Documents de Bondt, Gabe J. 3 results

"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..."

"This study develops a new monthly euro Area-wide Leading Indicator (ALI) for the euro area business cycle. It derives the composite ALI by applying a deviation cycle methodology with a one-sided band pass filter and choosing nine leading series. Our main findings are that i) the applied monthly reference business cycle indicator (BCI) derived from industrial production excluding construction is close to identical to the real GDP cycle, ii) the ALI reliably leads the BCI by 6 months and iii) the longer leading components of the ALI are good predictors of the ALI and therefore the BCI up to almost a year ahead and satisfactory predictors by up to 2 years ahead. A real-time analysis for predicting the euro business cycle during the 2008/2009 recession and following recovery confirms these findings."

"This study presents empirical evidence on the long-run motives for holding euro area money by focusing on the role of equity and labour markets. Equity positively affects money demand through wealth effects, as equities are a significant store of household wealth and thus part of a financial transaction motive. Negative substitution effects through the expected return on equity reflect a speculative motive from the equity market. A precautionary motive from the labour market is captured by the annual change in the unemployment rate. The main conclusion is that equity and labour markets do matter for money. All three new elements, in particular housing and financial wealth, have been found statistically and economically significant in explaining M3 since 1983. These findings are robust across different proxies for the augmented motives and a shorter sample period starting in 1994."