In recent years, the European Union has imposed various types of financial sanctions against Russian banks. A new study examines whether these measures have affected payment flows in TARGET2.

Record inflation in the euro area has led the ECB Governing Council to start raising its key interest rates. The effects on the domestic economy and spillover effects on foreign countries may primarily depend on whether exchange rates are floating or fixed. A new empirical study shows that, during the time of the Deutschmark, the Bundesbank’s monetary policy was transmitted to a significantly greater degree to neighbouring European countries with fixed exchange rates to the Deutschmark than to those with floating exchange rates to the Deutschmark.

A Bundesbank survey shows that individuals living in Germany suffered different types of financial losses during the pandemic. Primarily individuals with lower incomes reported losses in wages and salaries which persisted much longer than other financial losses, such as falling securities prices. The latter were frequently reported at the start of the pandemic, but were subsequently offset at least partly, according to the respondents. It was mainly the more persistent wage and salary losses that changed households’ consumption and saving decisions. Altered saving and consumption behaviour can, in turn, affect the transmission of monetary policy measures.

In a securitisation, a clearly defined and immutable loan portfolio is removed from a bank’s balance sheet and converted into marketable securities – that is the general understanding of how securitisation works. However, contrary to this view, the composition of securitised loan portfolios may change during the life of the securities. A new study explains why this is the case and examines the impact of replenishment on the quality of securitised portfolios. Originators’ reputation and transparency in the securitisation market are identified as key determinants in the selection of loans used to replenish securitised portfolios.

Are asset prices driven by news or by factors unrelated to economic fundamentals, such as market sentiment? In most asset pricing models news play a dominant role, but most empirical applications find only a low explanatory power of news. A new study examines this problem using an extensive time-stamped event database and finds that about half of all high-frequency market movements can be attributed to news.

Implementing a minimum exchange rate regime by buying foreign currency eases monetary conditions domestically and may thus have a direct impact on the inflation rate. However, such foreign currency purchases involve a risky expansion of the central bank’s balance sheet total. A new model can now predict what expansion of the balance sheet a central bank must expect if it wishes to implement a minimum exchange rate in the foreign exchange market.

Climate change is a global challenge that requires international policy coordination. This conclusion is also borne out in a recent study on the macroeconomics implications of carbon pricing. Several different scenarios are considered – different regions introduce carbon pricing schemes unilaterally or in cooperation, and in the presence or absence of border adjustment schemes.

As a response to the Covid-19 pandemic, parents in Germany received a series of transfer payments from the state in 2020 and 2021. This so-called child bonus (“Kinderbonus”) amounted to a total of €450 per child. A new study finds that the child bonus led to only a slight increase in household spending. Therefore, the child bonus should be seen less as a fiscal stimulus measure and more as an instrument of redistribution from the general population to families.

Are individuals concerned enough about climate change to change their behavior and bear additional costs as a consequence? How can they be motivated to fight climate change? A Bundesbank survey conducted between April 2020 and December 2021 shows that people are more concerned about climate change than about the state of the economy. During most of the ongoing pandemic, only the coronavirus was of a higher concern. While people who rate climate change as a serious issue are also more willing to take on additional costs to help fight climate change, providing information on ways to reduce carbon emissions further increases their willingness to do so.

The rate of inflation has a bearing on the relative price of individual products and therefore on demand for those products. Using new micro price data, we investigate how high the optimal inflation rate must be to prevent relative product demand from being distorted. Contradicting a common claim, we find that the optimal rate is not zero for a large part of the euro area, but is, in fact, clearly in positive territory.