In the aftermath of the global financial crisis, a consensus rapidly emerged that systemic risk – a central concept in financial stability – needed to be contained going forward. However, to this day experts cannot agree on how to even measure systemic risk in the first place. In the past few years, researchers have proposed a plethora of indicators, making matters more difficult for policymakers. Our study proposes an analytical approach designed to lend structure to this universe of indicators for measuring systemic risk.

Is there a difference between the inflation expectations of private households in Germany formed under the ECB’s previous target definition of “below, but close to, 2%” and those under the new inflation target of “symmetrically 2%”? New survey results from the Bundesbank Online Panel Households (BOP-HH) show that the new inflation target is associated with moderately higher inflation expectations for the next two to three years. The differences become more accentuated when the respondents are also told that the new monetary policy strategy entails the possibility of inflation exceeding the target.

Banks grant long-term loans funded by short-term customer deposits. This maturity transformation earns banks money because long-term interest rates are generally higher than short-term interest rates. At the same time, this exposes banks to the risk that interest rates will rise, forcing them to pay more for deposits in the short term already, whereas they only receive the higher interest on new loans. In the low interest rate environment which has prevailed over the past few years, the premium on assuming interest rate risk has trended downward. At the same time, banks with poor profitability have stepped up their maturity transformation and thus also this risk. This is potentially a sign of a search for yield.

The outbreak of the COVID-19 pandemic had an unprecedented impact on the global economy, forcing governments to take rapid fiscal action. However, generous government support programmes depend on the government having a good credit rating. How do financial market players take fiscal constraints into account in their investment decisions? A new study looks into this question by analysing developments in short positions in the first few months of the COVID-19 pandemic in Europe.

It is often said that industry in oil-importing countries is especially hard hit when oil prices climb. However, a new study reveals that the manufacturing sector actually often does well during episodes of elevated oil prices. This is because, from a global perspective, that particular sector is a driving force behind oil price movements. The manufacturing sector’s healthy performance thus bolsters the economy of oil-importing countries in times of rising oil prices. Conversely, industry often exerts negative effects when oil prices fall.

The root causes of the Great Depression from 1929 to 1933 have been researched extensively. In this context, economic historians view central bank policy as having played a pivotal role, something which empirical modelling often fails to confirm. A new study likewise examines this influence empirically, but more explicitly takes into account the functioning of the international monetary system at the time – the international gold standard.

Institutional funds manage the majority of the assets under management of all German investment funds. This research brief documents that institutional funds act in a strongly procyclical manner: they actively invest in higher-yielding, longer-duration and lower-rated assets as yield spreads compress. We show that this intensifies asset price volatility and highlight reasons behind this procyclical investment behaviour.

At the beginning of 2015, the ECB Governing Council decided to implement an asset purchase programme to increase inflation by lowering longer-term interest rates. The Research Brief examines how the programme has affected prices and economic activity in Germany, France, Italy and Spain. The authors are particularly interested in whether the effects differ across countries.

Did German banks take on a particularly high level of risk during the financial crisis by investing in risky government bonds? A new study examines the behaviour of German banks between 2008 and 2014 and reveals that German banks – especially those that received government support and were comparatively undercapitalised – de-risked. This finding contrasts with the results of similar studies for banks in the euro area periphery countries.

This research brief reports how consumption plans and spending propensities were affected at the early stages of the COVID-19 pandemic. An online survey shows that private households have been significantly more cautious in their spending intentions, while the average marginal propensity to spend has remained at an elevated level.