Macro-finance, systemic risk and macroprudential policy

Given the key role of financial markets in the transmission of monetary policy, it is crucial for the ECB to remain at the forefront of research on issues related to macro-financial linkages, financial instability, contagion and spillovers, macroprudential policies and early warning models and indicators.

Macroprudential policies and their effects

General area of interest: there has been a widespread adoption of macroprudential policies in recent years, which highlights the need to understand their usefulness and macroeconomic effects.

Selected areas of focus:

• drivers of systemic risk
• effects of macroprudential policies on output, credit and asset prices
• optimal level of capital requirements
• determinants of the effectiveness (or lack thereof) of macroprudential policies
• complementarities and interactions between macroprudential policies and monetary policy

Macro-financial linkages

General area of interest: interaction between financial markets and macroeconomic outcomes.

Selected areas of focus:

• effects of financial conditions, such as leverage, on macroeconomic performance and volatility
• market failures that foster excessive leverage and/or risk-taking by market participants
• development of techniques to assess macroeconomic risk and its relation to financial conditions

Monetary policy and financial stability

General area of interest: accommodative monetary policy can help relax financial constraints, but it can also incite risk-taking.

Selected areas of focus:

• effects of conventional and unconventional monetary policy on financial constraints and risk-taking
• costs and benefits of “leaning against the wind”
• financial dominance
• effects of climate change on banking stability and implications for financial regulation