Abstract: How do households perceive and interpret complex dynamic relationships between macroeconomic variables? Using a rich panel of elicited subjective expectations from households across multiple countries, combined with various sources of exogenous variation, we document a robust positive response of inflation expectations to contractionary demand and supply shocks. While households consistently interpret oil shocks as stagflationary, contractionary monetary policy shocks fail to reduce inflation expectations. We explore the drivers of this surprising pattern. Despite heterogeneity in individual forecasts, expectations are strongly correlated in the cross-section. A clear factor structure emerges: two principal components-remarkably consistent across countries, demographic groups, and levels of financial literacy-explain a substantial share of the variance in expectations. These factors capture households' perceptions of the sources of macroeconomic fluctuations. The first, dominant factor reflects a broad aversion to inflation, while the second relates to perceived labor market dynamics and interest rate movements.

Abstract: We show that the stock of excess savings alters the propagation of the business cycle. It markedly weakens the transmission of monetary policy shocks to real activity and inflation; in contrast, in the face of a cost-push disturbance, excess savings cushion the impact on output while amplifying and prolonging the pass-through to inflation. These findings underscore the importance of incorporating balance-sheet conditions into the assessment and calibration of monetary policy. They also offer a new perspective on the 2022-23 cyclical episode in the euro area: in an environment characterized by historically elevated excess savings, the surge in energy prices and the unprecedented pace of policy rate hikes resulted in resilient growth and stubbornly persistent high inflation.

Presented at: Banca d'Italia, Ghent 13th Workshop on Empirical Macroeconomics, 6th Sailing the Macro Conference

Abstract: We study how increasing deposit insurance coverage during crises shape deposits and lending. We exploit a reform of Denmark’s deposit insurance during the Global Financial Crisis and administrative datasets, including the universe of deposits. Increasing insurance coverage prevents weaker banks from further losing large (previously uninsured) deposits during crises, enabling continued credit supply. However, deposit insurance facilitates reallocation of large deposits from stronger to weaker banks, and increasing credit supply by weaker banks to ex-ante riskier firms with higher ex-post defaults. Consistently, banks that gained most deposits under increasing insurance are themselves more likely to fail, particularly ex-ante weaker banks. 

Presented at: Federal Reserve Board of Governors (Financial Stability), "Rethinking Optimal Deposit Insurance" conference (Yale), University of Kentucky Finance Conference, International Monetary Fund, BIS-CEPR-SCGSFI Conference on Financial Intermediation (Gerzensee), Conference on "Bank liquidity" (BIS), 17th NY Fed / NYU Stern Conference on Financial Intermediation, 2024 OCC Bank Research Symposium, Banco de Portugal and CEPR Conference on Financial Intermediation (Lisbon), Annual ECB Banking Supervision Research Conference, MoFiR workshop on banking (London), CEMFI, Bundesbank Conference on Markets and Intermediaries, Fed Chicago, Barcelona Summer Forum 2025, FIRS 2025, and NBER Summer Institute Corporate Finance 2025.

Abstract: This Occasional Paper reviews evidence from the ChaMP Research Network on the transmission of monetary policy to households in the euro area – an area of monetary policy that has attracted less attention among researchers. It highlights the central role of banks and non-bank intermediaries in shaping how policy affects borrowing, saving and consumption. Despite the overall effectiveness of monetary policy in the euro area, the pass-through of policy rates to household borrowing costs is incomplete and heterogeneous, reflecting differences in funding structures, market power and institutional settings.

A key insight is that transmission depends on household heterogeneity. Differences in balance sheets, credit access and housing market characteristics produce uneven effects across income, age and wealth groups, with important implications for aggregate demand and distributional consequences. Another key finding is that several components of consumption respond more rapidly to changes in interest rates than previously thought, especially in high-debt, variable-rate environments.

Overall, the findings point to the need for an integrated, system-wide perspective that accounts for multiple aspects of financial structure and heterogeneity when assessing monetary policy transmission. ChaMP research also highlights the value of readily available granular data, as many novel findings stem from a major coordinated effort to use new data on households obtained from national credit registers, as well as novel granular data on household expenditure.

Abstract: In the aftermath of the COVID-19 pandemic, China’s goods exports have expanded strongly while imports have remained subdued, pushing the country’s trade surplus to record levels and raising concerns about a new ‘China shock’. This paper analyses the recent surge in Chinese exports and investigates its economic implications for the euro area and its main countries. We show that around three quarters of China’s export growth since late 2023 has been driven by domestic factors rather than external demand. Weak domestic demand emerges as the main driver of the export surge, consistent with firms redirecting output abroad as domestic absorption weakens, while subsidies and technological upgrading also make a significant contribution. The shock spreads to the euro-area economy through three main channels. First, lower Chinese import prices exert sizeable disinflationary pressures: focusing on 2025 alone, the decline in Chinese import prices is estimated to lower consumer prices of non-energy industrial goods by about 1 per cent over three years. Second, stronger import competition weighs on manufacturing activity and reduces investment, especially in transport equipment and intellectual property, with possible adverse effects on innovation and long-term growth. Third, the technological upgrade in China and the subsequent increase in Chinese penetration in third markets significantly weakens euro-area export performance.