Research

Work In Progress

A Financial Chanel of Fiscal Policy? Evidence from German Companies
Abstract coming soon.

A Quantile Probability Model for Sectoral Corporate Defaults in Europe (with Julian Metzler and Aurea Ponte Marques)
Draft coming soon. We propose a new application of quantile regressions to corporate sectoral default probabilities for scenario analysis (QPD). Our model relies on unconditional quantile regressions and a balance sheet based measure of corporate defaults in con junction with scenario-relevant macro-and sectoral variables. The paper fills a gap in the corporate default modeling and stress-testing literature as it allows to analyze scenario driven sectoral heterogeneity and non-linearity in default probabilities. We evaluate the performance of our model with various tools and demonstrate its abilities with an application to a current scenario concerned with increasing geopoliti cal and trade tensions and find that the model projects heterogeneous sensitivities across the sectors that are expected to be most vulnerable.

Journal Publications

Macroeconomic Reversal Rate in a Low Interest Rate Environment (with Jan Wilem van den End, Anna Samarina, and Irina Stanga)
Internation Journal of Central Banking (2025) published version ECB WP 2620, Coverage in SUERF, Central Banking, and a speech by Isabel Schnabel.

This paper investigates how the monetary policy transmis sion changes once the economy is in a low interest rate environment. We estimate a nonlinear model for the euro area and a panel of 10 euro-area countries over the period 1999–2019 and allow for the effects of monetary policy shocks to be state-dependent. Using smooth transition local projections (STLPs), we examine the impulse responses of investment, savings, consumption, and the output gap to an expansionary monetary policy shock under normal and low interest rate regimes. We find evidence for changes in the monetary policy transmission across the two interest rate regimes. Expansionary monetary policy shocks are either less effective in stimulating aggregate demand or their impact reverses the sign in a low interest rate regime.

Working Papers

Tax Multipliers Across the Business Cycle (with Dennis Bonam)
DNB WP 699 (old version) NEW:Revised revision (2024)

We estimate the impact of tax shocks on output across different stages of the business cycle. We do this for a panel of nine advanced economies using a harmonized dataset of narratively identified exogenous tax changes and a smooth transition local projection model. The output response to an exogenous tax shock is significant, but only during economic expansions. In recessions, the tax multiplier is insignificant, both in the short- and long run. These results are robust to a number of alternative model specifications, definitions of the business cycle, and when we control for the size and sign of the tax shock. We relate our findings to existing theories on the state dependence of the tax multiplier.

Policy Work

Advancements in stress-testing methodologies (Budnik et al.)
ECB Occasional Paper 348 (2024)

This paper provides an overview of stress-testing methodologies in Europe, with a focus on the advancements made by the European Central Bank’s Financial Stability Committee Working Group on Stress Testing (WGST). Over a four-year period, the WGST played a pivotal role in refining stress-testing practices, promoting collaboration among central banks and supervisory authorities and addressing challenges in the evolving financial landscape. The paper discusses the development and application of various stress-testing models, including top-down models, macro-micro models and system-wide models. It highlights the integration of new datasets and model validation efforts as well as the expanded use of stress-testing methodologies in risk and policy evaluation and in communication. The collaborative efforts of the WGST have demystified stress-testing methodologies and fostered trust among stakeholders. The paper concludes by outlining the future agenda for continued improvements in stress-testing practices.

Measuring the impact of the Russian Invasion on Ukraine on firm defaults (with Julian Metzler and Aurea Ponte Marques) VoXEU column on the impact of the Russian invasion of Ukraine on corporate defaults in Europe (2022)