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Alberto Musso
Monetary Policy
- Division
Monetary Analysis
- Current Position
-
Lead Economist
- Fields of interest
-
Macroeconomics and Monetary Economics
- Education
- 2005
PhD in Economics (EUI)
- 1996
MA in Economics (University of Manchester)
- 1994
Laurea in Economia e Commercio (Universitá di Firenze)
- Professional experience
- 2014-
Senior Economist/Principal Economist/Lead Economist, Monetary Analysis Division, Directorate General Monetary Policy, European Central Bank
- 2008-2013
Senior Economist, Monetary Policy Stance Division, Directorate General Economics, European Central Bank
- 2000-2007
Economist/Senior Economist, Euro Area Macroeconomic Developments Division, Directorate General Economics, European Central Bank
- 23 June 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 4, 2022Details
- Abstract
- The debt financing structure of euro area firms has broadened since the introduction of the euro. While bank loans still account for a major share of corporate debt, euro area firms have increasingly resorted to bond financing over the past decade and a half. Empirical evidence suggests that this shift in firms’ debt financing structures affects the transmission of shocks to the euro area economy. While corporate bonds and loans typically respond in a similar procyclical manner to exogenous changes in business investment, bond issuance tends to mildly cushion the credit contraction resulting from adverse supply shocks. The evidence also indicates that a higher share of bond financing strengthens the transmission of monetary policy measures that primarily operate via longer-term yields, whereas short-term rate changes tend to exert stronger real effects in economies that are more dependent on loans. From a broader perspective, the higher share of bond financing renders euro area firms more resilient against crises concentrated in the banking sector. However, this benefit may be counteracted by a rising presence of more vulnerable firms in the corporate bond market and by the structural vulnerabilities of non-bank financial intermediaries, which are significant investors in that market.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 7 October 2021
- WORKING PAPER SERIES - No. 2600Details
- Abstract
- This paper develops a Bayesian quantile regression model with time-varying parameters (TVPs) for forecasting inflation risks. The proposed parametric methodology bridges the empirically established benefits of TVP regressions for forecasting inflation with the ability of quantile regression to model flexibly the whole distribution of inflation. In order to make our approach accessible and empirically relevant for forecasting, we derive an efficient Gibbs sampler by transforming the state-space form of the TVP quantile regression into an equivalent high-dimensional regression form. An application of this methodology points to a good forecasting performance of quantile regressions with TVPs augmented with specific credit and money-based indicators for the prediction of the conditional distribution of inflation in the euro area, both in the short and longer run, and specifically for tail risks.
- JEL Code
- C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 277Details
- Abstract
- This paper discusses the role of economic and monetary analysis in the monetary policy strategy of the European Central Bank (ECB). Both areas of analysis have evolved since the 2003 strategy review. Economic analysis has assigned an increasingly relevant role to the Eurosystem and ECB staff macroeconomic projections in forming a view on the medium-term outlook for economic activity and inflation. Furthermore, its focus has strengthened with regard to structural trends in shaping key economic relationships. Similarly, monetary analysis has shifted in focus: while the 2003 review emphasised the information value of monetary dynamics for detecting risks to price stability over medium-term to longer-term horizons, the focus of monetary analysis has increasingly been redirected to the assessment of monetary policy transmission. This evolution has opened a gap between the formal description of the strategy following the 2003 review and the practice of economic and monetary analysis in informing the ECB’s policy deliberations. This paper concludes by presenting options for closing this gap and aligning the strategy formulation with the evolved role of economic and monetary analysis.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 4 February 2020
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 1, 2020Details
- Abstract
- Bank lending to euro area corporates has gradually recovered since 2014, supported by very favourable financing conditions. An assessment of this recovery indicates that it has been broadly in line with economic activity, although loan growth has remained below pre-crisis levels. The moderate pace of the recovery in loan growth mainly reflects the post-crisis deleveraging process and the growing relevance of alternative sources of financing, as well as somewhat weaker economic activity compared with the pre-crisis period. Nevertheless, evidence suggests that bank lending to non-financial corporations has supported firms’ business investment. The strength of the relationship between business investment and bank lending to corporates has, however, differed across euro area countries. Qualitative and quantitative evidence shows that the recovery in bank lending to corporates has received strong support from the ECB’s non-standard monetary policy measures.
- JEL Code
- E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 25 April 2019
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2019Details
- Abstract
- The evidence presented in this box suggests that the leading and pro-cyclical properties of real M1 for real GDP remain a robust stylised fact for the euro area. Moreover, the box documents that these properties seem to reflect the information content of narrow money, beyond the influence of interest rates. Finally, the box presents model-based evidence indicating that despite the recent deceleration, recent real M1 developments do not point to risks of a recession in the euro area up to early 2020.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
- 30 April 2018
- WORKING PAPER SERIES - No. 2147Details
- Abstract
- We build a dynamic factor model with time-varying parameters and stochastic volatility and use it to decompose the variance of a large set of financial and macroeconomic variables for 22 OECD countries spanning from 1960 onwards into contributions from country-specific uncertainty, region-specific uncertainty and uncertainty common to all countries. We find that common global uncertainty plays a primary role in explaining the volatility of inflation, interest rates and stock prices, although to a varying extent over time. Region-specific uncertainty drives most of the exchange rate volatility for all Euro Area countries and for countries in North-America and Oceania. All uncertainty estimates (global, regional, country-specific and idiosyncratic) play a non-negligible role for real economic activity, credit and money for most countries. We also find that all uncertainty measures display significant recurrent fluctuations, that the recent peaks in uncertainty found for most estimates around 2008/2009 are comparable to those seen in the mid-1970s and early 1980s, and that all uncertainty measures appear to be strongly countercyclical and positively correlated with inflation.
- JEL Code
- C15 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Statistical Simulation Methods: General
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 13 June 2017
- WORKING PAPER SERIES - No. 2075Details
- Abstract
- This paper provides empirical evidence on the macroeconomic impact of the expanded asset purchase programme APP) announced by the European Central Bank (ECB) in January 2015. The shock associated to the APP is identified with a combination of sign, timing and magnitude restrictions in the context of an estimated time-varying parameter VAR model with stochastic volatility. The evidence suggests that the APP had a significant upward effect on both real GDP and HICP inflation in the euro area during the first two years. The effect on real GDP appears to be stronger in the short term, while that on HICP inflation seems more marked in the medium term. Moreover, several channels of transmission appear to have been activated, including the portfolio rebalancing channel, the exchange rate channel, the inflation re-anchoring channel and the credit channel.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 19 September 2012
- WORKING PAPER SERIES - No. 1469Details
- Abstract
- This paper provides empirical evidence on the role played by loan supply shocks over the business cycle in the Euro Area, the United Kingdom and the United States from 1980 to 2010 by applying a time-varying parameters VAR model with stochastic volatility and identifying these shocks with sign restrictions. The evidence suggests that loan supply shocks appear to have a significant effect on economic activity and credit market variables, but to some extent also inflation, in all three economic areas. Moreover, we report evidence that the short-term impact of these shocks on real GDP and loan volumes appears to have increased in all three economic areas over the past few years. The results of the analysis also suggest that the impact of loan supply shocks seems to be particularly important during slowdowns in economic activity. As regards to the most recent recession, we find that the contribution of these shocks can explain about one half of the decline in annual real GDP growth during 2008 and 2009 in the Euro Area and the United States and possibly about three fourths of that observed in the United Kingdom. Finally, the contribution of loan supply shocks to the decline in the annual growth rate of loans observed from the peaks of 2007 to the troughs of 2009/2010 was slightly less than half of the total decline in the Euro Area and the United States and somewhat more than half of that in the United Kingdom.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
- 26 February 2010
- WORKING PAPER SERIES - No. 1161Details
- Abstract
- The paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the US and in the euro area. First, it establishes some stylised facts concerning key variables in the housing market, such as the real house price, residential investment and mortgage debt on the two sides of the Atlantic. Then, it presents evidence from Structural Vector Autoregressions (SVAR) by focusing on the effects of three structural shocks, (i) monetary policy, (ii) credit supply and (iii) housing demand shocks on the housing market and the broader economy. We find that similarities overshadow differences as far as the role of the housing market is concerned. We find evidence pointing in the direction of a stronger role for housing in the transmission of monetary policy shocks in the US, while the evidence is less clearcut for housing demand shocks. We also find that credit supply shocks matter more in the euro area.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 25 February 2010
- WORKING PAPER SERIES - No. 1157Details
- Abstract
- This paper provides evidence on the reliability of euro area real-time output gap estimates. A genuine real-time data set for the euro area is used, including vintages of several sets of euro area output gap estimates available from 1999 to 2006. It turns out that real-time estimates of the output gap are characterised by a high degree of uncertainty, much higher than that resulting from model and estimation uncertainty only. In particular, the evidence indicates that both the magnitude and the sign of the real-time estimates of the euro area output gap are very uncertain. The uncertainty is mostly due to parameter instability, while data revisions seem to play a minor role. To benchmark our results, we repeat the analysis for the US over the same sample. It turns out that US real time estimates are much more correlated with final estimates than for the euro area, data revisions play a larger role, but overall the unreliability in real time of the US output gap measures detected in earlier studies is confirmed in the more recent period. Moreover, despite some difference across output gap estimates and forecast horizons, the results point clearly to a lack of any usefulness of real-time output gap estimates for inflation forecasting both in the short term (one-quarter and one-year ahead) and the medium term (two-year and three-year ahead). By contrast, some evidence is provided indicating that several output gap estimates are useful to forecast real GDP growth, particularly in the short term, and some appear also useful in the medium run. No single output gap measure appears superior to all others in all respects.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 26 September 2007
- WORKING PAPER SERIES - No. 811Details
- Abstract
- This paper provides a comprehensive analysis of the functional form of the euro area Phillips curve over the past three decades. In particular, compared to previous literature we analyse the stability of the relationship in detail, especially as regards the possibility of a time-varying mean of inflation. Moreover, we conduct a sensitivity analysis across different measures of economic slack. Our main findings are two. First, there is strong evidence of time variation in the mean and slope of the Phillips curve occurring in the early to mid 1980s, but not in inflation persistence once the mean shift is allowed for. As a result of the structural change, the Phillips curve became flatter around a lower mean of inflation. Second, we find no significant evidence of non-linearity, in particular in relation to the output gap.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 31 August 2007
- WORKING PAPER SERIES - No. 804Details
- Abstract
- This paper is concerned with the estimation of euro area potential output growth and its decomposition according to the sources of growth. The growth accounting exercise is based on a multivariate structural time series model which combines the decomposition of total output according to the production function approach with price and wage equations that embody Phillips type relationships linking inflation and nominal wage dynamics to the output gap and cyclical unemployment, respectively. Assuming a Cobb-Douglas technology with constant returns to scale, potential output results from the combination of the trend levels of total factor productivity and factor inputs, capital and labour (hours worked), which is decomposed into labour intensity (average hours worked), the employment rate, the participation rate, and population of working age. The nominal variables (prices and wages) play an essential role in defining the trend levels of the components of potential output, as the latter should pose no inflationary pressures on prices and wages. The structural model is further extended to allow for the estimation of potential output growth and the decomposition according to the sources of growth at different horizons (long-run, medium run and short run); in particular, we propose and evaluate a model–based approach to the extraction of the low–pass component of potential output growth at different cutoff frequencies. The approach has two important advantages: the signal extraction filters have an automatic adaptation property at the boundaries of the sample period, so that the real time estimates do not suffer from what is often referred to as the ”end–of-sample bias”. Secondly, it is possible to assess the uncertainty of potential output growth estimates with different degrees of smoothness.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C51 : Mathematical and Quantitative Methods→Econometric Modeling→Model Construction and Estimation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
- 20 October 2006
- OCCASIONAL PAPER SERIES - No. 53Details
- Abstract
- This paper provides a description and a discussion of some important aspects relating to recent productivity developments in the euro area. Following decades of stronger gains in the euro area than in the US, labour productivity growth has fallen behind that in the US in recent years. This reflects a decline in average labour productivity growth observed in the euro area since the mid-1990s, which stands in sharp contrast with opposite developments in the US. The decline in labour productivity growth experienced in the euro area since the mid-1990s resulted from both lower capital deepening and lower total factor productivity growth. From a sectoral perspective, industries not producing or using intensively information and communication technology (ICT) would appear mostly responsible for the decline in average labour productivity growth since the mid-1990s. These developments were broadly experienced by most euro area countries. A comparison with developments in the US suggests that the euro area economy seems to have benefited much less from increased production and use of ICT technologies, in particular in the services sector. Diverging trends in labour productivity growth between the euro area and the US in recent years mainly reflect developments in a number of specific ICT-using services such as retail, wholesale and some financial services where strong gains were registered in the US. The evidence presented in this paper suggests that, in order to support economic growth in the euro area, emphasis should be given to both policy measures that directly address the determinants of productivity and, given the interactions among the various factors of growth, to policies that raise labour utilisation.
- JEL Code
- J24 : Labor and Demographic Economics→Demand and Supply of Labor→Human Capital, Skills, Occupational Choice, Labor Productivity
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
- 28 August 2006
- OCCASIONAL PAPER SERIES - No. 51Details
- Abstract
- This paper examines the macroeconomic consequences of future demographic trends for economic growth, financial markets and public finances. It shows that in the absence of reforms and responses by economic agents, the currently projected demographic trends imply a decline in average real GDP growth and a severe burden in terms of pay-as-you-go pension and health care systems. Population ageing will change the financial landscape, with a potentially larger role for financial intermediaries and asset prices. All this points to a need to closely monitor demographic change also from a monetary policy perspective. While population projections are surrounded by considerable uncertainty and the effects of demographic change tend to be drawn out, the magnitude of the potential effects calls for an early recognition of this issue. This paper provides some input to the examination of possible policy issues.
- JEL Code
- J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
- 28 January 2005
- OCCASIONAL PAPER SERIES - No. 22Details
- Abstract
- For monetary policy purposes it is useful to apply a concept of potential output growth that looks through the fluctuations inherent in most model based estimates. Growth accounting can be a useful tool in this respect, given its focus on average developments in real GDP growth and supply side factors over medium to longer-term horizons. This paper describes the assumptions and measurement issues underlying the growth accounting framework and applies it to euro area data for the period 1980 to 2003. It shows that growth in measured total factor productivity has been the single most important contributor to real GDP growth over this period. However, the contribution to growth from this factor declined between the 1980s and the 1990s, while that from labour increased. Looking forward, the projected demographic developments imply a reduction in average real GDP growth in the coming decades unless compensation is achieved from other supply-side factors.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
- 2021
- Journal of Business & Economic Statistics
- 2020
- European Economic Review
- 2017
- Journal of Applied EconometricsLoan supply shocks and the business cycle
- 2012
- Empirical EconomicsGrowth accounting for the euro area: a structural approach
- 2011
- Economic ModellingThe reliability of real-time estimates of the euro area output gap
- 2011
- Journal of Banking & FinanceHousing, consumption and monetary policy: how different are the US and the euro area?
- 2009
- International Journal of Central BankingInstability and nonlinearity in the Euro area Phillips curve
- 2007
- Empirical EconomicsEstimating potential output and the output gap for the euro area: a model-based production function approach
- 2007
- Growth and Cycle in the EurozoneBasic characteristics of the euro area business cycle
- 2002
- IMF Staff PapersComparing Projections and Outcomes of IMF-supported Programs