IDEAS home Printed from https://ideas.repec.org/a/onb/oenbmp/y2019i19-q1-q2b3.html
   My bibliography  Save this article

Financing conditions in Austria since the introduction of the euro

Author

Listed:

Abstract

How have financing conditions for Austrian firms and households evolved since the start of the euro? To answer this question, we consider Austrian credit, bond and stock markets, estimate a financial conditions index and assess euro rates against a simple hypothetical monetary policy rule for Austria. We find that interest rates for bank loans have fallen since the introduction of the euro, with real interest rates being mostly lower in Austria than in Germany and the euro area average. This was partly related to the high share of variable rate loans, especially for house purchase. However, banks have compensated, at least in part, for lower interest rates by increasing non-interest price elements. Banks have also applied higher collateral requirements and loan covenants since the crisis. The post-crisis expansionary monetary policy conducted by the European Central Bank (ECB) has brought Austrian bond yields below 1% since end-2014. Earnings ratios of ATX companies were mostly below those in the DAX and Euro STOXX50. The stock earnings premium over 10-year government bonds was 2% to 3% in Austria during most of the period under review but rose substantially to around 9% in 2017/2018. A financial conditions index for Austria shows that the transmission of the policy rate through lending rates was an important driver of the tightening of financial conditions prior to and during the financial crisis. In the same way, the transmission of expansionary monetary policy through lending rates and credit risk has contributed to the loosening of financing conditions during the recovery. Judging from a hypothetical monetary policy rule for Austria, the monetary stance given by the euro area rate has been broadly adequate or slightly on the loose side in relation to economic conditions in Austria.

Suggested Citation

  • Ernest Gnan & Maria Teresa Valderrama & Walter Waschiczek, 2019. "Financing conditions in Austria since the introduction of the euro," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 19/Q1-Q2, pages 57-70.
  • Handle: RePEc:onb:oenbmp:y:2019:i:19/q1-q2:b:3
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:4e5a6ff0-7e2a-4177-aa82-2514f6ddf530/06_gnan_valderrama_waschiczek_mop_Q1_Q2_19.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Diego Nicolas Moccero & Matthieu Darracq Pariès & Laurent Maurin, 2014. "Financial Conditions Index and Identification of Credit Supply Shocks for the Euro Area," International Finance, Wiley Blackwell, vol. 17(3), pages 297-321, December.
    2. Athanasios Orphanides & John C. Williams, 2002. "Robust Monetary Policy Rules with Unknown Natural Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 63-146.
    3. Athanasios Orphanides & Volker Wieland, 2013. "Complexity and Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 167-204, January.
    4. Ansgar Belke & Jens Klose, 2017. "Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro Area Member Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 55(6), pages 1221-1238, November.
    5. Scott A. Brave & David L. Kelly, 2017. "Introducing the Chicago Fed’s New Adjusted National Financial Conditions Index," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    6. Jan Hatzius & Peter Hooper & Frederic S. Mishkin & Kermit L. Schoenholtz & Mark W. Watson, 2010. "Financial Conditions Indexes: A Fresh Look after the Financial Crisis," NBER Working Papers 16150, National Bureau of Economic Research, Inc.
    7. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    8. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ernest Gnan & Maria Teresa Valderrama & Walter Waschiczek, 2019. "Financing conditions in Austria since the introduction of the euro," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1-Q2/19, pages 57-70.
    2. Ansgar Belke & Jens Klose, 2019. "Forecasting ECB Policy Rates with Different Monetary Policy Rules," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(3), pages 238-252, June.
    3. Carla Soares & Nikolay Iskrev & Rita Fradique Lourenço, 2021. "Indicators of monetary policy stance and financial conditions: an overview," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    4. Zhu, Sheng & Kavanagh, Ella & O’Sullivan, Niall, 2021. "Inflation targeting and financial conditions: UK monetary policy during the great moderation and financial crisis," Journal of Financial Stability, Elsevier, vol. 53(C).
    5. Klose, Jens, 2023. "Estimated monetary policy rules for the ECB with granular variations of forecast horizons for inflation and output," Economic Modelling, Elsevier, vol. 127(C).
    6. Jens Klose, 2021. "Daily Monetary Policy Rules and the ECB's Medium-Term Orientation," MAGKS Papers on Economics 202129, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    8. Lars P Feld & Volker Wieland, 2021. "The German Federal Constitutional Court Ruling and the European Central Bank’s Strategy," Journal of Financial Regulation, Oxford University Press, vol. 7(2), pages 217-253.
    9. Athanasios Orphanides & John C. Williams, 2007. "Inflation targeting under imperfect knowledge," Economic Review, Federal Reserve Bank of San Francisco, pages 1-23.
    10. Beckmann, Joscha & Belke, Ansgar & Dreger, Christian, 2017. "The relevance of international spillovers and asymmetric effects in the Taylor rule," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 162-170.
    11. Orphanides, Athanasios & Williams, John C., 2005. "The decline of activist stabilization policy: Natural rate misperceptions, learning, and expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 29(11), pages 1927-1950, November.
    12. Hasui Kohei, 2021. "Trend Growth and Robust Monetary Policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 21(2), pages 449-472, June.
    13. Jeevan Kumar Khundrakpam & Rajesh Kavediya & Jessica M. Anthony, 2017. "Estimating Financial Conditions Index for India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 16(1), pages 61-89, April.
    14. Michael Scharnagl & Christina Gerberding & Franz Seitz, 2010. "Should Monetary Policy Respond to Money Growth? New Results for the Euro Area," International Finance, Wiley Blackwell, vol. 13(3), pages 409-441, December.
    15. Duo Qin & Qingchao Wang, 2016. "Predictive Macro-Impacts of PLS-based Financial Conditions Indices: An Application to the USA," Working Papers 201, Department of Economics, SOAS University of London, UK.
    16. Orphanides, Athanasios & Williams, John C., 2007. "Robust monetary policy with imperfect knowledge," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1406-1435, July.
    17. Athanasios Orphanides, 2007. "Taylor rules," Finance and Economics Discussion Series 2007-18, Board of Governors of the Federal Reserve System (U.S.).
    18. Michael Woodford, 2008. "How Important Is Money in the Conduct of Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1561-1598, December.
    19. Athanasios Orphanides, 2011. "Monetary Policy Lessons from the Crisis," Chapters, in: Sylvester Eijffinger & Donato Masciandaro (ed.), Handbook of Central Banking, Financial Regulation and Supervision, chapter 2, Edward Elgar Publishing.
    20. Stéphane Lhuissier & Aymeric Ortmans & Fabien Tripier, 2024. "The Risk of Inflation Dispersion in the Euro Area," Working papers 954, Banque de France.

    More about this item

    Keywords

    interest rates; credit conditions;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2019:i:19/q1-q2:b:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rita Glaser-Schwarz (email available below). General contact details of provider: https://edirc.repec.org/data/oenbbat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.