Pierre Monnin Profile picture
Mar 27, 2020 9 tweets 8 min read Read on X
The @ecb response to #COVID19.

My new blog (link below) and a thread on what #centralbanks should do to face the crisis

(1/9)
In short
- Households & firms need massive emergency #credit to cope with #COVID19
- #centralbanks are critically accommodating credit markets
- CBs must guarantee sustainable credit conditions
- CBs must ensure that credit go where it's needed
- #HelicopterMoney is option
(2/9)
#fiscalpolicy is crucial to ensure most vulnerable get the help needed. Ambitious fiscal plans have been pledged.

Volume and price countries get on markets is key to scale-up public response to #COVID19 and for #sustainability of sovereign debt.

(3/9)
#fiscalpolicy will not cover all families' and businesses' emergency needs. Some will need bank loans.

#CentralBanks thus face massive demand for public and private emergency credit. They can ensure that enough emergency credits are provided at #sustainable conditions.

(4/9)
#CentralBanks have set #interestrates at zero since outbreak of #COVID19 crisis.

Interest rates at zero for bonds and bank loans are necessary to ensure that debt service burden of emergency credits remains sustainable after the shutdown, and do not jeopardize recovery.

(5/9)
With #PEPP, @ecb has taken decisive action to ensure that European countries’ debt price don’t soar on markets.

#centralbanks must also ensure that banks provide #loans at low rates to SMEs, to maintain #sustainability of their debt service burden after the recovery.

(6/9)
Credit must go where it is needed and reach
- countries that needs resources to contain #COVID19
- firms directly affected by the crisis

#centralbanks new asset purchases must reflect distribution of emergency credit needs, not allocation of previous #QE programs

(7/9)
Credit for those who needs it!

#centralbanks must address issue of firms with structural business plan problems prior to crisis, but that are still getting financial help linked to #COVID19.

(8/9)
#centralbanks still have one remaining option: #HelicopterMoney!

This directly put funds from the central bank into the “hands”, i.e. the bank accounts, of people. It is fast way to reach most vulnerable and would minimize their debt burden.

(9/9)
ft.com/content/abd6bb…

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More from @Pierre_Monnin

Jul 4, 2022
Important steps taken by @ecb to incorporate climate change in its monetary policy operations

Principles are going in right direction, but concrete implementation must have teeth to effectively support the transition and address climate risks in ECB balance sheet

Thread below
Benchmark for corporate bond reinvestment will be be based on backward (emissions: Scope 1+2 at the firm level + Scope 3 at sector level) + forward looking (reduction targets) data

Delta allocation weight between polluting and sustainable firms is key for measure to have impact!
Concentration limits for pledged collateral from firms with a high carbon footprint

Threshold for defining high carbon firms will signal which firms are considered as sustainable, and which ones are not

Size of limit is crucially matters for the measure to have impact
Read 8 tweets
Sep 23, 2020
The @ecb will accept sustainability-linked bonds as collateral for Eurosystem credit operations and asset purchases. What does it mean and is it important for the transition to a low-carbon economy?
Analysis in thread below
(1/7)
Sustainability-linked bonds are tied to specific social or environmental goals which, if not met, oblige companies to step up their interest payments. They thus introduce a financial incentive for companies to achieve environmental goals
(2/7)
sustainalytics.com/sustainable-fi…
So far, bonds were eligible as collateral and for asset purchases by @ecb only if their interest payment path was set at issuance. Given that sustainability-linked interest is uncertain and depends on goals achievement, such bonds were not eligible. @ecb has changed that. (3/7)
Read 7 tweets
Jul 20, 2020
#centralbank urgently need to update their risk management to ensure the transition to a #sustainable post-#COVID19 economy!
New @CEPweb blog and its thread below
(1/6)
cepweb.org/the-transition…
Pandemic and environmental crises profoundly modify demand and supply for some goods and services.
This radically reshuffles firms' asset values on financial markets and creates substantial financial risks.
See @NGFS_ for the case of climate change
(2/6)
ngfs.net/sites/default/…
Financial markets are not good at assessing transition risks linked to pandemic and environmental crises. They are mispricing them.
This is acknowledged by central banks and financial supervisors.
See, eg, the last ESRB report on climate risks
(3/6)
esrb.europa.eu/pub/pdf/report…
Read 6 tweets
Mar 15, 2020
(1/5) #ClimateCrisis : what lessons from the #COVID19 crisis?
Excellent interview from philosophe @bourg_d on @RadioTeleSuisse (in French). My take-aways below (in English)
rts.ch/play/radio/le-…
(2/5) #COVID19 crisis highlights the fragility of our economies to disruptions. The destabilisation of ecosystems by #ClimateChange - which is under way - is also a source of disruptions for our economic systems - maybe less violent than an epidemy, but which will last for years.
(3/5) An efficient containment of #COVID19 relies on: 1) changes of individual behaviours (e.g. social distancing) and 2) radical political decisions (e.g. quarantines). Preventing future disruptions from #ClimateChange also requires a change in behaviour and political decisions.
Read 5 tweets
Jul 25, 2019
(1/4) Today, the @ecb Governing Council has tasked the relevant Eurosystem Committees with examining options […] such as the design of a tiered system for reserve remuneration and […] the size and composition of potential new net asset purchases
ecb.europa.eu/press/pr/date/…
@ecb (2/4) Integrating the environmental risks outlined by the @nfgs_ (of which the @ecb is a member) and ensuring that these options are aligned with the transition to a low-carbon economy is critical and should be on top of @ecb’s agenda, including…
banque-france.fr/sites/default/…
@ecb @nfgs_ (3/4) … excluding assets exposed to high climate-related financial risks from @ecb new net purchases and…
cepweb.org/integrating-cl…
Read 4 tweets
Jun 18, 2019
The IMF's evaluation office looked at IMF advice on unconventional monetary policies (UMP). This thread summarizes its conclusions regarding UMP and #inequality.
(1/4)

Full report: ieo.imf.org/en/our-work/ev…
Background paper on UMP and inequality: ieo.imf.org/~/media/IEO/Fi… ImageImage
Distributional effects of UMP:
"While UMP may have helped close output gaps on average, it may do so by helping some and hurting others, viz., it may have distributional effects that could exacerbate inequality, particularly of wealth."
(2/4)
Role of the IMF regarding UMP and inequality:
"The IMF has played more of a convening role than a research or advisory role in
assessing the distributional impacts of UMP."
(3/4) Image
Read 4 tweets

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