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Nakitte

Institutional research & analysis

Source: ECB

CENTRAL BANK

Economic BulletinMay 13, 2026

Drivers of the labour force in the euro area

This article examines the drivers and macroeconomic implications of the recent significant expansion of the euro area labour force, which reached a record high of 173 million people in 2025. The increase reflects rising labour force participation across demographic groups and sustained net migration, with older, more educated and foreign workers accounting for much of the growth. These compositional shifts, particularly the larger share of older workers, have exerted downward pressure on the ...

ECB1 min read
Economic BulletinMay 13, 2026

What drives employment trends among older workers?

This box shows that older workers have contributed significantly to euro area employment growth in recent years, largely because they are retiring later. The share of retired individuals in the total population shows little sensitivity to the economic cycle, but has decreased steadily over the past two decades, with this decline having shifted more towards older age groups. The share of retirees is still falling among individuals in their early to mid-60s and appears likely to also do so amon...

ECB1 min read
Working PaperMay 13, 2026

The role of judgement in supervisory scores and additional capital requirements assigned to banks

We empirically analyse the role of judgement in assigning overall scores by the euro area supervisors as part of the yearly Supervisory Review and Evaluation Process (SREP), which evaluates banks’ risks and sets supervisory actions. We also analyse its role in shaping the drivers of the Pillar 2 capital requirement (P2R) that banks must fulfil. We find that supervisors actively adjust the weight of the components of the overall score to reflect qualitative information, thereby smoothing fluct...

ECB1 min read
Working PaperMay 13, 2026

The role of biodiversity risk in shaping bank lending decisions

We examine whether banks incorporate firm-level biodiversity risk into their lending decisions. Using a large sample of syndicated loans matched to firm-level biodiversity risk measures, we document that borrowers with higher biodiversity risk face significantly higher loan spreads. Evidence on loan volumes is weaker, suggesting that banks primarily adjust along the pricing margin rather than restricting credit supply. To capture biodiversity risk exposure, we develop a novel text-based indic...

ECB1 min read
Working PaperMay 12, 2026

Wildfire cashflow shocks

This paper studies the impact on cashflows and financial decisions of firms affected by wildfires, focusing on the wildfires that occurred in Portugal in 2017. Using establishment-level data from the hotel industry combined with geospatial information on wildfire proximity and land use, we employ a difference-in-differences approach to study both directly and indirectly affected firms. Our findings reveal that firms with direct damages from the wildfires recorded, on average, a 43% drop in re...

ECB1 min read
Working PaperMay 12, 2026

Supply chain uncertainty, energy prices, and inflation

Using U.S. and Euro area data, we document that (i) the pass-through of energy prices to inflation is state-dependent - stronger when supply chain uncertainty is elevated – and (ii) in such states, energy prices become more informative about logistical conditions. We develop a model in which firms combine energy and a specialized input transported through a capacity-constrained transportation network. When congestion binds, energy remains available in local markets at a premium, whereas the s...

ECB1 min read
Economic BulletinMay 12, 2026

The impact of China’s industrial rise on the euro area

China’s industrial rise is a key external force influencing euro area trade, production and prices by reducing costs for euro area companies, via intermediate inputs, and increasing competitive pressures in European and global markets. Econometric analysis shows that the increase in the exposure of the euro area to intermediate goods imports from China has been positively associated with industrial production growth, whereas the increase in imports of final goods from China has tended to weig...

ECB1 min read
Working PaperMay 11, 2026

ECB exchange rate communication

We revisit the debate on the effectiveness of central bank communication on exchange rates, contrasting a skeptical view, which holds that communication neither moves exchange rates nor influences them in the desired direction, with an optimistic view that it does. Using nearly 100 official ECB statements on exchange rates made during its monetary policy press conferences since 2002, we show that the ECB tends to mention the exchange rate when the real effective exchange rate deviates from it...

ECB1 min read
Working PaperMay 11, 2026

Do lenders price diesel risk? Evidence from Dieselgate and low-emission zones in captive vs. independent banks

Transitioning to a sustainable economy and reducing air pollution hinge on appropriate economic incentives and financing conditions. The auto loan market offers a prime setting, as lenders’ credit terms can either discourage or incentivize the purchase of high-pollution vehicles. Using loan-level data, we examine how captive and independent banks adjust lending conditions in response to information and regulatory shocks affecting diesel vehicles. Exploiting the 2015 diesel emissions scandal a...

ECB1 min read
Economic BulletinMay 11, 2026

Save your energy: how the war in the Middle East could affect household savings and the economy

This box analyses how households adjust their saving behaviour in an environment of heightened geopolitical tensions and rising energy prices. Using an empirical model together with two general equilibrium frameworks, it evaluates how adverse shocks to energy prices and consumer uncertainty could affect the saving rate, and it examines the implications for GDP growth, inflation and the distribution of consumption across households.

ECB1 min read