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Julian Schumacher

Monetary Policy

Division: Monetary Policy Strategy
Current Position: Lead Economist
Fields of interest: Macroeconomics and Monetary Economics,International Economics,Law and Economics
Email: Julian.Schumacher@ecb.europa.eu

Biography

Education: 2015
PhD (Dr. rer. pol.) in Economics, Humboldt University Berlin; 2013-2014
Visiting PhD Student, Columbia University; 2010
M.Sc. Economics and Financial Economics, Nottingham University; 2009
B.A. Political Science and Economics, University of Mannheim
Professional experience: 2022-
Lead Economist - Monetary Policy Strategy Division, Directorate General Monetary Policy, European Central Bank; 2017-2021
Economist - Monetary Policy Strategy Division, Directorate General Monetary Policy, European Central Bank; 2016-2017
Economist - Risk Strategy Division, Directorate Risk Management, European Central Bank; 2015-2016
Graduate - Risk Analysis Division, Directorate Risk Management, European Central Bank; 2014-2015
Research Associate - University of Mainz; 2014
Visiting Researcher (summer) - International Monetary Fund; 2010-2013
Research Assistant - Hertie School of Governance
Teaching experience: 2015
Financial regulation after the crisis (Undergraduate seminar), University of Mainz; 2015
Government debt sustainability analysis: theory and empirics (Graduate seminar), University of Mainz; 2014-2015
Political Economy of Sovereign Debt (Graduate seminar), University of Mainz; 2014-2015
International Trade: Theory and Policy (Undergraduate lecture), University of Mainz; 2013
Applied Statistics (Graduate tutorial), Hertie School of Governance; 2012
Political Economy of Sovereign Debt and Default (Graduate seminar), Hertie School of Governance

ECB publications

1 October 2024

WORKING PAPER SERIES - No. 2985

The inflationary consequences of prioritising central bank profits

English

Abstract: This paper examines the impact of rising interest rates on central bank profitability. Using a stylized income model, we demonstrate that changes in interest rates in combination with expansive balance sheet policies introduce a cyclical component into the central bank’s profit and loss statement. Ourfindings reveal, however, that while the interplay of such policies may dampen short-term profitability if interest rates rise, they do not undermine a central bank’s financial strength, because higher interest rates also raise the value of future seigniorage income. Using data for the euro area, we quantify the consequences for inflation of setting interest rates aimed at mitigating financial losses, showing that such a strategy would lead to substantially higher inflation rates. Overall, our findings confirm that a central bank’s willingness to accept temporary losses reflects a commitment to price stability, rather than a hindrance.
JEL Code: E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
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
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy

31 July 2024

THE ECB BLOG

How central bank communication affects the economy

English

JEL Code: E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E59 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Other

9 August 2023

THE ECB BLOG

How words guide markets: measuring monetary policy communication

English

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
D53 : Microeconomics→General Equilibrium and Disequilibrium→Financial Markets

12 January 2023

ECONOMIC BULLETIN - ARTICLE

The pandemic emergency purchase programme – an initial review

Economic Bulletin Issue 8, 2022

English

Abstract: This article provides an initial review of the ECB’s pandemic emergency purchase programme (PEPP), with a focus on its objectives, implementation, and effectiveness. The ECB launched the PEPP in March 2020 in response to the extraordinary economic and financial shock brought about by the coronavirus (COVID-19) pandemic. Implementation of the programme was flexible, spreading purchases over time, across asset classes and among jurisdictions. The PEPP was instrumental in supporting market functioning and the transmission of the monetary policy stance, and thus in countering pandemic-related risks to price stability.
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
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes

4 January 2023

THE ECB BLOG

Fiscal policy: from free to affordable lunch

English

JEL Code: E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General

12 September 2022

OCCASIONAL PAPER SERIES - No. 302

Two-tier system for remunerating excess reserve holdings

English

Abstract: This paper reviews the experience of the ECB with the two-tier system for excess reserve remuneration that exempted a portion of banks’ excess liquidity (EL) holdings from the negative interest rate of the ECB’s deposit facility.
JEL Code: E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
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
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates

25 February 2022

WORKING PAPER SERIES - No. 2649

Money markets and bank lending: evidence from the adoption of tiering

English

Abstract: Exploiting the introduction of the ECB’s tiering system for remunerating excess reserve holdings, we document the importance of access to the money market for bank lending. We show that the two-tier system produced positive wealth effects for banks with excess reserves and encouraged a reallocation of liquidity toward banks with unused exemptions. This ultimately decreased the fragmentation in the money market and enhanced the monetary policy transmission mechanism. The increased access to money market by banks with unused allowances incentivizes them to extend more credit than other banks, including banks with excess liquidity whose valuations increase the most.
JEL Code: G2 : Financial Economics→Financial Institutions and Services
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit

15 January 2020

WORKING PAPER SERIES - No. 2366

Restructuring sovereign bonds: holdouts, haircuts and the effectiveness of CACs

English

Abstract: Sovereign debt crises are difficult to solve. This paper studies the “holdout problem”, meaning the risk that creditors refuse to participate in a debt restructuring. We document a large variation in holdout rates, based on a comprehensive new dataset of 23 bond restructurings with external creditors since 1994. We then study the determinants of holdouts and find that the size of creditor losses (haircuts) is among the best predictors at the bond level. In a restructuring, bonds with higher haircuts see higher holdout rates, and the same is true for small bonds and those issued under foreign law. Collective action clauses (CACs) are effective in reducing holdout risks. However, classic CACs, with bond-by-bond voting, are not sufficient to assure high participation rates. Only the strongest form of CACs, with single-limb aggregate voting, minimizes the holdout problem according to our simulations. The results help to inform theory as well as current policy initiatives on reforming sovereign bond markets.
JEL Code: F34 : International Economics→International Finance→International Lending and Debt Problems
G15 : Financial Economics→General Financial Markets→International Financial Markets
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
K22 : Law and Economics→Regulation and Business Law→Business and Securities Law

26 September 2019

ECONOMIC BULLETIN - BOX

The September policy package

Economic Bulletin Issue 6, 2019

English

Abstract: This box describes the elements and underlying rationale of the Governing Council’s comprehensive policy package decided in September.
JEL Code: E40 : Macroeconomics and Monetary Economics→Money and Interest Rates→General
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

20 June 2018

WORKING PAPER SERIES - No. 2162

Foreign-law bonds: can they reduce sovereign borrowing costs?

English

Abstract: Governments often issue bonds in foreign jurisdictions, which can provide additional legal protection vis-à-vis domestic bonds. This paper studies the effect of this jurisdiction choice on a bond prices. We test whether foreign-law bonds trade at a premium compared to domestic-law bonds. We use the euro area 2006-2013 as a unique testing ground, controlling for currency risk, liquidity risk, and term structure. Foreign-law bonds indeed carry significantly lower yields in distress periods, and this effect rises as the risk of a sovereign default increases. These results indicate that, in times of crisis, governments can borrow at lower rates under foreign law.
JEL Code: F34 : International Economics→International Finance→International Lending and Debt Problems
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
K22 : Law and Economics→Regulation and Business Law→Business and Securities Law

28 February 2018

WORKING PAPER SERIES - No. 2135

Sovereign defaults in court

English

Abstract: For centuries, defaulting governments were immune from legal action by foreign creditors. This paper shows that this is no longer the case. Building a dataset covering four decades, we find that creditor lawsuits have become an increasingly common feature of sovereign debt markets. The legal developments have strengthened the hands of creditors and raised the cost of default for debtors. We show that legal disputes in the US and the UK disrupt government access to international capital markets, as foreign courts can impose a financial embargo on sovereigns. The findings are consistent with theoretical models with creditor sanctions and suggest that sovereign debt is becoming more enforceable. We discuss how the threat of litigation affects debt management, government willingness to pay, and the resolution of debt crises.
JEL Code: F34 : International Economics→International Finance→International Lending and Debt Problems
G15 : Financial Economics→General Financial Markets→International Financial Markets
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
K22 : Law and Economics→Regulation and Business Law→Business and Securities Law

External publications

2021

Journal of International Economics

Sovereign Defaults in Court