De Nederlandsche Bank

We show that gifts made to heirs before death are substantial and highly responsive to taxation. Using intergenerationally-linked administrative data from the Netherlands and exploiting variation in the timing of death, we find that single people (including widows) with children transfer around 10 % of their wealth to their children in anticipation of death. This is almost entirely in the form of tax-exempt gifts. Exploiting bunching at kink points in the gift tax schedule and a reform to inheritance taxation, we estimate elasticities of gifts and wealth to taxation and find that tax-avoidance accounts for at least a significant minority of this deathbed giving. The ability to make tax-favoured gifts means that the revenue-maximising flat inheritance tax rate is at most 37 %. Equalising the tax rate on deathbed gifts and inheritances at death would increase revenues raised from singles by 10 %. • In the Netherlands, single people with children transfer around a tenth of their wealth to their children in anticipation of death. • Those with larger amounts of wealth and who suffer a health shock further in advance of death make larger deathbed transfers. • These transfers are responsive to tax incentives to transfers wealth as gifts while alive rather than after death. • The ability to make tax-free gifts limits the revenue-maximizing flat rate of inheritance tax to 37 %. • A reform that taxed deathbed gifts at the same rate as inheritances would increase inheritance and gifts tax revenues from singles by 10 %.

This study investigates the impact of climate shocks on economic activity, addressing the gap in the literature of climate change economics. Using data covering a time span of 59 years, from 1960 to 2019, we employ a new global model to examine the effects of temperature and precipitation shocks on real output across 33 countries, accounting for more than 90% of the world’s gross domestic product. Our analysis reveals that hotter and less-developed countries are more exposed to temperature shocks. Moreover, only some colder and more developed countries show a contraction of output in the medium-long run. Our results highlight trade interconnections as the main channel of propagation of climate shocks into the economic system. This study offers new insights into the transmission mechanism of climate shocks and suggests the adoption of climate policies at both global and local levels. • We study the effect of climate shocks on economic activity via a new global model. • The link between temperature/precipitation shocks and output is significant. • Temperature shocks are more significant for hotter/less-developed countries. • Trade interconnections are shown to be the main driver of the results. • There is need of policies to manage the economic effects of climate shocks.

At the start of the COVID-19 pandemic the increased market volatility and risk aversion led to a deterioration of U.S. Dollar funding conditions in the Euro Area. The swap line interventions by the ECB and Federal Reserve on March 15, 2020 aimed to alleviate the mispricing of EUR/USD FX swaps. We find that these swap line interventions were effective since they alleviated part of the mispricing. The announcement effect of the interventions is however limited; the impact of the swap line interventions is larger and more significant closer to the implementation date. This study provides insight into the effectiveness of central bank interventions in the FX swap market during turbulent periods.

Abstract In pursuing its mandate, a central bank assumes financial risks through its monetary policy operations. Central bank capital is a critical tool in mitigating these risks. We investigate the concept of central bank capital as a mechanism for risk sharing with its shareholder. Adopting an option pricing framework, we explore the setting where the central bank commits to distributing dividends when its capital is robust, while the shareholder may be called upon to recapitalize the bank during adverse economic conditions when its capital is negative. Our analysis dissects the trade-offs inherent in these options, seeking a mutually beneficial agreement that disincentivizes deviation for either party. This equilibrium is essential for safeguarding the independence and credibility of the central bank in executing monetary policy effectively.

Abstract This article analyses the consumer’s decision to apply for credit and the probability of the credit being accepted in the euro area during a period characterized by the unprecedented concomitance of events and changing borrowing conditions linked to the global coronavirus disease 2019 (COVID-19) pandemic and the Russian invasion of Ukraine. We use data between 2020Q1 and 2023Q2 from the ECB’s Consumer Expectations Survey. We find that credit demand is the highest when the first lockdown ends and it drops when supportive monetary compensation schemes are implemented. There is evidence that constrained households are significantly less likely to apply for credit. Credit is more likely to be accepted under favourable borrowing conditions and after the approval of national recovery plans. We also find that demographic, economic factors, perceptions, and expectations are associated with the demand for credit and the credit grant.

The key objective of this research is to gain a deeper understanding of the factors associated with pain of paying and to extend knowledge of the consequences. Using rich consumer survey data on the Netherlands, we find that electronic payments – both online and offline – hurt less than cash payments. This holds especially for contactless payments and iDEAL payments, a frequently used online payment method in the Netherlands, and for older people in particular but not for teenagers. Furthermore, the perceived pain of paying is positively related to the price of the product or service and slightly lower for an outing compared to grocery shopping. In addition, the pain is relatively high for individuals that are likely to value money more, such as people who find it hard to make ends meet with their income. On average, cash is perceived to be most helpful in preventing overspending, whereas contactless payments are the least helpful. The lower the perceived pain of paying contactless is in comparison to the pain associated with other payment methods, the lower its perceived usefulness in preventing overspending. Moreover, the intensity of use of contactless payments is negatively correlated with the relative pain of paying contactless, which suggests that people try to avoid the pain of paying. As the usage of cash is declining, it is important that policymakers develop tools that help consumers in averting overspending when utilizing electronic payment methods, particularly contactless ones.

This paper analyses the system of judicial protection for natural persons that are sanctioned under the system of banking supervision provided by the Single Supervisory Mechanism (SSM). As the imposition of sanctions on natural persons gains traction to ensure regulatory compliance, this study scrutinizes whether natural persons can effectively access judicial protection when sanctioned by national competent authorities (NCAs) on the request of the European Central Bank (ECB). The paper unveils the complexities of the SSM's sanctioning system. While the ECB exercises direct prudential supervision on significant banks (SIs), allowing it to ascertain whether a bank violated relevant Union law and subsequently impose administrative pecuniary penalties to the bank (SI-decision), it lacks the competence to directly impose an administrative penalty on the natural persons responsible. Instead, the ECB may require the NCAs (ECB-request) to impose appropriate penalties on the responsible natural person. Within this intricate system involving EU and national administrative procedures, the natural persons may get stuck between jurisdictions. Facts and legal questions relevant to the SI-decision adopted by the ECB in relation to the alleged breach of law conducted by the SI, subject to challenge before the EU Courts, can significantly impact the (national) sanction imposed on the natural persons. After all, they are sanctioned for that very same breach. In order to gain a complete picture of the possibilities for natural persons to gain judicial protection in this complex reality, the paper analyses the possibilities for the natural persons to gain judicial protection with respect to the sanction imposed by the NCA, the ECB-request, and the SI-decision.