Blog post by Matteo Ciccarelli, Matthieu Darracq Pariès, Bettina Landau and João Sousa | Central banks project future developments based on past data patterns and a set of assumptions. Crises can change economic structures, complicating this forecasting. The ECB Blog explains how scenario, risk and sensitivity analyses address the new uncertainty. We use economic models and data patterns from the past to project the future. In normal times, assessing what conditions will be like in the near future can be...

Transition plans hold potential for enhancing financial stability assessments by providing forward-looking information that can be useful to measure and monitor climate-related risks. This report considers the role that financial and non-financial firms’ transition plans can play for financial stability assessments, in particular as a source of information for monitoring climate-related financial risks and vulnerabilities, and as a tool for helping to address some of those risks. Climate transition planning and the resulting outputs – transition plans – have seen increased...

Blog post by Arnaud Dyèvre | Investments in R&D typically foster productivity growth. But the funding source matters. The ECB Blog shows that publicly funded R&D complements private investments and has greater effects on productivity growth because of its larger spillovers. Arguably, the track record of government-funded innovation is mixed. On the one hand, governments have funded some technological endeavours that later turned out to be unsuccessful and costly. On the other hand, the history of technology is also filled...

Prepared by Pablo Anaya Longaric, Alessandro De Sanctis, Charlotte Grynberg, Vasileios Kostakis and Francesca Vinci Published as part of the ECB Economic Bulletin, Issue 8/2024.   1 Introduction The surge in energy prices following the unjustified Russian invasion of Ukraine exposed the EU to the largest energy shock since the 1970s. As a key input in virtually any production process, the sharp rise in energy prices not only contributed to a surge in inflation and a loss of purchasing power for households but also to...

By Julie Cooper and Tim Youngberry | New Public Financial Management (NPFM) emerged in the 1980s as a transformative approach to public sector governance, aimed at enhancing efficiency, accountability, and responsiveness. Rooted in principles drawn from private sector management, NPFM promotes results-oriented practices such as performance-based budgeting, measurable outcomes, and decentralized management. Its objectives align closely with those of traditional PFM: ensuring fiscal discipline, strategically allocating resources, and delivering services efficiently and effectively. However, while NPFM's objectives are commendable and...