Institutional funds manage the majority of the assets under management of all German investment funds. This research brief documents that institutional funds act in a strongly procyclical manner: they actively invest in higher-yielding, longer-duration and lower-rated assets as yield spreads compress. We show that this intensifies asset price volatility and highlight reasons behind this procyclical investment behaviour.

At the beginning of 2015, the ECB Governing Council decided to implement an asset purchase programme to increase inflation by lowering longer-term interest rates. The Research Brief examines how the programme has affected prices and economic activity in Germany, France, Italy and Spain. The authors are particularly interested in whether the effects differ across countries.

Did German banks take on a particularly high level of risk during the financial crisis by investing in risky government bonds? A new study examines the behaviour of German banks between 2008 and 2014 and reveals that German banks – especially those that received government support and were comparatively undercapitalised – de-risked. This finding contrasts with the results of similar studies for banks in the euro area periphery countries.

This research brief reports how consumption plans and spending propensities were affected at the early stages of the COVID-19 pandemic. An online survey shows that private households have been significantly more cautious in their spending intentions, while the average marginal propensity to spend has remained at an elevated level.

Announcements of policy actions may influence households’ expectations about future individual and aggregate economic outcomes. We show that households have lowered their expectations with regard to the economic situation and that uncertainty about the economy increased during the initial stage of the COVID-19 pandemic. We also show that households who received information on stabilizing monetary and fiscal policy measures, surprisingly, become more pessimistic concerning their future income and GDP growth.