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Laura Parisi
International & European Relations
- Division
EU Institutions & Fora
- Current Position
-
Team Lead - Economist
- Fields of interest
-
International Economics,Financial Economics,Microeconomics
- Education
- 2014-2017
PhD in Economics and Management - University of Pavia and NYU Stern Business School, Italy and USA
- 2009-2012
Master in Theoretical Physics - University of Pavia, Italy
- 2007-2009
BA degree in Physics - University of Pavia, Italy
- Professional experience
- 2022-2023
Team Lead - Directorate General Macroprudential Policy and Financial Stability, European Central Bank
- 2021-2022
Team Lead - Climate Change Centre, European Central Bank
- 2019-2021
Financial Stability Expert - Stress Test Modelling, Directorate General Macroprudential Policy and Financial Stability, European Central Bank
- 2017-2019
PhD Trainee, Research Analyst and Financial Stability Expert - Financial Regulation and Policy, Directorate General Macroprudential Policy and Financial Stability, European Central Bank
- 15 December 2023
- OCCASIONAL PAPER SERIES - No. 336Details
- Abstract
- In this paper we analyse the sensitivity of the macroeconomic outcomes under the Network for Greening the Financial System’s (NGFS’s) Phase III net-zero and delayed transition scenarios to different monetary and fiscal policy settings. In doing so, we provide a rare application of the NGFS climate scenarios to economic assessment through the lens of the macroeconomic modelling frameworks underlying the scenario construction (e.g. NiGEM). Using the model to disentangle the main drivers of the scenarios, we show that gross domestic product (GDP) growth is shaped by physical and transition shocks jointly, whereas transition shocks account for most of the inflationary pressure. As regards alternative policy settings within the model, it turns out that Fiscal recycling options become more discriminant in terms of GDP impact in the medium term. Full recycling through government investment yields the strongest output multiplier, whereas recycling through household transfers or reduced income taxes yields the lowest multiplier. During the transition, euro area macroeconomic variables respond very similarly if two-pillar or price level-targeting monetary policy rules are followed. The Taylor- rule, reacting to inflation and output gap, yields higher and more persistent inflation as well as stronger short-term interest rate increases. These findings are certainly model-specific but do reflect the policy sensitivity embedded of the NGFS scenarios, within the confines of the very model used to build them up.
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
D6 : Microeconomics→Welfare Economics
- 1 December 2023
- OCCASIONAL PAPER SERIES - No. 335Details
- Abstract
- Biodiversity – the variety of life on Earth – is essential for sustaining the healthy ecosystems that our economy and banks depend on. Despite the clear benefits of a healthy natural world for people and the economy, humanity is putting immense pressure on nature and biodiversity. Economic activities that rely on healthy nature are often responsible for generating environmental pressures. It is important to assess the impact that firms and financial institutions have on nature degradation, in order to reveal their exposure to transition risk and highlight the need to move towards an economic system that values nature, rather than putting it at risk. This study analyses the contribution of euro area economic activities – and the bank loans provided to enable them – to biodiversity loss by estimating biodiversity footprints. The datasets we use account for approximately €4.3 trillion in corporate loans to around 4.2 million companies located in the euro area, issued by more than 2,500 unique consolidated euro area banks. Considering two primary drivers of biodiversity loss (land-use change and climate change), the results show that the economy has had a significant impact on biodiversity, equivalent to the loss of 582 million hectares of “pristine” natural areas worldwide. Even though the impact on biodiversity is highest in Europe, the supply chains of companies are important determinants of their indirect biodiversity footprint worldwide. Asia and Africa have the largest areas impacted by activities that take place in company supply chains. Additionally, financing of economic activities with a high global impact on nature is concentrated: the ten banks with the highest financing share are responsible for financing around 40% of the total global impact of euro area firms. [...]
- JEL Code
- C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
Q5 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics
- 8 November 2023
- OCCASIONAL PAPER SERIES - No. 333Living in a world of disappearing nature: physical risk and the implications for financial stabilityDetails
- Abstract
- The loss of biodiversity and the degradation of natural ecosystems pose a significant threat to the broader economy and financial stability that central banks and financial supervisors cannot ignore. To gain further insights into the implications of nature and ecosystem service degradation for financial stability, this study assesses the dependencies of euro area non-financial corporations and banks on different ecosystem services. The study then develops a method to capture banks’ credit portfolio sensitivity to possible future changes in the provision of ecosystem services. Our results show that 75% of all corporate loan exposures in the euro area have a strong dependency on at least one ecosystem service. We also find that loan portfolios may be significantly affected if nature degradation continues its current trend, with greater vulnerabilities concentrated in certain regions and economic sectors.
- JEL Code
- C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
Q5 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics
- 11 October 2023
- WORKING PAPER SERIES - No. 2856Details
- Abstract
- The systemic risk measure (SRISK) by V-Lab provides a market view of the vulnerability of financial institutions to a sudden downturn in the economy. To overcome the shortcoming that it cannot be applied to non-listed banks, SRISK characteristics of listed banks are mapped on balance sheet information. Systemic risk tends to be higher for banks that are larger, less profitable and have lower equity funding. Balance sheet information provides a surprisingly good approximation of SRISK for non-listed banks, when compared with banks’ capital depletion from the EU-wide stress testing exercises in 2018 and 2021. The proposed methodology can usefully complement the more thorough overview provided by traditional stress tests, providing supervisors the option to evaluate the systemic risks of the banking system at a higher frequency and at a fraction of the costs.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G1 : Financial Economics→General Financial Markets
- 18 November 2022
- THE ECB BLOGDetails
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q56 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Environment and Development, Environment and Trade, Sustainability, Environmental Accounts and Accounting, Environmental Equity, Population Growth
Q51 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Valuation of Environmental Effects
Related- 15 November 2022
- THE ECB BLOG
- 9 November 2022
- THE ECB BLOG
- 7 November 2022
- THE ECB BLOG
- 2 November 2022
- THE ECB BLOG
- 20 May 2022
- WORKING PAPER SERIES - No. 2665Details
- Abstract
- We analyse the double materiality of climate physical and transition risks in the euro area economy and banking sector. By tailoring the EIRIN Stock-Flow Consistent behavioural model, we provide a dynamic balance sheet assessment of the Network for Greening the Financial System scenarios. We find that an orderly transition achieves early co-benefits by reducing carbon emissions (12% less in 2040 than in 2020) while supporting growth in economic output. In contrast, a disorderly transition worsens the economic performance and financial stability of the euro area. Further, in disorderly transition with high physical risks, real GDP decreases by 12,5%in 2050 relative to an orderly transition. Second, by extending the concept of climate sentiments to firms, we analyse how expectations about climate policy credibility affect investment decision in high or low-carbon goods. Firms that trust an orderly policy introduction and anticipate carbon price scenarios switch earlier to low-carbon investments. This, in turn, accelerates economic decarbonization and decreases the risk of carbon stranded assets for investors. Our results highlight the crucial role of early and credible climate policies to signal investment decisions in the low-carbon transition.
- JEL Code
- B59 : History of Economic Thought, Methodology, and Heterodox Approaches→Current Heterodox Approaches→Other
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
- 19 October 2021
- MACROPRUDENTIAL BULLETIN - FOCUS - No. 15Details
- Abstract
- By means of a theoretical model, this analysis finds that without policy intervention, transition risk generates excessive risk-taking by banks. This finding provides a theoretical justification for the introduction of climate prudential policies to address transition risks.
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 22 September 2021
- OCCASIONAL PAPER SERIES - No. 281Details
- Abstract
- Climate change is one of the greatest challenges facing humankind this century. If left unchecked, it is likely to result in more frequent and severe climatic events, with the potential to cause substantial disruption to our economies, businesses and livelihoods in the coming decades. Yet the associated risks remain poorly understood, as climate shocks differ from the financial shocks observed during previous crises. This paper describes the ECB’s economy-wide climate stress test, which has been developed to assess the resilience of non-financial corporates (NFCs) and euro area banks to climate risks, under various assumptions in terms of future climate policies. This stress test comprises three main pillars: (i) climate-specific scenarios to project climate and macroeconomic conditions over the next 30 years; (ii) a comprehensive dataset that combines climate and financial information for millions of companies worldwide and approximately 1,600 consolidated euro area banks; (iii) a novel set of climate-specific models to capture the direct and indirect transmission channels of climate risk drivers for firms and banks.
- JEL Code
- C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 17 May 2021
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2021Details
- Abstract
- The ECB has been intensifying its quantitative work aimed at capturing climate-related risks to financial stability. This includes estimating financial system exposures to climate-related risks, upgrading banking sector scenario analysis and monitoring developments in the financing of the green transition. Considerable progress has been made on capturing banking sector exposures to firms that are subject to physical risks from climate change. While data and methodological challenges are still a focus of ongoing debates, our analyses suggest (i) somewhat concentrated bank exposures to physical and transition risk drivers, (ii) a prevalence of exposures amongst more vulnerable banks and in specific regions, (iii) risk-mitigating potential for interactions across financial institutions, and (iv) strong inter-temporal dependency conditioning the interaction of transition and physical risks. At the same time, investor interest in “green finance” continues to grow – but so-called greenwashing concerns need to be addressed to foster efficient market mechanisms. Both the assessment of risks and the allocation of finance to support the orderly transition to a more sustainable economy can benefit from enhanced disclosures, including of firms’ forward-looking emission targets, better data and strengthened risk assessment methodologies, among other things.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G20 : Financial Economics→Financial Institutions and Services→General
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 10 November 2020
- OCCASIONAL PAPER SERIES - No. 250Details
- Abstract
- This paper contributes to the debate on liquidity in resolution by providing a quantitative assessment of liquidity gaps of banks in resolution in the euro area. It estimates possible ranges of liquidity gaps for significant banks under different assumptions and scenarios. The findings suggest that, while the average liquidity gaps in resolution are limited, the averages hide significant outliers. The paper thus shows that, under adverse circumstances, the instruments currently available to provide liquidity support to financial institutions in the euro area would be insufficient
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
C63 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Computational Techniques, Simulation Modeling
- 29 July 2019
- WORKING PAPER SERIES - No. 2298Details
- Abstract
- This paper illustrates that systemically important banks reduce a range of activities at year-end, leading to lower additional capital requirements in the form of G-SIB buffers. The effects are stronger for banks with higher incentives to reduce the indicators, and for banks with balance sheet structures that can more easily be adjusted. The observed reduction in activity may imply an overall underestimation of banks' systemic importance as well as a distortion in their relative ranking, with implications for banks' ability to absorb losses. Moreover, a reduction in the provision of certain services at year-end may adversely affect overall market functioning.
- JEL Code
- G20 : Financial Economics→Financial Institutions and Services→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 27 March 2019
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 7Details
- Abstract
- This study analyses whether the ability of the euro area banking system to withstand potential shocks while minimising taxpayers’ costs has changed in the ten years since the financial crisis as a consequence of the impact of post-crisis reforms on bank capital and loss-absorbing capacity. The results show that the average probability of default of banks decreased from 3.5% in 2007 to 1.1% in 2017, less than a third of its pre-crisis value. In addition, under conservative assumptions on the scope of liabilities affected by the bail-in tool, banks’ loss-absorbing capacity has increased from 7.2% to 12.0% of total assets owing to the introduction of larger capital buffers and the new resolution framework, which enhances banks’ loss-absorbing capacity via the bail-in tool. Finally, the potential intervention of the Single Resolution Fund has further increased the loss-absorbing capacity of the system to 16.9% of total assets. Considering all these three factors, the ability of the banking system to absorb losses while minimising costs to taxpayers has increased more than 3-fold over the last ten years. When considering a broader scope for the bail-in tool, the system’s loss-absorbing capacity has increased to 55.5% of total assets, which corresponds to an overall 12-fold increase in its ability to absorb losses while minimising taxpayers’ costs.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 2 October 2018
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 6Details
- Abstract
- This article evaluates whether the global systemically important bank (G-SIB) framework has incentivised banks to adopt window-dressing behaviour, and whether their engagement in capital market activities has facilitated it. Window-dressing behaviour could have detrimental effects on financial stability, for at least two reasons: first, it may imply an underestimation of banks’ overall systemic importance and a distortion of the relative ranking in favour of banks that engage in more window-dressing behaviour; second, overall market functioning may be adversely affected if banks reduce the provision of certain services towards the end of the year. The evidence presented in this article suggests that both G-SIBs and banks with reporting obligations have reduced their overall risk score and some of their individual risk indicators at the end of a calendar year, both in absolute terms and relative to the other banks in the sample. The results also indicate that year-end reductions in capital market activities are a main driver of the observed window-dressing behaviour.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
- 11 April 2018
- OCCASIONAL PAPER SERIES - No. 208Details
- Abstract
- On 24 November 2015, the European Commission published a proposal to establish a European Deposit Insurance Scheme (EDIS). The proposal provides for the creation of a Deposit Insurance Fund (DIF) with a target size of 0.8% of covered deposits in the euro area and the progressive mutualisation of its resources until a fully-fledged scheme is introduced by 2024. This paper investigates the potential impact and appropriateness of several features of EDIS in the steady state. The main findings are the following: first, a fully-funded DIF would be sufficient to cover payouts even in a severe banking crisis. Second, risk-based contributions can and should internalise specificities of banks and banking systems. This would tackle moral hazard and facilitate moving forward with risk sharing measures towards the completion of the Banking Union in parallel with risk reduction measures; this approach would also be preferable to lowering the target level of the DIF to take into account banking system specificities. Third, smaller and larger banks would not excessively contribute to EDIS relative to the amount of covered deposits in their balance sheet. Fourth, there would be no unwarranted systematic cross-subsidisation within EDIS in the sense of some banking systems systematically contributing less than they would benefit from the DIF. This result holds also when country-specific shocks are simulated. Fifth, under a mixed deposit insurance scheme composed of national deposit insurance funds bearing the first burden and a European deposit insurance fund intervening only afterwards, cross-subsidisation would increase relative to a fully-fledged EDIS. The key drivers behind these results are: i) a significant risk-reduction in the banking system and increase in banks' loss-absorbing capacity in the aftermath of the global financial crisis; ii) a super priority for covered deposits, further contributing to protect EDIS; iii) an appropriate design of risk-based contributions, benchmarked at the euro area level, following a "polluter-pays" approach.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 2024
- Journal of Financial Stability
- 2022
- International Journal of Central Banking
- 2020
- Economic Policy
- 2019
- Risks
- 2018
- VoxEU Column
- 2018
- Risks
- 2017
- VoxEU Column
- 2017
- Statistical Analysis and Data Mining
- 2017
- Quantitative Finance