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Omiros Kouvavas
Economics
- Division
Business Cycle Analysis
- Current Position
-
Economist
- Fields of interest
-
Labour Economics,Macroeconomics and Monetary Economics
- Education
- 2017-2022
PhD in Economics, University of Warwick, United Kingdom
- Professional experience
- 2021-
Economist - Statistician, Directorate General Statistics, European Central Bank
- 2020-2021
Graduate Programme Participant, Directorate General Statistics, European Central Bank
- 29 October 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 7, 2024Details
- Abstract
- Consumer perceptions of the main drivers of inflation can affect their inflation expectations and, in turn, their economic behaviour. The results of the ECB’s Consumer Expectations Survey (CES) for March 2024 reveal that most euro area consumers attribute inflation primarily to input costs, followed by profits and wages. However, the proportion of consumers identifying wages as the main driver of inflation has increased since June 2023, with this perception being most pronounced in countries experiencing significant wage growth. These evolving perceptions highlight the need to monitor shifts in inflation narratives and their potential impact on inflation expectations.
- JEL Code
- D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 15 August 2024
- THE ECB BLOGDetails
- JEL Code
- D10 : Microeconomics→Household Behavior and Family Economics→General
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
E20 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→General
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
D83 : Microeconomics→Information, Knowledge, and Uncertainty→Search, Learning, Information and Knowledge, Communication, Belief
- 24 June 2024
- STATISTICS PAPER SERIES - No. 47Details
- Abstract
- The Harmonised Index of Consumer Prices (HICP) currently only includes rentals for housing (paid by tenants) and auxiliary housing expenditures (paid by both tenants and owners). The inclusion of an item for owner-occupied housing (OOH) would be desirable for both representativeness and cross-country comparability. This paper reviews the potential options for including OOH in the HICP to derive a new inflation index. We discuss the conceptual and measurement issues involved. Additionally, we present our analytical calculations on the impact and economic properties of this index as compared to the HICP. We show that since 2011 the estimated impact of including OOH in HICP annual inflation, based on either the “net acquisition” approach or the “rental equivalence” approach, would have been within a band of between -1.2 and +0.4 percentage points. The net acquisition approach could result in bigger differences in future, should the fluctuations in the housing market cycles in the euro area be more pronounced and synchronised. The results should be interpreted keeping in mind that the period of observation is relatively short in relation to housing market cycles. In general, the empirical evidence suggests that including OOH based on the rental equivalence approach decreases the cyclicality of the new inflation index, while the net acquisition approach implies a small amplification of its cyclical properties compared to the HICP.
- JEL Code
- C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
- 15 May 2024
- THE ECB BLOGDetails
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 25 April 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2024Details
- Abstract
- Changes in energy prices and wage costs can, to the extent these are passed through to consumer prices, have important effects on HICP inflation excluding energy and food (HICPX). Data from different sources can be matched to obtain the cost shares of energy and wages in various sectors. Since the importance of changes in input costs is likely to increase with the share of such costs in the overall input costs or in the production of a service or a good, this information allows HICPX inflation to be broken down into indicators for energy-sensitive and not energy-sensitive items, as well as into contributions from wage-sensitive and not wage-sensitive items. The energy-sensitive HICPX inflation indicator derived in this way illustrates the important role of the energy shock in HICPX inflation developments over the last few years. Similarly, the indicator for wage-sensitive HICPX inflation signals an important role for wages as a driver of underlying inflation in the euro area, especially more recently. The two indicators have little overlap – which helps in interpreting their signals.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
P44 : Economic Systems→Other Economic Systems→National Income, Product, and Expenditure, Money, Inflation
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
Q4 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy
- 22 April 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2024Details
- Abstract
- In recent quarters, euro area households have faced higher housing costs, and in particular rising rent or mortgage payments. The ECB Consumer Expectations Survey shows that housing cost dynamics vary across households depending on the type of ownership, with the highest cost increases being borne by those who do not own their home outright (mortgage and renter households). Since 2022 rising housing costs have, on average, largely been offset by growth in household income, leading to stable housing cost to household income ratios. The housing cost burden has, however, increased slightly for both renter and mortgage households at the upper end of the income distribution. Furthermore, at the lower end of the income distribution, a substantial proportion of households have been overburdened by their housing costs. Finally, there is a positive correlation between higher housing costs for households and late payment of rent or mortgages and of utilities. While the figures for late payment have, to date, remained relatively stable, an increasing number of households, especially those in lower income brackets, have indicated in recent months that they expect to fall behind with payments.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 20 March 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 2, 2024Details
- Abstract
- This box investigates how households have responded to the 2021-23 inflationary episode using evidence from the ECB’s Consumer Expectations Survey. The findings suggest that households have primarily adjusted their consumption spending to cope with higher inflation. However, noteworthy adjustments were also observed through the saving and income margins. The decline in the saving rate in 2022 and 2023 was mainly attributed to increased spending on recreation and travel, mostly driven by high-income consumers.
- JEL Code
- E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
D15 : Microeconomics→Household Behavior and Family Economics
- 11 January 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2023Last updated on 12 January 2024Details
- Abstract
- The disposable income of households, as measured in the national accounts, benefited from rising labour income and continued strong growth in non-labour income in the first half of 2023. But not all components of income generate a positive cash flow for households. This mainly concerns non-labour income (excluding net fiscal income), which benefited from the exceptionally strong growth in gross operating surplus and the strong increase in financial intermediation services indirectly measured (FISIM). These two components do not generate positive cash flow for households and may therefore not be reflected in households’ income perceptions, which recently lagged behind the positive income developments as measured in the national accounts. One indicator of growth in household income that comes closer to household perceptions is compensation of employees. Looking ahead, the negative assessment by households of recent real income growth appears to be consistent with the muted outlook for private consumption.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 28 September 2023
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2023Details
- Abstract
- Consumer perceptions of the factors driving inflation can be an important determinant of their economic behaviour and inflation expectations. In this context, in June 2023 the ECB’s Consumer Expectations Survey asked consumers what they believed was the main factor driving changes in the general level of prices for goods and services in their country over the past 12 months. Most consumers believe that price changes over the past 12 months were mainly driven by input cost factors, with corporate profits ranked second and wages third. Consumers responding that other input costs are the main driver expect inflation to be less persistent. Consumer perceptions of the factors driving inflation should continue to be monitored. As the various drivers can influence inflation persistence differently, profits or wages being perceived as more prominent drivers in the future could have implications for consumers’ medium-term inflation expectations.
- JEL Code
- D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 11 March 2022
- WORKING PAPER SERIES - No. 2653Details
- Abstract
- During the Great Recession, unemployment increased substantially across several euro area countries, with wages exhibiting a muted response. As low skilled workers lose their jobs first during a recession, the remaining employed workers result in a relatively more skilled employment pool. This change in the composition of the employed workers inflates the aggregate wage mechanically, even in the case of no actual pay rises. This paper uses individual level data to control for the effect of changes in the composition of workers on wages and wage cyclicality. We find that compositional effects are highly correlated with the severity of the business cycle, being significant in countries where employment losses were larger. Thus, the results partially explain the muted response of the observed wages to the business cycle, as wages decreased more than what the aggregate numbers suggest during the downturn, a picture that is reversed somewhat during the recent recovery.
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 16 February 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 1, 2022Details
- Abstract
- The ECB’s monetary policy strategy review confirmed that the Harmonised Index of Consumer Prices (HICP) remains the appropriate price measure for assessing the achievement of the medium-term price stability objective. However, the Governing Council recognised that the inclusion of costs related to owner-occupied housing in the HICP would better represent the inflation rate that is relevant for households. This article elaborates on the topic of owner-occupied housing and its proposed inclusion in the HICP. It showcases the two options considered by the Governing Council, focusing on their statistical and conceptual properties. For the net acquisition approach recommended by the Governing Council, the article presents analytical indices based on ECB approximations that serve as a blueprint for the quarterly internal measure to be monitored. Finally, the article looks ahead to the incorporation of the costs of owner-occupied housing into the HICP and the associated challenges, noting that the current HICP will remain the main reference index for monetary policy during the transition period.
- JEL Code
- C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
- 16 February 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2022Details
- Abstract
- A recurring theme in the “ECB Listens” event conducted in the context of the monetary policy strategy review was the affordability of housing and the case for including related costs more adequately in the HICP. Housing costs can be analysed on the basis of different sources of data. This box reviews perceptions of housing costs among tenants and homeowners based on survey microdata, compares them with developments in housing costs based on macro price statistics, and highlights conceptual differences between the various measures that are important in the interpretation of the data.
- JEL Code
- R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 26 November 2021
- WORKING PAPER SERIES - No. 2617Details
- Abstract
- Price inflation in the euro area has been stable and low since the Global Financial Crisis, despite notable changes in output and unemployment. We show that an increasing share of high markup firms is part of the explanation of why inflation remained stubbornly stable and low in the euro area over the past two decades. For this purpose, we exploit a rich firm-level database to show that over the period 1995–2018 the aggregate markup in the euro area has been on the rise, mainly on account of a reallocation towards high-markup firms. We document significant heterogeneity in markups across sectors and countries and, by linking these markup developments to the evolution of sectoral level producer and consumer price inflation, we find that (i) inflation in high-markup sectors tends to be less volatile than in low-markup sectors and (ii) inflation in high-markup sectors responds significantly less to oil supply, global demand and euro area monetary policy shocks.
- JEL Code
- D2 : Microeconomics→Production and Organizations
D4 : Microeconomics→Market Structure and Pricing
N1 : Economic History→Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations
O3 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights - Network
- Price-setting Microdata Analysis Network (PRISMA)
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 265Details
- Abstract
- This paper – which takes into consideration overall experience with the Harmonised Index of Consumer Prices (HICP) as well as the improvements made to this measure of inflation since 2003 – finds that the HICP continues to fulfil the prerequisites for the index underlying the ECB’s definition of price stability. Nonetheless, there is scope for enhancing the HICP, especially by including owner-occupied housing (OOH) using the net acquisitions approach. Filling this long-standing gap is of utmost importance to increase the coverage and cross-country comparability of the HICP. In addition to integrating OOH into the HICP, further improvements would be welcome in harmonisation, especially regarding the treatment of product replacement and quality adjustment. Such measures may also help reduce the measurement bias that still exists in the HICP. Overall, a knowledge gap concerning the exact size of the measurement bias of the HICP remains, which calls for further research. More generally, the paper also finds that auxiliary inflation measures can play an important role in the ECB’s economic and monetary analyses. This applies not only to analytical series including OOH, but also to measures of underlying inflation or a cost of living index.
- JEL Code
- C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C82 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Macroeconomic Data, Data Access
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 25 March 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 2, 2021Details
- Abstract
- The coronavirus (COVID-19) pandemic triggered significant changes in household spending in 2020. These shifts are reflected in the 2021 HICP weights, and consequently, also in measured annual inflation. The impact of these new HICP weights on annual inflation is not insignificant and is also heterogenous across countries. Looking ahead, the full impact will most likely only materialise over the course of the year as the relative prices gradually change.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 10 November 2020
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 7, 2020Details
- Abstract
- The coronavirus (COVID-19) pandemic has triggered large shifts in household consumption as well as issues related to price collection. We construct a monthly-reweighted consumer price index for the euro area which is able to capture part of the changes in household consumption since the beginning of the pandemic. In this way, we quantify the gap between published HICP inflation and the inflation rate of the items actually purchased by final consumers. Furthermore, we discuss the issue of price imputation and its impact on published statistics.
- JEL Code
- E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
- 14 May 2020
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2020Details
- Abstract
- In this box we review price measurement issues that can arise in times of economic distress. First, we discuss how consumers’ substitution across items in the face of an economic downturn can drive a wedge between published statistics and household consumption prices. We present some evidence from previous recessions along with the historical weights of the aggregated HICP. Second, we discuss additional challenges generated by the ongoing Coronavirus outbreak. Lastly, we discuss possible implications for policymakers.
- JEL Code
- E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
- 27 December 2019
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2019Details
- Abstract
- Although recent wage growth has increasingly been in line with predictions, there has been a period of low and under-predicted wage growth in the euro area. This period of weak wage growth can be explained to a large extent by the drivers traditionally captured in a Phillips curve analysis, such as economic slack (including broader measures of labour market slack) and inflation expectations. However, these factors do not paint the full picture, as wages were consistently under-predicted during the period 2013-17. As wages differ across sectors and according to employees’ individual characteristics, significant changes in the composition of employment that have taken place in the euro area since the beginning of the crisis could have been an important factor in aggregate wage growth developments. These changes can result from slow-moving trends, cyclical changes or a combination of the two. This article discusses the role of such changes, known as “compositional effects”, in wage growth. It analyses the role of changes in the composition of employment with respect to the individual characteristics of employees (e.g. age, education or gender), employment types (e.g. permanent or temporary contracts) and sectoral shifts. The analysis is mainly based on microdata from the EU survey of income and living conditions, but the article also includes cross-checks and analyses based on the EU Labour Force Survey (EU-LFS) and national accounts data. The analyses indicate that compositional effects pushed up wage growth early in the crisis, but that the effect later decreased and turned negative. This has contributed to a relatively muted response from aggregate wage growth, both to the strong downturn of the labour market early in the crisis and later, from 2014 onwards, to cyclical improvements. Hence compositional effects have been one factor contributing to low wage growth in the euro area. The most important contributions to compositional effects seem to be related to changes in the age and educational structure of the workforce, which can have both a long-term and a cyclical impact. Looking at country-specific evidence, the euro area aggregate results have been influenced by Spain and Italy in particular.
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 27 December 2019
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2019Details
- Abstract
- The box assesses recent developments in social security contributions and minimum wages. It finds that social security contributions have led to a moderation of growth in composition of employee growth, while growth in wages and salaries per employee – excluding employers’ social security contributions – has remained quite robust. Over the last decade minimum wages have affected wage growth substantially in some countries, but only marginally in the euro area.
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital