Economic Memo

Published Download Title
30-09-2022

Inequality and savings

This memo studies the impact of demographic shifts and income inequality on the evolution of savings rates in Denmark, and compares with evidence from the US. Income inequality has followed similar trends in Denmark as in the US, and savings rates vary in a similar way over the life cycle and along the income distribution in the two countries. Changes in savings behavior play an important role for the evolution of total savings.

27-09-2022

Energy renovations of houses will pay for themselves by the heating bill – not by the sales price

The majority of energy renovations of houses cost more than they increase the sales price. This holds particularly in the metropolitan area and Aarhus, but also in a number of rural areas. Renovations that increase the sales price more than the renovation costs reduce CO2 emissions only marginally and are typically only possible for houses in and around the medium to large towns and more generally in the geographically more central parts of the country. (Memo available in Danish only).

02-09-2022

(Mis)matching in the post-pandemic Danish labour market

Since the beginning of the pandemic, matching in the Danish labour market seems to have become less efficient: a given number of job seekers and vacancies result in fewer matches than previously. This economic memo studies mismatch between job seekers and vacancies as a potential explanation. Mismatch was an important driver during the great financial crisis, but much less so during the pandemic.

08-08-2022

The rise in cash holdings of Danish companies

We show that the cash holdings of a typical Danish company have increased after the 2007/08 financial crisis. Especially the cash holdings of small companies have seen a strong increase. The increase in cash holdings coincides with a decrease in the use of loan financing for the typical company, which suggests a decrease in loan demand or supply to these companies. The development of cash holdings is also driven by a strong selection effect: companies with low cash holdings have been especially likely to exit during and after the financial crisis.

01-06-2022

Explaining the Danish-German sovereign yield spread

This economic memo investigates the drivers of the Danish-German 10-year yield spread, which has widened 25 basis points since January 2020. The widening is found to be driven mainly by larger collateral scarcity of German sovereign bonds due to the ECB’s significant bond purchases and a substantial increase in duration on callable Danish mortgage bonds.

02-05-2022

Looking beyond the impact of energy prices: What drives trend inflation in Denmark?

Before the pandemic, wage and price inflation remained low in Denmark and other advanced economies, despite falling unemployment rates. We attribute the subdued inflation to low competition among firms to hire employed workers. This same force may continue to constrain inflation once the current rise in energy and commodity prices has been passed through to consumer prices.

22-04-2022

Market concentration and the Danish rental market

This memo analyzes the evolution of firm ownership concentration in the private Danish rental market and its link to rental prices. We show that the overall increase in rental market concentration between 2010 and 2020 is mainly driven by the rental market in the Capital Region. Further, we document a positive empirical link between market concentration and rental prices.

08-04-2022

Higher gas prices can lead to lower house prices in parts of Denmark

The price of natural gas has risen significantly since the summer of 2021. Higher heating costs may put downward pressure on homes heated with gas. Seen in isolation, the average price drop will be DKK 73,000 for a house with gas, if the gas price develops in line with the expectations of financial markets. (Memo available in Danish only).

01-04-2022

AI and machine learning in the financial sector: Five focus points

Artificial intelligence (AI) can improve the resiliency of both individual financial institutions and the financial sector as a whole. Yet, its users must balance benefits and risks of these technologies. This paper illustrates five focus points which financial institutions should consider when moving from traditional models to complex AI systems.

16-03-2022

Pressure on the labour market during the pandemic

The Danish labour market has tightened substantially during the recovery of the Danish economy. Pandemic-related labour demand can account for some of the employment growth. The majority of the movements on the labour market have occurred among marginal jobs, and cross-sectoral movements have been slightly higher than usual.

04-02-2022

The impact of digitalisation on Danish companies and workers

This memo explores the impact of digitalisation on Danish workers and companies. For this, we first build two complementary measures of digitalisation that leverage Danish administrative data. We then document a positive association between the level of digitalisation and sales of large companies. In the final part, we study the workers in the IT sector – the producers of the digital tools. We find that the workforce in the IT sector is more specialised than the rest of the Danish workforce, and that this specialisation has increased during the past decade.

17-12-2021

The foreign exchange market for kroner is able to absorb large company acquisitions

In the recent years Danish companies have increasingly acquired foreign companies and vice versa. The size of some company acquisitions surpasses the daily turnover in the foreign exchange market for kroner. A case study in this Economic Memo shows that large company acquisitions have not exacerbated krone exchange rate movements over and above the normal daily variation. (Memo available in Danish only).

14-12-2021

Domestic bond portfolio adjustments during duration jumps

This Memo investigates the bond portfolio reaction of key Danish institutional investors to duration jumps in callable mortgage bonds. It shows that the investors remain net buyers of Danish mortgage bonds during periods of jumps. In particular, they buy more than they do on average, supporting the Danish mortgage bond market, limiting a potential self-reinforcing mechanism of duration jumps.

10-12-2021

Do strategic interaction effects drive excess capital financing of banks?

In this memo we find empirical evidence consistent with the hypothesis that banks act strategically to finance themselves through similar levels of excess capital to their competitors. We find that this channel is a significant driver of banks’ choice of excess capital but not the most important one.

29-11-2021

Nonbanks, credit provision and the transmission of monetary policy in Denmark

We analyse the role of nonbank lenders in corporate and consumer credit markets in Denmark and show that they affect the transmission of monetary policy to financial and real outcomes. Nonbanks increase their share of credit supply after an interest rate hike in both the consumer and corporate credit markets.

22-10-2021

Flood risk discounts in the Danish housing market

We investigate the effects of the risk of flooding on the prices of single-family homes in Denmark. Houses that are exposed to flood risk today, as well as houses that will be exposed to flood risk in the future due to rising sea levels, are priced at a discount.

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