Monetary policy

From this page you can access thematically grouped Analytical Articles published in the Economic Bulletin from 1999, ordered by date of dissemination within each year.

All documents are available in PDF format PDF File. Opens in a new window

  • 05/12/2018
    The increase in TARGET balances in the euro area since 2015 (673 KB) Pana Alves, Antonio Millaruelo and Ana del Río

    The TARGET2 platform, which is owned by the Eurosystem, processes payments in euro
    with reserves, i.e. central bank money. The cross-border payment transactions channelled
    through this platform give rise to central bank claims and liabilities which, when aggregated
    and netted, produce the so-called TARGET balances. Since 2015, when various extraordinary
    monetary stimulus measures were introduced by the ECB, there has been a marked
    increase in aggregate TARGET balances, to levels above those reached during the sovereign
    debt crisis which took place in the first few years of the current decade. Unlike then, the
    recent developments do not reflect financial stress or general funding problems in euro area
    economies, as during the sovereign debt crisis, but are instead mainly linked to the
    execution of the Eurosystem’s asset purchase programme (APP).

  • 30/10/2018
    The growth of the FinTech industry in China: a singular case (566 KB) Sergio Gorjón

    In scarcely two decades, the People’s Republic of China has become one of the most prominent countries in the FinTech field. This has been the result of a singular set of factors, including most notably the structural shortcomings of China’s financial system, the growth of its middle classes and their attitude to privacy, a high level of digital connectivity, the volume of e-commerce and a series of public policies and enabling regulations. In addition, the emergence of the FinTech industry in China is marked by the success of the national technological giants, which have recently embarked on an international expansion. The Chinese Government continues to pursue ambitious strategic plans which, for the first time, evidence greater concern for a framework of robust safeguards to protect customers and ensure financial stability.

  • 23/10/2018
    The October 2018 Bank Lending Survey in Spain (573 KB) Álvaro Menéndez Pujadas

    In 2018 Q3, according to the Bank Lending Survey, credit standards for loans to enterprises eased somewhat, both in Spain and in the euro area, while the terms and conditions applied to such loans also eased. As for lending to households, Spanish banks reported an easing in the credit standards and terms and conditions for consumer credit and other lending to households, and no change in those for housing loans, while in the euro area banks reported no significant changes in the first of these segments and a slight easing in the second. The demand for loans to enterprises fell somewhat in Spain and increased in the euro area as a whole, while in the two segments of loans to households, loan applications increased in both areas. In Spain, banks’ conditions of access to wholesale funding markets deteriorated, while their conditions of access to retail funding markets barely changed. In the euro area as a whole, on the other hand, the changes were very small in both cases. The ECB’s expanded asset purchase programme continued to contribute, over the six month period prior to the survey, to improving the liquidity position and funding conditions of banks in both areas and to easing the terms and conditions for loans, while the impact on profitability was mildly positive in Spain and negative in the euro area as a whole. Both Spanish and euro area banks reported that the ECB’s negative deposit facility rate had led to a reduction in net interest income over the previous six months, and a general fall in interest rates and margins on loans, as well as a slight increase in the volume of lending.

  • 18/10/2018
    Composite indicators of inflationary pressures (599 KB) Luis Julián Álvarez and Isabel Sánchez

    This article analyses a broad set of relevant variables for monitoring inflationary pressures in the Spanish economy. On the basis of these variables, composite indicators are calculated that proxy inflation expectations, the degree of slack in the economy and other inflation pressures, domestic and external alike. On the information analysed, the recent period of low inflation in the Spanish economy is estimated to have come about in a setting in which domestic factors particularly eased, with a notable reduction in inflation expectations.

  • 16/10/2018
    Distributed ledger technology (DLT): introduction (243 KB) José Luis Romero Ugarte

    Distributed ledger technology is attracting the attention of the financial sector, both owing to its use in transactions with crypto-assets and to the proliferation of initiatives which have the potential to increase the efficiency, transparency, speed and resilience of processes underlying financial transactions. This article aims to introduce this technology, describing a series of basic issues surrounding it and attempting to identify opportunities and intrinsic limitations. Additionally, it addresses possible applications in the financial sector and outlines some of the main challenges which its use poses for the authorities.

  • 04/10/2018
    Recent movements in the euro exchange rate and the impact on inflation in the Spanish economy (461 KB) Danilo Leiva, Jaime Martínez-Martín and Eva Ortega

    The effect of the euro exchange rate on inflation has taken on significant importance recently, with the application of the ECB’s expansionary monetary policy measures having coincided with episodes of euro appreciation, such as that observed between the second half of 2017 and early 2018, which tend to exert downward pressure on imported prices. This article analyses the factors behind the fluctuations in the euro exchange rate against the dollar during the recent period, and finds that this appreciation may have largely been due to the higher relative growth of the euro area, compatible with a pick-up in expected euro area inflation. However, the subsequent depreciation, since February 2018, might reflect factors related to changes in the relative confidence of financial markets to the detriment of the euro, and to the lower relative growth of the euro area compared with the United States. Further, it is documented how the pass-through of exchange rate movements to overall consumer-price inflation in the Spanish economy has increased slightly in recent years, owing mainly to the energy component, while core inflation remains much less sensitive to exchange rate changes.

  • 30/07/2018
    Monetary policy implications of central bank-issued digital currency (514 KB) Galo Nuño

    This article analyses the concept of digital currency issuable by a central bank, highlighting its similarities to and differences from the two main liabilities on its balance sheet: cash and bank reserves. It also discusses the main reasons why some central banks are looking into the potential consequences of the introduction of this new instrument. Lastly, it considers different central bank digital currency alternatives and highlights some of the possible implications for monetary policy conduct and for financial stability.

  • 24/07/2018
    The July 2018 Bank Lending Survey in Spain (625 KB) Álvaro Menéndez Pujadas

    The results of the Bank Lending Survey show that during 2018 Q2 credit standards for new loans eased slightly in all segments, both in Spain and in the euro area. Household demand for credit grew in both areas, while that from enterprises did so only in the euro area, holding stable in Spain. As regards funding, both Spanish and euro area banks generally perceived some improvement in access conditions to retail markets and a slight deterioration in practically all wholesale markets. During the first half of 2018, regulatory and supervisory measures are estimated to have been conducive, in both areas, to some increase in capital levels, and, in the case of the euro area, also in assets. According to Spanish banks, these measures are not expected to have appreciably impacted either their funding conditions or lending standards or margins on loans. In the case of the euro area, they provided for some easing in institutions’ funding conditions, along with a slight tightening in credit standards, not significantly affecting the margins applied in most segments. Banks in both areas highlighted, as the key factors for the setting of their margins, the search for yield and competitive pressures. Finally, the NPL ratio has not significantly affected Spanish institutions’ lending policies during the first half of 2018, while it has contributed to some tightening in the euro area.

  • 05/07/2018
    Recourse to Eurosystem funding by Spanish banks (683 KB) Ricardo Gimeno and Ana del Río

    During the crisis, euro area banks’ recourse to Eurosystem funding facilities was closely related to the severe tensions in the funding markets. However, since the latter part of 2014, Eurosystem refinancing operations have been essentially determined by the implementation of the single monetary policy and the need to reinforce the monetary stimulus by means of non-standard measures. The Spanish banking system currently has a relatively high level of recourse to Eurosystem funding, as a proportion of GDP and in terms of its weight in the banking sector balance sheet, although its share of total Eurosystem funding has fallen since 2014. The long maturities of this funding and the favourable conditions in the financial markets in the more recent period have afforded banks more scope to refinance or repay these debts in an orderly manner.

  • 24/04/2018
    The April 2018 Bank Lending Survey in Spain (615 KB) Álvaro Menéndez Pujadas

    The results of the Bank Lending Survey show that during 2018 Q1 credit standards for new
    loans in Spain eased slightly in loans to households, remaining unchanged in loans to enterprises, while credit supply in the euro area grew across the board, although unevenly by segment. In Spain demand for credit from households grew and from enterprises remained stable, while in the euro area applications for all types of loans increased. Access to the financial markets by credit institutions has barely changed in the two areas. Credit standards both in Spain and in the euro area are now somewhat stricter than those seen on average since 2003, while in almost all cases they are similar to, or slightly laxer than, the average levels posted since 2010. The ECB’s expanded asset purchase programme has continued to contribute during the last six months to improving the liquidity and funding conditions of institutions in the two areas and to an easing of lending conditions, although it has also impacted profitability negatively. Spanish and euro area banks alike reported that the ECB’s
    negative deposit facility rate caused a reduction in net interest income in the last six months,
    as well as a generalised fall in interest rates and margins on loans and a slight increase in the
    volume of loans granted.

  • 13/03/2018
    Global funding trends in capital markets in 2017 (1 MB) Alberto Fuertes, Luis Molina, Luna Romo and Emilio Muñoz de la Peña

    The total volume of bond issuance in 2017 remained similar to that in previous years, edging down slightly as a result of the drop in public-sector issuance. As usual, there were significant
    differences between the regions and quarters analysed. By quarters, the year got off to a good start, with strong growth in the volume of issuance in the first quarter, followed by a slight deceleration. This pattern possibly reflects some issuers seeking to bring forward their placements in anticipation of worsening financial conditions, given the context of progressive monetary policy tightening. By region, the drop in issuance by the United States stands out, alongside the strong performance of the emerging markets. There was also a marked increase in the volume of placements in higher-risk segments, such as corporate and high-yield bonds, and in emerging markets, which reached record levels.

  • 09/03/2018
    The flattening of the yield curve in the United States (863 KB) Juan Carlos Berganza and Alberto Fuertes

    The yield curve for US government debt securities has flattened significantly since late 2016 and its slope, while positive, has fallen to levels not observed since before the global financial crisis. The inversion of the yield curve slope is considered, on occasions, as a leading indicator of future recessions. And this, given moreover that the current expansionary phase is proving more durable than previous upturns, has prompted debate on the implications of the recent flattening of the curve. However, as illustrated in this article, unlike previous episodes, in which the flattening of the curve was explained by the behaviour of the interest rates expected at different terms, at this current juncture it is warranted substantially by the compression of term premia. Against this background, the historical relationship between the yield curve and predicted recessions in the US economy might have altered.

  • 28/02/2018
    Euro area inflation expectations (2 MB) Ricardo Gimeno and Eva Ortega

    This study explores the recent dynamics of inflation expectations for the main euro area countries. It uses daily financial data for the main euro area countries over the past 15 years with a wide range of time horizons. The estimation of a model of the term structure of inflation expectations using these data allows the common part to be separated from the countryspecific part. It is found that, for the various time horizons and countries, the bulk of expected inflation is common to the whole euro area. The weight of country-specific factors is low, being most significant for the shorter term. For time horizons between five and ten years, the estimated inflation expectations showed a downward trend from 2012, which has reversed in the last two years owing to the application of a broad set of unconventional monetary policy measures in the euro area since mid-2014. Still, in the past year, medium-term inflation expectations have held below 2%, around 1.7% on average, clearly lower than in the period before the economic crisis.

  • 23/01/2018
    The January 2018 Bank Lending Survey in Spain (562 KB) Álvaro Menéndez Pujadas

    The results of the Bank Lending Survey show that during 2017 Q4 credit standards for new loans in Spain eased slightly in loans to households and were stable in loans to enterprises. The pattern was similar in the euro area, except in the case of consumer credit and other lending to households, where credit standards barely changed. Households’ demand for credit rose moderately in both areas, while demand from enterprises grew in the euro area but remained unchanged in Spain. As regards funding received by banks, both Spanish and euro area banks generally perceived some improvement in access to retail markets and to almost all wholesale markets. Lastly, in both areas, regulatory and supervisory measures seem to have prompted some increase in capital levels and risk-weighted assets. Spanish banks assessed these measures as having no significant impact on their funding conditions or on credit standards or margins on loans. In the case of the euro area, the measures appear to have brought a slight easing of bank funding conditions, while the effect on credit standards and margins on loans has generally been small.

  • 18/01/2018
    The effects of the Eurosystem’s corporate sector purchase programme on Spanish companies (665 KB) Óscar Arce, Ricardo Gimeno and Sergio Mayordomo

    In March 2016, the ECB announced the extension of the asset purchase programme (APP) to investment-grade bonds issued by non-financial corporations established in the euro area. Following the announcement of this new programme (known as the CSPP), there was a significant fall in the interest rates on bonds issued by Spanish companies eligible for purchase by the Eurosystem, which also extended to those on lower-rated securities, through the usual rebalancing of investment portfolios. At the same time, a significant increase was seen in bond issuance, as a result of which Spanish bond issuers (usually large corporations) reduced their demand for bank credit. Resident banks responded by shifting their credit offering towards other firms that do not have the same ability to issue bonds and that tend to be smaller in size. The analysis presented in this article reveals that for each euro reduction in the outstanding debt of large companies with Spanish banks during the three months after the announcement of the programme, some 78 cents were diverted to other non-issuing firms, including SMEs. These firms, in turn, increased their levels of real investment significantly.


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