Publications

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.

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  • 28/10/2019
    The Federal Reserve review of its monetary policy framework (399 KB) Susana Párraga, Pedro del Río and Juan Luis Vega

    This article offers an overview of the monetary policy framework review currently being conducted by the United States Federal Reserve (Fed). First, we examine the alternative strategies under consideration to address the likely greater incidence of episodes in which monetary policy is influenced by the existence of an effective lower bound (ELB) to which the policy rate can fall. We also discuss how the available empirical evidence drawn from the Fed’s own experience makes it likely that it will retain in its toolkit the non-conventional monetary policy instruments adopted in the wake of the global financial crisis to tackle the problem of the greater incidence of the ELB: namely, quantitative easing and forward guidance. Finally, we analyse possible changes in the Fed’s communications policy.

  • 22/10/2019
    Bank Lending Survey in Spain: October 2019 (403 KB) Álvaro Menéndez Pujadas

    In 2019 Q3, according to the Bank Lending Survey, loan supply in Spain remained generally stable, with only credit standards for consumer credit to households tightening slightly, and terms and conditions on new loans for house purchase easing somewhat. By contrast, in the euro area, credit standards mostly eased while the overall terms and conditions tightened. In Spain, loan demand across all categories is estimated to have decreased, while demand from the two household segments appears to have increased in the euro area. Conditions of access to wholesale and retail funding markets remained stable or improved in nearly all cases during the quarter, both in Spain and in the euro area. In the last six months, the ECB’s expanded asset purchase programme continued to have a positive effect on banks’ liquidity and financing conditions, although the impact on banks’ profitability in the euro area appears to have been negative. This programme also continued to contribute to an easing of the terms and conditions of loans, and to an increase in the volume of lending, in nearly all segments. Lastly, the ECB’s negative deposit facility rate is estimated to have contributed, in the last six months, to the drop in the net interest income of Spanish and euro area banks, and to the lower interest rates applied to new loans. In the euro area, the negative interest rates are also favoured a reduction in margins and an increase in lending volumes.

  • 23/07/2019
    Bank Lending Survey in Spain: July 2019 (425 KB) Álvaro Menéndez Pujadas

    The results of the Bank Lending Survey reflect, in general, a slightly less expansionary credit supply, both in Spain and the euro area, in 2019 Q2. Thus, credit standards tightened in Spain in the two household segments, while in the euro area standards tightened for both lending to enterprises and consumer credit and other lending to households. By contrast, terms and conditions for new lending eased somewhat in the consumer credit segment, both in Spain and the euro area, while for lending to enterprises they eased in Spain but tightened in the euro area. Spanish banks reported a decline in demand for loans to enterprises and for consumer credit and other lending to households, whereas loan applications increased across the board in the euro area. The conditions of access to retail and wholesale financial markets remained stable or improved both in Spain and the euro area. According to the banks surveyed, regulatory and supervisory measures on capital, leverage and liquidity prompted a degree of tightening in the credit supply in 2019 H1, again both in Spain and the euro area. Lastly, between January and June 2019, the NPL ratio also contributed to some tightening of the credit supply in both areas.

  • 13/06/2019
    The impact of TLTROs on banks’ lending policies: the role of competition (401 KB) Miguel García-Posada Gómez

    This article assesses the impact of the targeted longer-term refinancing operations (TLTROs) of the European Central Bank (ECB) on the credit supply of the euro area banks. An empirical approach is used that permits distinction between the direct and indirect effects of the TLTROs. The direct effects are that banks participating in the TLTROs increase their credit supply thanks to the lower costs prompted by these refinancing operations. The indirect effects stem from the changes that the TLTROs produce in the competition between banks in the loan and deposit markets and which also affect banks that do not participate directly in the programme, albeit in principle with an ambiguous sign. Taking a sample of 130 banks from 13 countries and their confidential replies to the ECB Bank Lending Survey, it is found that the TLTROs played a direct part in reducing the margins on lower risk loans and easing credit standards in the large enterprises segment. As regards the indirect effects, it is observed that the TLTROs also eased credit standards at non-participating banks, primarily at banks exposed to high competitive pressure, so it appears that the TLTROs increased the supply of bank credit through the indirect channel also.

  • 17/05/2019
    The impact of China on Latin America: trade and foreign direct investment channels (623 KB) Jacopo Timini and Ayman El-Dahrawy Sánchez-Albornoz

    The economic, political and institutional ties between Latin America and China have become closer as the Chinese economy has grown. Indeed, as a result of its rapid economic growth, China now plays a systemic role in the world economy. However, since the global financial crisis, the Chinese economic model has shown signs of exhaustion and controlling the rate of growth may prove to be a particularly difficult challenge, taking into account the profound structural transformation to be addressed and the high level of debt of the Chinese economy. Against this backdrop, the article provides an empirical analysis of the effects on the Latin American countries’ growth of their trade and investment relations with China. It also analyses the channels through which the Chinese economic slowdown is transmitted to the region. The study shows that, through the trade channel at least, an unexpected slowdown in China could have a negative impact on economic growth in Latin America.

  • 09/04/2019
    The April 2019 Bank Lending Survey in Spain (618 KB) Álvaro Menéndez Pujadas

    The results of the Bank Lending Survey show somewhat less expansionary behaviour of loan supply and demand in 2019 Q1, both in Spain and in the euro area. Thus credit standards for approving loans tightened in both areas in the two segments of lending to households and did not change in loans to enterprises. The terms and conditions for new loans held steady both in Spain and in the euro area, except those for consumer credit and other lending, which eased in Spain and tightened in the euro area. For the second quarter of 2019, the banks of both areas did not anticipate further tightening of credit standards save those for loans to households for house purchase in the euro area. Loan demand in Spain decreased both in that from enterprises and in that from households for consumer credit and other lending, while that from households for house purchase increased. By contrast, in the euro area, the demand for loans to households increased, although that for consumer credit and other lending slowed, and the demand for loans to enterprises stopped growing. According to banks in both areas, the conditions of access to financial markets remained unchanged or even improved, both in retail markets and in nearly all wholesale markets. The ECB expanded asset purchase programme continued having a positive effect on the liquidity and financing conditions of banks in the past six months, although it had a negative impact on their profitability. In addition, this programme continued to foster, in nearly all segments, an easing of loan terms and conditions and an increase in the volume of loans granted. The negative interest rate of the ECB deposit facility contributed, over the past six months, to a decrease in the net interest income of banks in the two areas and to an increase in credit volumes.

  • 12/03/2019
    Adapting lending policies against a background of negative interest rates (603 KB) Óscar Arce, Miguel García-Posada and Sergio Mayordomo

    Since June 2014 the European Central Bank (ECB) has placed its deposit facility interest rate (DFR) at negative levels. Against this background, the question arises as to whether maintaining negative interest rates over a prolonged period can adversely affect credit institutions’ net interest income and, ultimately, the supply of credit. Euro area banks’ responses to the Bank Lending Survey (BLS) enable the banks to be classified into two groups, depending on whether their net interest income has been impaired or not by the negative rates (“affected” versus “unaffected” banks). The analysis in this article shows that the affected banks are generally not as well capitalised. This circumstance might have hindered these banks from taking on fresh risks under their lending policy in order to attempt to offset the adverse effect of the negative rates on their unit lending margins. Indeed, the banks most affected by negative interest rates tightened the terms and conditions on their loans to a greater extent than those unaffected, to optimise their risk-weighted assets and, therefore, their capital ratios. Lastly, the article shows there are no differences between both groups of banks as regards the total credit offered and that the credit supply has been adapted via loan terms and conditions and not through the total amount offered. This result suggests that the current level of the DFR (-0.4%) is not causing a contraction in the volume of credit supplied by the banks affected.

  • 21/02/2019
    The Eurosystem’s monetary policy following the end of net asset purchases (627 KB) Óscar Arce, Galo Nuño and Carlos Thomas

    This article analyses the monetary policy conduct framework in the euro area following the end of net purchases under the financial asset purchase programme. First, there is a review of the monetary policy measures since 2014 and of the ECB’s announcements on the future course of its instruments, comparing the recent changes in euro area monetary policy with the normalisation of US monetary conditions initiated by the Federal Reserve in 2013. Second, the authors analyse the main instruments currently available to the ECB (forward guidance on interest rates and its asset portfolio reinvestment policy), and discuss how both instruments provide monetary stimulus in the current setting.

  • 22/01/2019
    The January 2019 Bank Lending Survey in Spain (586 KB) Álvaro Menéndez Pujadas

    In 2018 Q4, according to the Bank Lending Survey (BLS), credit standards for consumer credit and other lending to households tightened slightly both in Spain and in the euro area. There were no appreciable changes in the other two lending segments. For the current quarter, Spanish banks anticipated a slight tightening in all lending segments, a development also observable in the euro area – albeit to a lesser degree – in practically all segments. The overall terms and conditions on new loans eased across the board, both in Spain and, more moderately, in the euro area as a whole. In Spain, the demand for credit fell both in loans to enterprises and loans to households for house purchase, and it ceased to grow in consumer credit and other lending to households; in the euro area as a whole, meantime, loan applications grew across the board. Conditions of access to wholesale funding markets worsened, both in Spain and in the euro area, whereas in retail markets the changes were minor and of a different sign. According to the banks surveyed, regulatory and supervisory measures in respect of capital, leverage and liquidity did not exert an appreciable impact on the supply of credit in Spain in the second half of 2018, whereas in the euro area they prompted some tightening. Finally, the NPL ratio did not exert any influence on Spanish banks’ lending policy in the second half of 2018, while in the euro area they contributed to some tightening in the supply of credit in all segments.

  • 10/01/2019
    Spanish banks’ internationalisation strategy: characteristics and comparison (414 KB) Isabel Argimón

    Banks’ international strategy and the way in which they have expanded are explanatory
    factors for the economic effects of their activity. Based on information from individual
    institutions, the internationalisation strategies of banks based in Spain, the Netherlands
    and the United States have been compared. In addition, in the Spanish case, whether
    banks’ risk, efficiency, return and income source type differ according to the chosen
    model of internationalisation has been tested. The results of this comparison point to
    Spanish banks with subsidiaries and branches abroad having higher returns but also
    higher costs than banks whose foreign business is mainly cross-border.

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