Recent trends in corporate and household finances in SpainMacroeconomic implications

Abstract

This paper analyses the trends in corporate and household wealth in Spain over the past decade. It is found that the non-financial private sector has increased its exposure to changes in interest rates and in financial asset prices, which suggests significant changes in the monetary policy transmission mechanism. Nonetheless, it is documented that these effects are insufflciently reflected in the conventional macroeconometric modeis used by central banks and public- and private-sector analysts. This starting point is taken to reflect on the role to be played, in general, by the analysis of financial develo pments in evaluating the macroeconomic situation underpinning monetary policy decis¡ons and the implications of financial imbalances for the conduct of economic authorities in the euro area countries.