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The Banco de Portugal balance sheet expansion during the last two decades: a monetary policy perspective

Authors 
Carmen Camacho
Cristina Coutinho
Diana Correia
Joana Sousa-Leite
Publication Year 
2022
JEL Code 
E41 - Demand for Money
E44 - Financial Markets and the Macroeconomy
E51 - Money Supply; Credit; Money Multipliers
E52 - Monetary Policy (Targets, Instruments, and Effects)
E58 - Central Banks and Their Policies
Abstract 
This paper analyses the evolution dynamics of the Banco de Portugal balance sheet since the beginning of the Stage III of the EMU. Following the global financial crisis, the evolution of the Banco de Portugal balance sheet was initially driven by an increase in liabilities, namely in intra-Eurosystem liabilities related to TARGET and current accounts, reflecting the liquidity provided through monetary policy refinancing operations, which was either deposited in the central bank or transferred to euro area banks outside of Portugal. Since 2015, broader monetary policy decisions regarding the asset side of the balance sheet were designed to support economic growth and bring inflation back to the 2% target. Between 1999 and 2021, the Banco de Portugal balance sheet expansion was mostly driven by the asset purchase programmes and significant increases in central bank funding to banks and in intra-Eurosystem claims, the latter aggregate being explained by the inflow of banknotes related to the tourism activity in Portugal.
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