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Monetary and financial analysis

In our monetary and financial analysis we look at how our monetary policy is transmitted to the economy via channels such as credit, bank lending, risk-taking and asset pricing. Our analysis assigns an important role to monetary and financial indicators which, together with other variables, allow us to assess:

  • possible changes in monetary policy transmission (for example related to structural factors such as a rise in non-bank financial intermediation); or
  • impairments in transmission (for example owing to fragmentation or market stress).

The monetary and financial analysis also provides for a more systematic evaluation of any longer-term build-up of financial imbalances and their impact on the economy and inflation. It thus recognises that financial stability is a precondition for price stability.

Moreover, the analysis looks at the extent to which macroprudential measures mitigate possible financial stability risks that are relevant from a monetary policy perspective. The monetary and financial analysis thus recognises that financial stability is a precondition for price stability.

We continuously refine and develop the tools and instruments we use for monetary analysis.

Definitions of euro area monetary aggregates
Liabilities1 M1 M2 M3
Currency in circulation X X X
Overnight deposits X X X
Deposits with an agreed maturity of up to 2 years   X X
Deposits redeemable at notice of up to 3 months X X
Repurchase agreements X
Money market fund shares/units X
Debt securities issued with a maturity of up to 2 years X
1Monetary liabilities of MFIs and central government (post office, treasury) vis-à-vis non-MFI euro area residents excluding central government. In August 2012, the ECB has amended its statistical measurement of broad money to adjust for repurchase agreement (repo) transactions with central counterparties (see also Box 3 of the September 2012 Monthly Bulletin: “The adjustment of monetary statistics for repurchase agreement transactions with central counterparties”).


Find out more about our strategy

Strategy review

The aim of the ECB’s strategy review was to make sure our monetary policy strategy is fit for purpose, both today and in the future.

The outcome of our strategy review

Our revised analytical framework

Our analysis acts as a window into the economy. Through it, we can see how the economy is evolving. That helps us make the right monetary policy decisions.

Our analytical framework and the strategy review

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