It is likewise important to recall that the impact of population ageing is not confined to public finances, since it also bears down on the participation rate, productivity and the economy’s potential growth; hence, tackling this phenomenon calls for a broad-brush approach, regarding both the time period envisaged and the set of instruments that should be used. In this respect, the outlook for the Spanish economy’s long-term potential growth is relatively modest (see Chart 13). Specifically, on the latest available estimates, which are naturally subject to some degree of uncertainty, our economy’s potential growth rate is expected to fall from close to 3% per annum in 2008 to post-crisis levels slightly below 1.5%. This level, though close to that of the euro area, is below that estimated for the most dynamic developed economies. Among the key structural factors constraining this growth are the aforementioned population ageing, high structural unemployment and lacklustre productivity. Indeed, despite the swift pace of job creation in recent years, unemployment remains very high, especially among certain groups, such as the lesser-skilled, whose unemployment rate is over 25% (see Chart 14). The difficulties some groups face in finding work means that, according to figures for the third quarter of 2018, practically half the unemployed have been in this situation for over a year. Of particular importance here is improving the quality of employment, which is affected by the high involuntary part-time status and short duration of employment contracts. Such marked segmentation of the labour market hampers, moreover, productivity gains.

In particular, there is evidence that the agency MBS market, due to the nature of its trading conventions, is prone to dislocation when market participants expect large transitions in central bank agency MBS flows.17 Such concerns can be self-fulfilling: if market participants are concerned that an abrupt shift in flow might be disruptive, they might, for example, withdraw from liquidity provision. An overly fast redemption flow of Treasuries could also create challenges in the government’s management of public debt auctions and result in communications challenges.18 A sustained portfolio runoff at an overly fast pace could also shrink the balance sheet so quickly that it impacts other aspects of monetary policy implementation. Rapid portfolio declines could have unforeseen impacts on overnight money markets, for example by creating significant shifts in dealers’ demand for overnight repo financing. We have seen such impacts in the past. During the Maturity Extension Program, the Federal Reserve sold substantial amounts of shorter-dated Treasuries. Some of these securities accumulated in dealers’ inventories, and secured financing rates rose a bit as dealers sought to finance these holdings. This sort of volatility did not, and would not now, pose a major problem to markets or policy implementation, but it is something worth avoiding if possible. Rapid portfolio runoff could also make it more likely that bank reserves become scarce unexpectedly or more quickly than policymakers had anticipated. Finally, overly fast portfolio runoff could introduce undesired noise into financial conditions.