Target Losses in Case of a Euro Breakup
AbstractEvaluation of the financial costs of a Eurozone breakup depends critically on the interpretation of TARGET balances. While it has been argued that TARGET claims in the Eurozone can be written off without incurring any losses on the claimants as the value of fiat money is independent of the claims of a national central bank, the present paper shows that TARGET claims represent a shift of the ECB's refinancing credit to the crisis countries and thus a claim on the interest return from the commercial banks of these countries. If TARGET claims were to be written off, a loss of real wealth would occur to the amount of the present value of this interest return, which is exactly measured by the amount of the TARGET claims.
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Bibliographic InfoArticle provided by Ifo Institute for Economic Research at the University of Munich in its journal CESifo Forum.
Volume (Year): 13 (2012)
Issue (Month): 4 (December)
Wechselkurspolitik; Internationaler Zahlungsverkehr; Währungsunion; Euromarkt;
Other versions of this item:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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International Tax and Public Finance,
Springer, vol. 19(4), pages 468-508, August.
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NBER Working Papers
6072, National Bureau of Economic Research, Inc.
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- Buiter, Willem H. & Rahbari, Ebrahim, 2012. "Target2 Redux: The simple accountancy and slightly more complex economics of Bundesbank loss exposure through the Eurosystem," CEPR Discussion Papers 9211, C.E.P.R. Discussion Papers.
- Stefan Homburg, 2012. "Der neue Kurs der Europäischen Zentralbank," Wirtschaftsdienst, Springer, vol. 92(10), pages 673-677, October.
- Hans-Werner Sinn, 2013. "Die Target-Verluste im Fall des Auseinanderbrechens des Euro – Eine Replik auf De Grauwe und Ji," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(01), pages 14-24, 01.
- Stephen Cecchetti & Robert McCauley & Patrick McGuire, 2012. "Interpreting TARGET2 balances," BIS Working Papers 393, Bank for International Settlements.
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