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CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area


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  • Philippine Cour-Thimann


This paper offers a meticulous description and analysis of the development of the Target balances, with a rich set of new data and detailed information that specialists will treasure and the general public will find illuminating. The last part of the paper, in which the author discusses measures to prevent Target balances from ballooning in the future and includes a comparison of settlement possibilities, is particularly thoughtprovoking and useful. In the US system, balance-of-payment imbalances between commercial banks and, much later, district Feds, were settled for two hundred years using gold and gold certificates; and the US system only recently adopted settlement with marketable securities. In Europe no settlement procedure for Target balances has been introduced to-date. Target balances are merely carried forward on the balance sheets of national central banks from year to year, with interest added to the debt and liability positions that have accumulated between the national central banks. This could imply risks that limit the policy choices of member countries. After all, Moody’s decided to consider downgrading the Netherlands and Germany because of their huge outstanding Target claims. It is high time for the Eurosystem partners to discuss the settlement issue more seriously.

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Article provided by Ifo Institute for Economic Research at the University of Munich in its journal CESifo Forum.

Volume (Year): (2013)
Issue (Month): (05)
Pages: 05-50

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Handle: RePEc:ces:ifofor:v::y:2013:i::p:05-50

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  1. Hans-Werner Sinn & Timo Wollmershaeuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility," NBER Working Papers 17626, National Bureau of Economic Research, Inc.
  2. Silvia Merler & Jean Pisani-Ferry, 2012. "Sudden stops in the euro area," Policy Contributions 718, Bruegel.
  3. Raphael A. Auer, 2013. "What Drives Target2 Balances? Evidence From a Panel Analysis," Working Papers 13.03, Swiss National Bank, Study Center Gerzensee.
  4. Philippine Cour-Thimann & Bernhard Winkler, 2012. "The ECB’s non-standard monetary policy measures: the role of institutional factors and financial structure," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 765-803, WINTER.
  5. Bindseil, Ulrich & Winkler, Adalbert, 2012. "Dual liquidity crises under alternative monetary frameworks: a financial accounts perspective," Working Paper Series 1478, European Central Bank.
  6. Ulrich Bindseil & Philippine Cour- Thiman & König Philipp, 2011. "Weitere Anmerkungen zur Debatte um Target2 während der Finanzkrise," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(16), pages 79-86, 09.
  7. Martin Handig & Robert Holzfeind & Clemens Jobst, 2012. "Understanding TARGET 2: The Eurosystem’s Euro Payment System from an Economic and Balance Sheet Perspective," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 81–91.
  8. Ulrich Bindseil & Philippine Cour-Thimann & Philipp König, 2012. "Target2 and Cross-border Interbank Payments during the Financial Crisis," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 83-92, 02.
  9. Karl Whelan, 2012. "TARGET2 and Central Bank Balance Sheets," Working Papers 201229, School Of Economics, University College Dublin.
  10. 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.
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