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TARGET2 and central bank balance sheets
[The economics of TARGET2 balances]

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  • Karl Whelan

Abstract

The eurozone's TARGET2 payments system has featured heavily in academic and popular discussions of the euro crisis. Some of this commentary has described the system as being responsible for a ‘secret bailout’ of Europe's periphery. Another common theme has been that the system has built up large credit risks for Germany should the euro break up. This paper discusses the TARGET2 system, focusing in particular on how it impacts the balance sheets of the central banks that participate in the system. It discusses the factors driving TARGET2 balances, considers some counterfactual cases in which eurozone monetary policy might have operated differently, examines the risks to Germany and considers proposals for settlement of these balances.— Karl Whelan

Suggested Citation

  • Karl Whelan, 2014. "TARGET2 and central bank balance sheets [The economics of TARGET2 balances]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 29(77), pages 79-137.
    • Handle: RePEc:oup:ecpoli:v:29:y:2014:i:77:p:79-137.
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    File URL: http://hdl.handle.net/10.1111/1468-0327.12025
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    References listed on IDEAS

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    1. Whittaker, John, 2011. "Eurosystem debts, Greece, and the role of banknotes," MPRA Paper 38406, University Library of Munich, Germany.
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    More about this item

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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