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Will TARGET2-Balances be Reduced again after an End of the Crisis?

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Author Info

  • Christian Fahrholz

    ()
    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Andreas Freytag

    ()
    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

Abstract

This article deals with the macro-economics of the Trans-European Automated Re- al-time Gross Settlement Express Transfer System (TARGET2). Originally, the TARGET2 was in-tended to solely function as a monetary arrangement for liquidity issues. It is shown that the TARGET2 contributes to a substantial misallocation of real resources within the Eurozone (EZ). The discussion highlights that there are no tendencies for rebalancing TARGET2-claims and liabilities, but rather a dynamic towards infinite and prolonged TARGET2-imbalances in the form of hysteresis.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena in its series Global Financial Markets Working Paper Series with number 30-2012.

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Date of creation: 28 May 2012
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Handle: RePEc:hlj:hljwrp:30-2012

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Web page: http://www.gfinm.de

Related research

Keywords: TARGET2; Eurosystem; ESCB; balance-of-payments;

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References

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  1. Korinek, Anton, 2011. "Systemic risk-taking: amplification effects, externalities, and regulatory responses," Working Paper Series 1345, European Central Bank.
  2. Abad, José M. & Löffler, Axel & Zemanek, Holger, 2011. "TARGET2 Unlimited: Monetary Policy Implications of Asymmetric Liquidity Management within the Euro Area," CEPS Papers 5904, Centre for European Policy Studies.
  3. Jens Ulbrich & Alexander Lipponer, 2012. "Balances in the Target2 Payments System – A Problem?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 73-76, 02.
  4. Christian Fahrholz & Cezary Wójcik, 2012. "The Eurozone Needs Exit Rules," CESifo Working Paper Series 3845, CESifo Group Munich.
  5. Guido Lorenzoni, 2007. "Inefficient Credit Booms," NBER Working Papers 13639, National Bureau of Economic Research, Inc.
  6. Hans-Werner Sinn & Timo Wollmershäuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility," CESifo Working Paper Series 3500, CESifo Group Munich.
  7. Christian Fahrholz & Andreas Freytag, 2011. "Whither the TARGET2 System? Taking a Glance at the Real Economic Facets of the Euro-Area Debt Crisis," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 57(1), pages 15-25.
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Citations

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Cited by:
  1. Sergio Cesaratto, 2013. "The implications of TARGET2 in the European balance of payments crisis and beyond," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 10(3), pages 359—.
  2. Dominique Jacob, 2013. "Quels sont les enseignements de l'histoire du fédéralisme américain pour la zone euro actuelle ?," Larefi Working Papers 1305, Larefi, Université Bordeaux 4.
  3. Dominique Jacob, 2013. "Quels sont les enseignements de l'histoire du fédéralisme américain pour la zone euro actuelle ?," Working Papers hal-00863029, HAL.
  4. Stephen Cecchetti & Robert McCauley & Patrick McGuire, 2012. "Interpreting TARGET2 balances," BIS Working Papers 393, Bank for International Settlements.
  5. Marcel Fratzscher & Philipp König & Claudia Lambert, 2013. "Liquiditätsmanagement des Eurosystems im Zeichen der Krise," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 80(44), pages 3-17.

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