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Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility

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  • Hans-Werner Sinn
  • Timo Wollmershaeuser

Abstract

The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target balances in the national central banks’ balance sheets, was 404 billion euros in August 2011. The national central banks of these countries covered the deficits by creating and lending out additional central bank money that flowed to the euro core countries, Germany in particular, and crowded out the central bank money resulting from local refinancing operations. Thus the ECB forced a public capital export from the core countries that partly compensated for the now reluctant private capital flows to, and the capital flight from, the periphery countries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17626.

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Date of creation: Nov 2011
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Handle: RePEc:nbr:nberwo:17626

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References

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  1. Helmut Schlesinger, 2011. "Die Zahlungsbilanz sagt es uns," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(16), pages 09-11, 09.
  2. Sinn, Hans-Werner & Feist, Holger, 1997. "Eurowinners and Eurolosers: The distribution of seigniorage wealth in EMU1," European Journal of Political Economy, Elsevier, vol. 13(4), pages 665-689, December.
  3. Hans-Werner Sinn & Holger Feist, 1999. "Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU," NBER Working Papers 6072, National Bureau of Economic Research, Inc.
  4. 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.
  5. Peter M. Garber, 1998. "Notes on the Role of TARGET in a Stage III Crisis," NBER Working Papers 6619, National Bureau of Economic Research, Inc.
  6. Sinn, Hans-Werner, 2012. "Casino Capitalism: How the Financial Crisis Came About and What Needs to be Done Now," OUP Catalogue, Oxford University Press, number 9780199659883.
  7. Rebecca McCaughrin & Simon Gray & Alexandre Chailloux, 2008. "Central Bank Collateral Frameworks: Principles and Policies," IMF Working Papers 08/222, International Monetary Fund.
  8. Hans-Werner Sinn, 2011. "Die europäische Zahlungsbilanzkrise - Eine Einführung," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(16), pages 03-08, 09.
  9. Whittaker, John, 2011. "Intra-eurosystem debts," MPRA Paper 38368, University Library of Munich, Germany.
  10. Hans-Werner Sinn & Teresa Buchen & Timo Wollmershäuser, 2011. "Trade Imbalances – Causes, Consequences and Policy Measures: Ifo’s Statement for the Camdessus Commission," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(1), pages 47-58, 03.
  11. Hans-Werner Sinn, 2011. "How to Rescue the Euro: Ten Commandments," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(4), pages 52-56, December.
  12. Stefan Homburg, 2011. "Anmerkungen zum Target2-Streit," Wirtschaftsdienst, Springer, vol. 91(8), pages 526-530, August.
  13. Wilhelm Kohler, 2011. "Zahlungsbilanzkrisen im Eurosystem: Griechenland in der Rolle des Reservewährungslandes?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(16), pages 12-19, 09.
  14. Ruckriegel, Karlheinz & Seitz, Franz, 2002. "The euro system and the federal reserve system compared: Facts and challenges," ZEI Working Papers B 02-2002, ZEI - Center for European Integration Studies, University of Bonn.
  15. Aaron Tornell & Frank Westermann, 2012. "Greece: The Sudden Stop That Wasn’t," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 102-103, 02.
  16. Catharina Klepsch & Timo Wollmershäuser, 2011. "Yield spreads on EMU government bonds — How the financial crisis has helped investors to rediscover risk," Intereconomics: Review of European Economic Policy, Springer, vol. 46(3), pages 169-176, June.
  17. repec:ces:ifofor:v:12:y:2012:i:4:p:52-56 is not listed on IDEAS
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