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TARGET2 and central bank balance sheets

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  • Karl Whelan

Abstract

type="main" xml:id="ecop12025-abs-0001"> 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," Economic Policy, CEPR;CES;MSH, vol. 29(77), pages 79-137, January.
  • Handle: RePEc:bla:ecpoli:v:29:y:2014:i:77:p:79-137
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    File URL: http://hdl.handle.net/10.1111/ecop.2014.29.issue-77
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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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    Cited by:

    1. Alberto Cardaci & Francesco Saraceno, 2017. "Inequality and Imbalances : a Monetary Union Agent-Based Model," Documents de Travail de l'OFCE 2017-30, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. Eichengreen, Barry & Mehl, Arnaud & Chitu, Livia & Richardson, Gary, 2015. "Mutual Assistance between Federal Reserve Banks: 1913–1960 as Prolegomena to the TARGET2 Debate," The Journal of Economic History, Cambridge University Press, vol. 75(03), pages 621-659, September.
    3. M. Vari, 2014. "Implementing monetary policy in a fragmented monetary union," Working papers 529, Banque de France.
    4. Martin Hellwig, 2019. "Target-Falle oder Empörungsfalle? – Zur deutschen Diskussion um die Europäische Währungsunion," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2019_05, Max Planck Institute for Research on Collective Goods.
    5. repec:ces:ifofor:v:ue:y:2013:i:1:p:05-50 is not listed on IDEAS
    6. E. Mengus, 2014. "International Bailouts: Why Did Banks' Collective Bet Lead Europe to Rescue Greece?," Working papers 502, Banque de France.
    7. repec:eee:poleco:v:48:y:2017:i:c:p:40-53 is not listed on IDEAS
    8. PhilippineCour-Thimann, 2013. "CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 0, pages 05-50, May.
    9. Pablo G. Bortz, "undated". "The Greek “Rescue†: Where Did the Money Go? An Analysis," Working Papers Series 29, Institute for New Economic Thinking.
    10. Kleczka, Mitja, 2015. "Monetary Policy, Fiscal Policy, and Secular Stagnation at the Zero Lower Bound. A View on the Eurozone," MPRA Paper 67228, University Library of Munich, Germany.
    11. repec:ces:ifofor:v:19:y:2018:i:4:p:36-45 is not listed on IDEAS
    12. Constantin ANGHELACHE & Madalina Gabriela ANGHEL & Marius POPOVICI, 2016. "Financial-monetary analysis model," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(7), pages 19-23, July.
    13. Yin-Wong Cheung & Sven Steinkamp & Frank Westermann, 2019. "Capital Flight to Germany: Two Alternative Measures," IEER Working Papers 115, Institute of Empirical Economic Research, Osnabrueck University.
    14. repec:ces:ifosdt:v:71:y:2018:i:24:p:15-25 is not listed on IDEAS
    15. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69, March.
    16. Pitsoulis, Athanassios & Schwuchow, Soeren C., 2017. "Holding out for a better deal: Brinkmanship in the Greek bailout negotiations," European Journal of Political Economy, Elsevier, vol. 48(C), pages 40-53.
    17. Francesco Purificato & Caterina Astarita, 2015. "TARGET2 Imbalances and the ECB as Lender of Last Resort," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 3(4), pages 1-28, October.

    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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