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Target loans, current account balances and capital flows: the ECB’s rescue facility

  • Hans-Werner Sinn

    ()

  • Timo Wollmershäuser

This paper presents the first comprehensive Target database of the Eurozone and interprets it from an economic perspective. We show that the Target accounts measure the intra-Eurozone balances of payments and indirectly also international credit given through the Eurosystem in terms of reallocating the ECB’s net refinancing credit. We argue that the Euro crisis is a balance-of-payments crisis similar to the Bretton Woods crisis, and document to what extent the Target credit financed the current account deficits and outright capital flight in Greece, Ireland, Portugal, Spain and Italy. To prevent the ECB from undermining the allocative role of the capital market, we propose adopting the US system of credit redemption between the District Feds. Copyright The Author(s) 2012

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File URL: http://hdl.handle.net/10.1007/s10797-012-9236-x
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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 19 (2012)
Issue (Month): 4 (August)
Pages: 468-508

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Handle: RePEc:kap:itaxpf:v:19:y:2012:i:4:p:468-508
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  1. 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 - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 47-58, 03.
  2. 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.
  3. Stefan Homburg, 2011. "Anmerkungen zum Target2-Streit," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 91(8), pages 526-530, August.
  4. Ruckriegel, Karlheinz & Seitz, Franz, 2002. "The euro system and the federal reserve system compared: Facts and challenges," ZEI Working Papers B 02-2002, University of Bonn, ZEI - Center for European Integration Studies.
  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. 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;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 46(3), pages 169-176, June.
  7. Feist, Holger & Sinn, Hans-Werner, 1997. "Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU," CEPR Discussion Papers 1747, C.E.P.R. Discussion Papers.
  8. Rebecca McCaughrin & Simon T Gray & Alexandre Chailloux, 2008. "Central Bank Collateral Frameworks; Principles and Policies," IMF Working Papers 08/222, International Monetary Fund.
  9. Whittaker, John, 2011. "Intra-eurosystem debts," MPRA Paper 38368, University Library of Munich, Germany.
  10. repec:ces:ifofor:v:12:y:2012:i:4:p:52-56 is not listed on IDEAS
  11. Sinn, Hans-Werner, 2010. "Casino Capitalism: How the Financial Crisis Came About and What Needs to be Done Now," OUP Catalogue, Oxford University Press, number 9780199588275, December.
  12. Hans-Werner Sinn, 2011. "How to Rescue the Euro: Ten Commandments," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(4), pages 52-56, December.
  13. John Hawkins, 2003. "Central bank balance sheets and fiscal operations," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal issues and central banking in emerging economies, volume 20, pages 71-83 Bank for International Settlements.
  14. Hans-Werner Sinn, 2011. "Die europäische Zahlungsbilanzkrise - Eine Einführung," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(16), pages 03-08, 09.
  15. Wilhelm Kohler, 2011. "Zahlungsbilanzkrisen im Eurosystem: Griechenland in der Rolle des Reservewährungslandes?," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(16), pages 12-19, 09.
  16. Buti,Marco & Deroose,Servaas & Gaspar,Vitor & Martins,João Nogueira (ed.), 2010. "The Euro," Cambridge Books, Cambridge University Press, number 9789279098420, November.
  17. 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.
  18. Helmut Schlesinger, 2011. "Die Zahlungsbilanz sagt es uns," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(16), pages 09-11, 09.
  19. Aaron Tornell & Frank Westermann, 2012. "Greece: The Sudden Stop That Wasn’t," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 102-103, 02.
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