Target Losses in Case of a Euro Break-up
Evaluation of the financial costs of a Eurozone breakup depends critically on the interpretation of TARGET balances. While it has been argued that TARGET claims in the Eurozone can be written off without incurring any losses on the claimants as the value of fiat money is independent of the claims of a national central bank, the present paper shows that TARGET claims represent a shift of the ECB's refinancing credit to the crisis countries and thus a claim on the interest return from the commercial banks of these countries. If TARGET claims were to be written off, a loss of real wealth would occur to the amount of the present value of this interest return, which is exactly measured by the amount of the TARGET claims.
|Date of creation:||2012|
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- Sinn, Hans-Werner & Wollmershäuser, Timo, 2012.
"Target loans, current account balances and capital flows: The ECB’s rescue facility,"
Munich Reprints in Economics
19556, University of Munich, Department of Economics.
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"Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU,"
CEPR Discussion Papers
1747, C.E.P.R. Discussion Papers.
- Hans-Werner Sinn & Holger Feist, 1997. "Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU," NBER Working Papers 6072, National Bureau of Economic Research, Inc.
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- Buiter, Willem H. & Rahbari, Ebrahim, 2012. "Target2 Redux: The simple accountancy and slightly more complex economics of Bundesbank loss exposure through the Eurosystem," CEPR Discussion Papers 9211, C.E.P.R. Discussion Papers.
- Sinn, Hans-Werner, 2012.
"Target losses in case of a Euro breakup,"
Munich Reprints in Economics
19622, University of Munich, Department of Economics.
- Stefan Homburg, 2012. "Der neue Kurs der Europäischen Zentralbank," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 92(10), pages 673-677, October.
- Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 468-508, August.
- Hans-Werner Sinn, 2012. "Die Target-Falle: Gefahren für unser Geld und unsere Kinder," Books, by Staff of the Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 2012001.
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