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What Does It Take? Quantifying Cross-Country Transfers in the Eurozone

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Abstract

We measure the cross-country transfers that result from unconventional monetary policy in the Eurozone. The ECB funds its balance sheet expansion mostly by issuing bank reserves and cash in core countries. The national central banks (NCBs) in periphery countries then borrow from the core NCBs at below-market rates, and use these funds to finance asset purchases and bank lending. This arrangement exposes taxpayers in core countries to credit and currency risk without corresponding compensation. By comparing the cross-country distribution of NCB income to a counterfactual scenario without non-marketable intra-Eurozone claims, we document significant and persistent cross-country transfers in the Target2 system.

Suggested Citation

  • YiLi Chien & Zhengyang Jiang & Matteo Leombroni & Hanno Lustig, 2025. "What Does It Take? Quantifying Cross-Country Transfers in the Eurozone," Working Papers 2025-024, Federal Reserve Bank of St. Louis, revised 28 May 2026.
    • Handle: RePEc:fip:fedlwp:101808
    DOI: 10.20955/wp.2025.024
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    2. Cochrane, John H. & Garicano, Luis & Masuch, Klaus, 2026. "Reforms to ensure the stability of the Euro–Member States, the EU and the ECB need to act," LSE Research Online Documents on Economics 138669, London School of Economics and Political Science, LSE Library.

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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