IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/101808.html

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

Author

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
    as

    Download full text from publisher

    File URL: https://doi.org/10.20955/wp.2025.024
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.20955/wp.2025.024?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    2. De Santis, Roberto A., 2015. "A measure of redenomination risk," Working Paper Series 1785, European Central Bank.
    3. Desislava C. Andreeva & Thomas Vlassopoulos, 2019. "Home Bias in Bank Sovereign Bond Purchases and the Bank-Sovereign Nexus," International Journal of Central Banking, International Journal of Central Banking, vol. 15(1), pages 157-197, March.
    4. Carlo Altavilla & Giacomo Carboni & Roberto Motto, 2021. "Asset Purchase Programs and Financial Markets: Lessons from the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 17(70), pages 1-48, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Albertazzi, Ugo & Barbiero, Francesca & Marqués-Ibáñez, David & Popov, Alexander & Rodriguez d’Acri, Costanza & Vlassopoulos, Thomas, 2020. "Monetary policy and bank stability: the analytical toolbox reviewed," Working Paper Series 2377, European Central Bank.
    2. Gomes, João F. & Grotteria, Marco & Wachter, Jessica A., 2023. "Foreseen risks," Journal of Economic Theory, Elsevier, vol. 212(C).
    3. De Santis, Roberto A. & Stein, Michael, 2016. "Correlation changes between the risk-free rate and sovereign yields of euro area countries," Working Paper Series 1979, European Central Bank.
    4. repec:prs:ecstat:estat_0336-1454_2017_num_494_1_10781 is not listed on IDEAS
    5. Andreas Beyer & Benoît Coeuré & Caterina Mendicino, 2017. "Foreword – The crisis, ten years after: Lessons learnt for monetary and financial research," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 494-495-4, pages 45-64.
    6. Daniel Monteiro, 2023. "Macrofinancial Dynamics in a Monetary Union," European Economy - Discussion Papers 188, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Afonso, António & Arghyrou, Michael G. & Gadea, María Dolores & Kontonikas, Alexandros, 2018. "“Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 1-30.
    8. Francesco Paolo Mongelli & Gonzalo Camba-Mendez, 2018. "The Financial Crisis and Policy Responses in Europe (2007–2018)," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 531-558, December.
    9. Andreas Beyer & Benoît Coeuré & Caterina Mendicino, 2017. "Foreword ‒ The Crisis, Ten Years After: Lessons Learnt for Monetary and Financial Research [Avant‑propos – La crise, dix ans après : les enseignements pour la recherche dans les domaines monétaire et financier]," Post-Print hal-05500967, HAL.
    10. Etienne Vaccaro-Grange, 2025. "Quantitative easing, tightening, and the term premium channel in the Euro Area," Empirical Economics, Springer, vol. 69(6), pages 3089-3125, December.
    11. Dani Rodrik, 2018. "Populism and the economics of globalization," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 12-33, June.
    12. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "Recovery from Financial Crises: Evidence from 100 Episodes," American Economic Review, American Economic Association, vol. 104(5), pages 50-55, May.
    13. Wojciech Charemza & Christian Francq & Radu Lupu & Svetlana Makarova & Jean-Michel Zakoïan, 2025. "Testing for the footprints of stabilization economic policy in forecast errors," PLOS ONE, Public Library of Science, vol. 20(12), pages 1-23, December.
    14. Scott E. Page, 2012. "A complexity perspective on institutional design," Politics, Philosophy & Economics, , vol. 11(1), pages 5-25, February.
    15. Steven J. Davis & John C. Haltiwanger & Kyle Handley & Ben Lipsius & Josh Lerner & Javier Miranda, 2021. "The economic effects of private equity buyouts," Jena Economics Research Papers 2021-013, Friedrich-Schiller-University Jena.
    16. Michael Redmond & Willem Van Zandweghe, 2016. "The Lasting Damage from the Financial Crisis to U.S. Productivity," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-3, March.
    17. Roos, Michael W. M., 2015. "The macroeconomics of radical uncertainty," Ruhr Economic Papers 592, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    18. Christoph Trebesch, 2019. "Resolving sovereign debt crises: the role of political risk," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 421-444.
    19. Pogany, Peter, 2013. "Thermodynamic Isolation and the New World Order," MPRA Paper 49924, University Library of Munich, Germany.
    20. Prabheesh, K.P. & Anglingkusumo, Reza & Juhro, Solikin M., 2021. "The dynamics of global financial cycle and domestic economic cycles: Evidence from India and Indonesia," Economic Modelling, Elsevier, vol. 94(C), pages 831-842.
    21. Röhrs, Sigrid & Winter, Christoph, 2017. "Reducing government debt in the presence of inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 1-20.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:101808. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Scott St. Louis (email available below). General contact details of provider: https://edirc.repec.org/data/frbslus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.