IDEAS home Printed from https://ideas.repec.org/p/han/dpaper/dp-640.html
   My bibliography  Save this paper

Speculative Eurozone Attacks and Departure Strategies

Author

Listed:
  • Homburg, Stefan

Abstract

This paper shows that the eurozone payment system does not effectively protect member states from speculative attacks. Suspicion of a departure from the common currency induces a terminal outflow of central bank money in weaker member states. TARGET2 cannot inhibit this drain but only protects central bank assets. Evidence presented here suggests that a run on Italy is already on the way. The paper also considers departure strategies of strong and weak member states and the distributive effects of an orderly eurozone dissolution.

Suggested Citation

  • Homburg, Stefan, 2018. "Speculative Eurozone Attacks and Departure Strategies," Hannover Economic Papers (HEP) dp-640, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  • Handle: RePEc:han:dpaper:dp-640
    as

    Download full text from publisher

    File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-640.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stephen Cecchetti & Robert McCauley & Patrick McGuire, 2012. "Interpreting TARGET2 balances," BIS Working Papers 393, Bank for International Settlements.
    2. Sven Steinkamp & Aaron Tornell & Frank Westermann, 2017. "The Euro Area’s Common Pool Problem Revisited: Has the Single Supervisory Mechanism Ameliorated Forbearance and Evergreening?," IEER Working Papers 107, Institute of Empirical Economic Research, Osnabrueck University, revised 06 Oct 2017.
    3. Hans-Werner Sinn & Timo Wollmershäuser, 2011. "Target-Kredite, Leistungsbilanzsalden und Kapitalverkehr: Der Rettungsschirm der EZB," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(1), pages 01-29, June.
    4. repec:ces:ifodic:v:16:y:2018:i:3:p:50000000003757 is not listed on IDEAS
    5. Steiner, Andreas & Steinkamp, Sven & Westermann, Frank, 2019. "Exit strategies, capital flight and speculative attacks: Europe's version of the trilemma," European Journal of Political Economy, Elsevier, vol. 59(C), pages 83-96.
    6. 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.
    7. Garber, Peter M., 1999. "The target mechanism: Will it propagate or stifle a stage III crisis?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 51(1), pages 195-220, December.
    8. Alexander L. Wolman, 2013. "Federal Reserve Interdistrict Settlement," Economic Quarterly, Federal Reserve Bank of Richmond, issue 2Q, pages 117-141.
    9. Benjamin Born & Teresa Buchen & Kai Carstensen & Christian Grimme & Michael Kleemann & Klaus Wohlrabe & Timo Wollmershäuser, 2012. "Austritt Griechenlands aus der Europäischen Währungsunion: Historische Erfahrungen, makroökonomische Konsequenzen und organisatorische Umsetzung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(10), pages 09-37, May.
    10. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    11. Clemens Fuest, 2018. "[Art 50] Ways to Leave the Euro – Does the Eurozone Need an Exit Clause?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(03), pages 25-30, November.
    12. Ulrich Bindseil & Philipp Johann König, 2012. "TARGET2 and the European Sovereign Debt Crisis," Credit and Capital Markets, Credit and Capital Markets, vol. 45(2), pages 135-174.
    13. Stefan Homburg, 2011. "Anmerkungen zum Target2-Streit," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(16), pages 46-50, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Steiner, Andreas & Steinkamp, Sven & Westermann, Frank, 2019. "Exit strategies, capital flight and speculative attacks: Europe's version of the trilemma," European Journal of Political Economy, Elsevier, vol. 59(C), pages 83-96.
    2. Heikki Oksanen, 2019. "Reforming the Euro Pragmatically: Towards Sustainable Fiscal Policy and a Revamped Eurosystem," CESifo Working Paper Series 7912, CESifo.

    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. Sinn Hans-Werner, 2019. "Der Streit um die Targetsalden : Kommentar zu Martin Hellwigs Artikel „Target-Falle oder Empörungsfalle?“," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 20(3), pages 170-217, September.
    2. Stefan Homburg, 2018. "Speculative Eurozone Attacks and Departure Strategies," CESifo Working Paper Series 7343, CESifo.
    3. Steiner, Andreas & Steinkamp, Sven & Westermann, Frank, 2019. "Exit strategies, capital flight and speculative attacks: Europe's version of the trilemma," European Journal of Political Economy, Elsevier, vol. 59(C), pages 83-96.
    4. Chmielewski Tomasz & Sławiński Andrzej, 2019. "Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort," Economics and Business Review, Sciendo, vol. 5(2), pages 48-63, June.
    5. Raphael A. Auer, 2014. "What drives TARGET2 balances? Evidence from a panel analysis [What drives Target2 balances? Evidence from a panel analysis]," Economic Policy, CEPR;CES;MSH, vol. 29(77), pages 139-197.
    6. Cheung, Yin-Wong & Steinkamp, Sven & Westermann, Frank, 2020. "Capital flight to Germany: Two alternative measures," Journal of International Money and Finance, Elsevier, vol. 102(C).
    7. 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.
    8. Barry Eichengreen & Arnaud J. Mehl & Livia Chițu & Gary Richardson, 2014. "Mutual Assistance between Federal Reserve Banks, 1913-1960 as Prolegomena to the TARGET2 Debate," NBER Working Papers 20267, National Bureau of Economic Research, Inc.
    9. Eisenschmidt, Jens & Kedan, Danielle & Schmitz, Martin & Adalid, Ramón & Papsdorf, Patrick, 2017. "The Eurosystem’s asset purchase programme and TARGET balances," Occasional Paper Series 196, European Central Bank.
    10. Christiaan Pattipeilohy, 2013. "A descriptive analysis of the balance sheet and monetary policy of De Nederlandsche Bank: 1900-1998 and beyond," DNB Occasional Studies 1103, Netherlands Central Bank, Research Department.
    11. Pavel Knotek, 2016. "Imbalances in payment system TARGET2 - background, reasons and solutions [Nerovnováhy v platebním systému TARGET2 - vznik, příčiny a řešení]," Současná Evropa, Prague University of Economics and Business, vol. 2016(2), pages 24-37.
    12. Eladio Febrero & Jorge Uxó & Óscar Dejuán, 2015. "The ECB During the Financial Crisis. Not so Unconventional!," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 715-739, November.
    13. Eger, Thomas & Weise, Peter, 2020. "Die Target-Salden in der Eurozone: "Falle" oder Scheinproblem?," Discussion Papers 1/20, Europa-Kolleg Hamburg, Institute for European Integration.
    14. Rewel, Thomas, 2013. "Target-2-Salden - Fluch oder Segen für das Eurosystem?," EconStor Preprints 97621, ZBW - Leibniz Information Centre for Economics.
    15. Francesco Papadia, 2014. "Operational Aspects of a Hypothetical Demise of the Euro," Journal of Common Market Studies, Wiley Blackwell, vol. 52(5), pages 1090-1102, September.
    16. Jorg Bibow, 2015. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution," Economics Working Paper Archive wp_845, Levy Economics Institute.
    17. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target-Salden und die deutsche Kapitalbilanz im Zeichen der europäischen Zahlungsbilanzkrise," Credit and Capital Markets, Credit and Capital Markets, vol. 45(4), pages 465-487.
    18. Christian Fahrholz & Andreas Freytag, 2012. "Will TARGET2-Balances be Reduced again after an End of the Crisis?," Global Financial Markets Working Paper Series 30-2012, Friedrich-Schiller-University Jena.
    19. Peter Burgold, 2013. "Nominale Abwertung innerhalb einer Währungsunion," Global Financial Markets Working Paper Series 47-2013, Friedrich-Schiller-University Jena.
    20. Stefan Homburg, 2012. "Notes on the Target2 Dispute," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 50-54, February.

    More about this item

    Keywords

    Currency speculation; TARGET2; eurozone; Italexit; Dexit; trilemma;
    All these keywords.

    JEL classification:

    • 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
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

    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:han:dpaper:dp-640. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/fwhande.html .

    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: Heidrich, Christian (email available below). General contact details of provider: https://edirc.repec.org/data/fwhande.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.