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Notes on the Role of TARGET in a Stage III Crisis

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  • Peter M. Garber

Abstract

When Stage III of EMU begins on January 1, 1999, member countries will irrevocably lock exchange rates, and interbank payments in euros will commence. Will the ensuing respite from Stage II instabilities be permanent or only the eye of the storm? Can Stage III itself be subject to an attack that forces a realignment of the of the system? The key question for this paper is how the infrastructural arrangements designed to underpin the monetary union will emerge to determine capital flow dynamics in a crisis and accentuate potential cross-border flows. The answer lies in the details of the TARGET payment system, which can provide the inter-central bank credit necessary to fund an attack.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:6619
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    1. Michael G. Spencer & Peter M. Garber, 1992. "The Dissolution of the Austro-Hungarian Empire; Lessons for Currency Reform," IMF Working Papers 92/66, International Monetary Fund.
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    Cited by:

    1. Barry Eichengreen, 2010. "The Breakup of the Euro Area," NBER Chapters,in: Europe and the Euro, pages 11-51 National Bureau of Economic Research, Inc.
    2. Pisani-Ferry, Jean, 2013. "The known unknowns and unknown unknowns of European Monetary Union," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 6-14.
    3. Robert P. Flood & Peter M. Garber, 2000. "Is Launching the Euro Unstable in the Endgame?," NBER Chapters,in: Currency Crises, pages 163-177 National Bureau of Economic Research, Inc.
    4. Raphael A. Auer, 2014. "What drives TARGET2 balances? Evidence from a panel analysis," Economic Policy, CEPR;CES;MSH, vol. 29(77), pages 139-197, January.
    5. Thomas Mayer & Jochen Möbert & Christian Weistroffer, 2011. "Makroökonomische Ungleichgewichte in der EWU und das Eurosystem," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 64(16), pages 31-38, September.
    6. Wolf, Marvin, 2013. "Währungsunionen und Allmendeproblem," Hannover Economic Papers (HEP) dp-521, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    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. 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.
    9. Thomas Mayer & Jochen Möbert & Christian Weistroffer, 2012. "Macroeconomic Imbalances in EMU and the Eurosystem," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 35-42, February.
    10. Sergio Cesaratto, 2013. "The implications of TARGET2 in the European balance of payments crisis and beyond," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(3), pages 359-382.
    11. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-638, August.
    12. 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, February.
    13. Peter B. Kenen, 2000. "Comment on "Is Launching the Euro Unstable in the Endgame?"," NBER Chapters,in: Currency Crises, pages 177-181 National Bureau of Economic Research, Inc.
    14. Rosati, Simonetta & Secola, Stefania, 2005. "Explaining cross-border large-value payment flows: evidence from TARGET and EURO 1 data," Working Paper Series 443, European Central Bank.

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