Target Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility

Hans-Werner Sinn and Timo Wollmershaeuser
Authors registered in the RePEc Author Service: Timo Wollmershäuser

No 17626, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target balances in the national central banks' balance sheets, was 404 billion euros in August 2011. The national central banks of these countries covered the deficits by creating and lending out additional central bank money that flowed to the euro core countries, Germany in particular, and crowded out the central bank money resulting from local refinancing operations. Thus the ECB forced a public capital export from the core countries that partly compensated for the now reluctant private capital flows to, and the capital flight from, the periphery countries.

JEL-codes: E50 E58 E63 F32 F34 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (104)

Published as 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, vol. 19(4), pages 468-508, August.

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Journal Article: Target loans, current account balances and capital flows: the ECB’s rescue facility (2012)
Working Paper: Target loans, current account balances and capital flows: The ECB’s rescue facility (2012)
Working Paper: Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility (2011)
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