Conclusions and Policy Recommendations

Hans-Werner Sinn

Chapter Chapter 13 in The Economics of Target Balances, 2020, pp 115-126 from Springer

Abstract: Abstract Target overdraft credit in principle is a useful shock absorber in the case of liquidity and confidence crises that entail the risk of fire sales and capital flight. However, as it may grow without bounds and does not have to be settled, it also enables the ECB to depress the interest spreads among European countries below the levels implied by differences in creditworthiness, which would induce less prudent and parsimonious financial behavior than otherwise would be the case.

Keywords: Automatic shock absorption; Capital allocation; Excessive borrowing; Gold settlement; Voting rights (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/978-3-030-50170-9_13

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