External and Internal Money

Hans-Werner Sinn

Chapter Chapter 7 in The Economics of Target Balances, 2020, pp 49-52 from Springer

Abstract: Abstract If a country’s sum of Target and cash balances is positive, external liquidity must have flown in. This external liquidity fulfils functions similar to internal liquidity which has resulted from the local NCB’s purchases of assets and provision of refinancing credits to commercial banks. However it originates from money creation and lending activities of other NCBs. This is the reason why the local NCB is allocated compensating Target and cash balance claims on the Eurosystem. In some northern Eurozone countries, in 2012 and 2013 the external money as measured by the balances crowded out most of the internal money. In Germany and Finland, the crowding out was actually 100%.

Keywords: Base money; Open market operations; Refinancing credits; Minimum reserves; Excess liquidity (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-50170-9_7

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DOI: 10.1007/978-3-030-50170-9_7

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