The rise of national central banks' TARGET balances in the euro area: a comment

Andrea Terzi

European Journal of Economics and Economic Policies: Intervention, 2019, vol. 16, issue 2, 161-168

Abstract: With the implementation of the Eurosystem's asset purchase programme (APP), national central banks' TARGET balances have risen. For the European Central Bank, this reflects cross-border payments and portfolio rebalancing in the context of the APP. Minenna et al. (2018) disagree and claim that the causes of rising TARGET balances (2015–2017) have been the persistent current-account surplus of Germany and ‘capital flight.’ This comment explains that rising TARGET balances occur under specific monetary policy configurations and that the context of the APP was critical to account for rising TARGET balances. It then questions the decomposition approach employed by the authors by arguing that it shows accounting correspondences, not causality, and concludes that there is no established two-way association between TARGET balances and actual vulnerabilities of the euro area.

Keywords: TARGET; TARGET2; payment system; quantitative easing; asset purchase program; interbank market (search for similar items in EconPapers)
JEL-codes: E42 E44 E52 E58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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