Modelling the Eurozone as an Extraordinary Exchange Rate Union

Beate Sauer (), Friedrich Sell () and Thomas Werner ()

International Advances in Economic Research, 2014, vol. 20, issue 4, 357-367

Abstract: The Trans-European Automated Real-Time Gross settlement Express Transfer system (TARGET) imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in theory it is more of an exchange rate union or a system of fixed exchange rates than a monetary union. This paper will show why the TARGET is a crucial indicator for the Eurozone not being a monetary union but instead an exchange rate union, and why countries holding TARGET liabilities against the European System of Central Banks can be compared to a reserve currency country, like the US under the Bretton-Woods System. Copyright International Atlantic Economic Society 2014

Keywords: Balance of payments adjustment mechanism; Debt crisis; Eurozone; Exchange rate regimes; TARGET; E40; E42; E43; E50; E52; F34 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11294-014-9482-z

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