Understanding the German criticism of the Target system and the role of central bank capital

Roberto Perotti

No 15067, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Criticism of the Target system by a group of central European scholars has become a widespread argument against the policies of the European Central Bank and even the integrity of the monetary union, and even standard fare in the media and in the political debate in Germany. Most academics and practitioners that have participated in the debate have been dismissive of the German preoccupations. In this paper, I first try and clarify the many remaining misunderstandings about the workings and implications of the Target system. I propose a unified, systematic and simple approach to the study of the workings of the Target system in response to different shocks and in comparison with different alternative regimes. I then argue that the German criticism of the Target system is not so unfounded after all, and should be taken seriously, both on theoretical grounds and for its political implications.

Keywords: Target2 system; European monetary union; Central bank capital (search for similar items in EconPapers)
JEL-codes: E58 E63 F33 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (6)

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