Target loans, current account balances and capital flows: The ECB’s rescue facility

Hans-Werner Sinn and Timo Wollmershäuser

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This paper presents the first comprehensive Target database of the Eurozone and interprets it from an economic perspective. We show that the Target accounts measure the intra-Eurozone balances of payments and indirectly also international credit given through the Eurosystem in terms of reallocating the ECB’s net refinancing credit. We argue that the Euro crisis is a balance-of-payments crisis similar to the Bretton Woods crisis, and document to what extent the Target credit financed the current account deficits and outright capital flight in Greece, Ireland, Portugal, Spain and Italy. To prevent the ECB from undermining the allocative role of the capital market, we propose adopting the US system of credit redemption between the District Feds.

Date: 2012
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Citations: View citations in EconPapers (146)

Published in International Tax and Public Finance 4 19(2012): pp. 468-508

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Related works:
Journal Article: Target loans, current account balances and capital flows: the ECB’s rescue facility (2012)
Working Paper: Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility (2011)
Working Paper: Target Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility (2011)
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