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

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  • Andrea Terzi

    (Franklin University Switzerland, Sorengo, Switzerland)

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.

Suggested Citation

  • Andrea Terzi, 2019. "The rise of national central banks' TARGET balances in the euro area: a comment," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 16(2), pages 161-168, September.
    • Handle: RePEc:elg:ejeepi:v:16:y:2019:i:2:p161-168
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    Cited by:

    1. Minenna, Marcello, 2022. "Target 2 determinants: The role of Balance of Payments imbalances in the long run," Journal of Banking & Finance, Elsevier, vol. 140(C).

    More about this item

    Keywords

    TARGET; TARGET2; payment system; quantitative easing; asset purchase program; interbank market;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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