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Imbalances in payment system TARGET2 - background, reasons and solutions
[Nerovnováhy v platebním systému TARGET2 - vznik, příčiny a řešení]

Author

Listed:
  • Pavel Knotek

Abstract

We observe increase in TARGET2 balances of certain central banks in European Monetary Union (EMU) after 2008, especially in case of central banks from Germany and eurozone's south wing countries. The aim of this article is to explain the problem of TARGET2 imbalances, describe creation of TARGET2 position, their determinants and to provide proposals of possible solutions using basic literature regarding the topic. There are few approaches for explaining, what are the main drivers of TARGET2 imbalances. The current account balances have been balanced by corresponding movements on financial accounts until 2008, therefore no significant positions in TARGET2 occurred in pre-crisis period. After financial crisis, capital flows inside EMU, which helped in balancing of TARGET2 positions, changed. Regular redemptions or limits for TARGET2 liabilities belong among possible solutions of imbalance in the payment system.

Suggested Citation

  • Pavel Knotek, 2016. "Imbalances in payment system TARGET2 - background, reasons and solutions [Nerovnováhy v platebním systému TARGET2 - vznik, příčiny a řešení]," Současná Evropa, Prague University of Economics and Business, vol. 2016(2), pages 24-37.
    • Handle: RePEc:prg:jnlsev:v:2016:y:2016:i:2:id:135:p:24-37
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    payment system TARGET2; European Monetary Union; imbalances; banks; TARGET positions; H. W. Sinn; platební systém TARGET2; Evropská měnová unie; nerovnováhy; banky; TARGET pozice;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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