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Conclusions and Policy Recommendations

In: The Economics of Target Balances

Author

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  • Hans-Werner Sinn

    (Ludwig Maximilian University)

Abstract

Target overdraft credit in principle is a useful shock absorber in the case of liquidity and confidence crises that entail the risk of fire sales and capital flight. However, as it may grow without bounds and does not have to be settled, it also enables the ECB to depress the interest spreads among European countries below the levels implied by differences in creditworthiness, which would induce less prudent and parsimonious financial behavior than otherwise would be the case.

Suggested Citation

  • Hans-Werner Sinn, 2020. "Conclusions and Policy Recommendations," Springer Books, in: The Economics of Target Balances, chapter 0, pages 115-126, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-50170-9_13
    DOI: 10.1007/978-3-030-50170-9_13
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