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The Target Credit

In: The Economics of Target Balances

Author

Listed:
  • Hans-Werner Sinn

    (Ludwig Maximilian University)

Abstract

Among a variety of potential private and public ways of creating an international payment system for its new currency, the Eurozone chose a public solution without the NCBs’ sustaining paid-in accounts. Payment orders from one NCB to another as recorded in the Target balances create open, uncollateralized credit positions that are in fact overdraft credit. There is no limit to this overdraft credit and no settlement mechanism. The latter distinguishes the Target balances from the corresponding (ISA) balances between the branches of the US Federal Reserve System, which are settled annually.

Suggested Citation

  • Hans-Werner Sinn, 2020. "The Target Credit," Springer Books, in: The Economics of Target Balances, chapter 0, pages 9-16, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-50170-9_2
    DOI: 10.1007/978-3-030-50170-9_2
    as

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