What is the meaning of TARGET balances?
on 29th February 2012 by Silvia Merler
TARGET2 (the centralised payment system operated by euro area central banks) has recently drawn attention, due to the constantly diverging net balances of Southern and Northern countries. Divergence started at the onset of the financial crisis and has accellerated during summer 2011, with the intensifying of the euro crisis and of tensions on the interbank market. Read more
Debate on Target 2: don’t confuse symptom and disease!
on 2nd of March by Jean Pisani-Ferry
For some time economists have been engaged in an arcane controversy about the significance of the imbalances in the joint settlement system used by eurozone central banks, called Target 2. In a series of contributions, Hans-Werner Sinn of the CESifo research group in Munich has drawn attention to the fact that... Read more
on 5 March 2012 by Shahin Vallée
Dear All, I’m writing these lines from Paris after a few days in Naples where I participated in a conference on the future of the Arab Spring. There are important debates to follow both in the world economy and on the geopolitical front. On this note, the meeting between PM Netanyahu and a suddenly more Hawkish President Obama on Monday is important to follow. It could, somewhat paradoxically, reduce the risks of a unilateral Israeli strike and therefore take away some risk premium from energy markets.
I will focus on:
1. The Target 2 debate and the Bundesbank
2. The aftermath of the Arab Spring
... Read more
Target 2 of the ECB vs. Interdistrict Settlement Account of the Federal Reserve
The Target 2 discussion is still going strong in Europe especially after the president of the German Bundesbank has expressed his concern as regards the quality of the collateral held by the ECB and National Central Banks. Observers such as Hans-Werner Sinn have claimed that the US Federal Reserve had a fundamentally different (and presumably better and more stable) set up...Read more
Collateral is key for target debate
on 7th March 2012 by Guntram B. Wolff
In my letter of June 8 2011 to the FT, I had argued that the lack of collateral will limit flows of the eurosystem to the periphery and thereby limit target 2 balances. This has now somewhat been addressed by a growing recourse to Emergency Liquidity Assistance and Long Term Refinancing Operations that include a substantial expansion of the collateral pool. Jens Weidman of the Bundesbank has started a debate on exactly this link between target balance and the collateral pool. In his letter... Read more