<abstract xmlns="http://www.w3.org/1999/xhtml"><p>During the global banking crisis of 2007-2009 and the Eurozone sovereign debt crisis of 2010-2012 the so called ‘TARGET2 imbalances’ attracted considerable attention. Some economists interpreted them as a symptom of the ECB’s ‘stealth bail-out’. The aim of the paper is to highlight that contrary to such claim, the emergence of TARGET2 imbalances reflected the benefits of having a mutual central bank within a monetary union which facilitated cross-border funding in spite of the global financial turbulence. The ECB’s liquidity loans to commercial banks in the Eurozone debtor countries shielded the Eurozone from a much deeper financial crisis than it actually occurred. The emergence of the TARGET 2 imbalances was actually only an accounting phenomenon resulting from the fact that these liquidity loans were technically extended by the debtor countries’ national central banks which are <italic>de facto</italic> (from the monetary policy perspective) ECB’s regional branches.</p></abstract>

During the global banking crisis of 2007-2009 and the Eurozone sovereign debt crisis of 2010-2012 the so called ‘TARGET2 imbalances’ attracted considerable attention. Some economists interpreted them as a symptom of the ECB’s ‘stealth bail-out’. The aim of the paper is to highlight that contrary to such claim, the emergence of TARGET2 imbalances reflected the benefits of having a mutual central bank within a monetary union which facilitated cross-border funding in spite of the global financial turbulence. The ECB’s liquidity loans to commercial banks in the Eurozone debtor countries shielded the Eurozone from a much deeper financial crisis than it actually occurred. The emergence of the TARGET 2 imbalances was actually only an accounting phenomenon resulting from the fact that these liquidity loans were technically extended by the debtor countries’ national central banks which are de facto (from the monetary policy perspective) ECB’s regional branches.

Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort

Research Department of the National Bank of Poland

Economics and Business Review

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

During the global banking crisis of 2007-2009 and the Eurozone sovereign debt crisis of 2010-2012 the so called ‘TARGET2 imbalances’ attracted considerable...

Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort

Publié en ligne: 09 juil. 2019

Pages: 48 - 63

Reçu: 02 mars 2019

Accepté: 23 avr. 2019

DOI: https://doi.org/10.18559/ebr.2019.2.3

Mots clés
liquid reserve and money creation, TARGET2 imbalances

© 2019 Tomasz Chmielewski et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Lessons from TARGET2 imbalances: The case for the ECB being a lender of last resort

Publié en ligne: 09 juil. 2019

Pages: 48 - 63

Reçu: 02 mars 2019

Accepté: 23 avr. 2019

DOI: https://doi.org/10.18559/ebr.2019.2.3

Mots clésliquid reserve and money creation, TARGET2 imbalances

© 2019 Tomasz Chmielewski et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
liquid reserve and money creation, TARGET2 imbalances