Please use this identifier to cite or link to this item:
Title: TARGET (im)balances at record level: Should we worry?
Authors: De Grauwe, P
Ji, Y
Macchiarelli, C
Keywords: central bank;cross-border cooperation;Economic and Monetary Union;economic policy;euro area;exchange rate;international finance;monetary policy;payment;public debt
Issue Date: 20-Nov-2017
Publisher: European Union
Citation: De Grauwe, P., Ji, Y. and Macchiarelli, C. (2017) 'TARGET (im)balances at record level: should we worry?', in European Parliament. Directorate-General for Internal Policies of the Union. Policy Department A. Economic and Scientific Policy. Monetary dialogue November 2017 : in-depth analysis for the ECON Committee, pp. 1 - 23. doi: 10.2861/118636.
Series/Report no.: Monetary dialogue;November 2017 : in-depth analysis
European Union. Directorate-General for Internal Policies of the Union. Policy Department A. Economic and Scientific Policy;IP/A/ECON/2017-04
European Parliament. Committee on Economic and Monetary Affairs;PE 607.365
Monetary dialogue; November 2017 : in-depth analysis
Abstract: TARGET is the payments system for making settlements between euro area economies and five other EU economies. Cross-border transactions generate claims/surpluses and liabilities/deficits among national central banks which “net out” for the system as a whole. These imbalances are manageable in relative terms, but look large in absolute terms. None are larger than one third of their corresponding public debt ratios; and despite a big build up in the 2010-13 period, the imbalances now appear to be on a non-expanding cyclical path. The implications for the EU economies and their policymakers are less easy. The main drivers, beyond the need to fund persistent current account deficits or surpluses, are the use of different funding sources (some outside the euro area), internal and external portfolio re-balancing, loose monetary policy and exchange rate risks. TARGET imbalances support quantitative easing, but are not driven by it. The main threats are the divergence that interrupts further economic integration; and the increasing liabilities taken on by the ECB since 2015. That said, self-correcting mechanisms are weak which makes symmetric adjustments by both creditor and debtor countries essential (because of the adding up constraint); and the difficulty that the imbalances cannot always be eliminated simply by balancing current accounts around the system.
Description: This document was requested by the European Parliament's Committee on Economic and Monetary Affairs.
Gov't Doc #: IP/A/ECON/2017-04
PE 607.365
ISBN: 978-92-846-2182-8
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

Files in This Item:
File Description SizeFormat 
FullText.pdf1.73 MBAdobe PDFView/Open

Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.