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

• Authors: Chmielewski Tomasz , Sławiński Andrzej
• Languages of publication: EN

Abstracts

EN

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 bailout’. 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.

Keywords

EN

liquid reserve and money creation; TARGET2 imbalances

• Publisher: Uniwersytet Ekonomiczny w Poznaniu
• Journal: Economics and Business Review
• Year: 2019
• Volume: 5 (19)
• Issue: 2

Dates

published

2019-06-28

Contributors

author

Chmielewski Tomasz

• Research Department of the National Bank of Poland, 00-919 Warszawa, ul. Świętokrzyska 21, Poland

author

Sławiński Andrzej

• Research Department of the National Bank of Poland, 00-919 Warszawa, ul. Świętokrzyska 21, Poland, [e-mail]

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Identifiers

DOI

10.18559/ebr.2019.2.3