Nature of TARGET2 Imbalances
Msc in International Finance, Hec Paris
Published in: Public Finance Quarterly 2015/3 (p. 342-356.)
SUMMARY: There is no consensus among economists regarding the nature of TARGET2 assets and liabilities recorded on the balance sheets of euro area national central banks, the exact reasons for their build-up in recent years and the possible ways of their management. The paper points out that TARGET2 balances are shaped concurrently by endogenous and exogenous factors. The common banking supervision system and the quantitative easing programme of the ECB may ease the imbalances, reduce the dynamics of TARGET2 balances, and alleviate currently perceived risks.
KEYWORDS: interbank settlements, euro area, imbalance, monetary policy, TARGET2
JOURNAL OF ECONOMIC LITERATURE (JEL) KÓD: E42, E58, F33