The Eurosystem's Asset Purchase Programme and Target Balances

The rise of national central banks' TARGET balances in the euro area: a comment

“…The TARGET balances of the NCBs of the jurisdictions where the banks providing settlement services to the sellers of securities 7 are concentrated will record an increase in TARGET claims, while the other NCBs will record an increase in TARGET liabilities. Eisenschmidt et al (2017) provide evidence that supports the hypothesis that this has been the case for the EA in the years of the APP. In Europe, a few financial centres (notably Germany, the Netherlands, Luxembourg, and Finland) act as important gateways between the EA and the rest of the world (RoW), 8 and non-EA sellers of securities are likely to request payment to their bank deposits in one of these jurisdictions.…”

“…Depending on context, rising TARGET balances may or may not be an indicator of stress, fragmentation, or 17. Unfortunately, MDR have chosen not to review the analysis by Eisenschmidt et al (2017). This analysis shows that 'there is no time-invariant causal link between changes in TARGET balances and specific components of the BoP' and that 'the analysis of BoP developments during the PSPP period shows that large changes in TARGET balances per se are not an appropriate individual indicator to detect crisis-related external flows' (ibid.…”

Two-Tier System for Remunerating Excess Reserve Holdings

“…The speedy redistribution of EL following the introduction of the TTS hints at lower levels of segmentation across borders in euro area money markets. It also supports the notion that the skewed distribution of EL in the euro area is largely due to the financial structure of the euro area in conjunction with the ECB's asset purchases given that large cross-border flows were taking place as soon as even very limited financial incentives were present (Eisenschmidt et al(2017)). At the same time, the flows associated with the TTS were limited in relation to both the overall reserves in the system and the amount of cross-border TARGET2 flows.…”

European Monetary Unification through Novation. The Political Economy of the TARGET System

“…The literature on TARGET2 has continued to evolve in a number of ways, especially with the advent of the Eurosystem's Asset Purchases Programmes (APPs) in 2014. There are econometric studies of how to interpret TARGET2 balances (Abad et al 2013;Auer 2014;Eisenschmidt et al 2017;Chmielewski and Sławiński 2019;Cheung, Steinkamp, and Westermann 2020), technical analyses considering how NCBs can exit the TARGET2 system (Papadia 2014;Malinen et al 2016), scholars analysing the TARGET2 system in relation to the 1944 Keynes Plan for an International Clearing Union (Lavoie 2015;Amato et al 2016;Barredo-Zuriarrain, Molero-Simarro, and Quesada-Solana 2016;Rossi 2016;Mazier and Valdecantos 2019;Kregel 2019), the TARGET2 system as a risk-sharing mechanism (Schelkle 2017), as well as sociological studies focusing on the conceptual ambiguities of the TARGET2 system and how individuals deal with it (Krarup 2016;Sahr 2019). However, we still lack a proper political economy account of the role that the TARGET and TARGET2 systems play for European monetary unification that includes the politics connected to their introduction, the institutional reality they have created, and the process of institutional transformation they have triggered.…”