Target loans, current account balances and capital flows

Description

"The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target balances in the national central banks' balance sheets, was 404 billion euros in August 2011. The national central banks of these countries covered the deficits by creating and lending out additional central bank money that flowed to the euro core countries, Germany in particular, and crowded out the central bank money resulting from local refinancing operations. Thus the ECB forced a public capital export from the core countries that partly compensated for the now reluctant private capital flows to, and the capital flight from, the periphery countries"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series -- working paper 17626
• Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17626.

Links

• http://www.nber.org/papers/w17626