The real costs and profits of TARGET 2 balances

Titelangaben

Erler, Alexander ; Hohberger, Stefan:
The real costs and profits of TARGET 2 balances.
Bayreuth : Universität Bayreuth , 2014 . - 27 S. - (Wirtschaftswissenschaftliche Diskussionspapiere der Universität Bayreuth, Rechts- und Wirtschaftswissenschaftliche Fakultät ; 02-14 )

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Abstract

The paper assesses the real costs and profits of German claims on the Eurosys-
tem through TARGET2. While Germany’s nominal profits from holding TARGET2
claims depend on the development of the nominal interest rate, the real profits are
determined by the real interest rate as well as the real exchange rate. The paper
finds that at the end of 2013 Germany faces current costs of around 15 billion euros
in real terms. Calculating the costs and profits of every member country in the euro
area reveals that the TARGET2 system mirrors an implicit distribution mechanism
with a volume of about 30 billion euros. The results underline the aspect that even
without an euro area break-up or exit of one member-country, holding TARGET2
claims can cause high economic costs in real terms.