Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173029
Authors: 
Steiner, Andreas
Steinkamp, Sven
Westermann, Frank
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6753
Abstract: 
In the winter 2011/12 a wave of internal capital flight prompted the ECB to abandon its exit strategy and to announce an unprecedented monetary expansion. We analyze this episode in several dimensions: (i) by providing an event-study analysis covering key variables from national central banks’ balance sheets, (ii) by rationalizing their patterns in a portfolio balance model of the exchange rate, augmented by institutional characteristics of the TARGET2 system, and (iii) by proposing a theory-based index of exchange market pressure within the euro area. We argue that the euro area entails an inherent policy trilemma that makes it prone to speculative attacks.
Subjects: 
currency union
exchange market pressure
policy trilemma
speculative attack
TARGET2
JEL: 
E42
F36
F41
F45
Document Type: 
Working Paper

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