Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/176896 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 6877
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We estimate a panel VAR model for the euro area to quantitatively asses the contribution of the TARGET2 system to the propagation of different types of structural economic shocks as well as to the historical evolution of aggregate economic activity in euro area member countries. Our results suggest that TARGET2 has significantly affected the transmission of capital ow shocks while leaving the macroeconomic responses to other aggregate shocks virtually unaltered. Furthermore, on basis of counterfactual analyses, we find that TARGET2 has contributed substantially to avoid deeper recessions in distressed periphery member countries like Spain, Italy, Ireland and Portugal, while to a smaller degree depressing aggregate economic activity in core member states, such as Germany, the Netherlands and Finland.
Subjects: 
euro area
TARGET2 balances
capital inflow shocks
panel vector autoregressive model
JEL: 
E42
F32
F41
F45
Document Type: 
Working Paper
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