Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/201007
Authors: 
Hristov, Nikolay
Hülsewig, Oliver
Wollmershäuser, Timo
Year of Publication: 
2019
Series/Report no.: 
Bundesbank Discussion Paper No. 24/2019
Abstract: 
We estimate a panel VAR model for the euro area to quantitatively assess how the uneven recourse of national banking systems in the euro area to the ECB's unconventional refinancing operations that led to the accumulation of large TARGET2 balances, has contributed 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 in the period 2008-2014. Our results suggest that the built-up of TARGET2 balances was mainly driven by capital flow shocks while being barely responsive to other aggregate shocks. Furthermore, on basis of counterfactual experiments we find that the ability to build-up sizable TARGET2 liabilities has contributed substantially to avoid deeper recessions in the distressed euro area member countries like Spain, Italy, Ireland and Portugal, while to a smaller extent depressing aggregate economic activity in core member states, such as Germany, the Netherlands and Finland.
Subjects: 
Euro area
TARGET2 balances
capital in flow shocks
panel vector autoregressive model
JEL: 
E42
F32
F41
F45
ISBN: 
978-3-95729-602-3
Document Type: 
Working Paper

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