Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77651
Authors: 
Potrafke, Niklas
Reischmann, Markus
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4297
Abstract: 
Using the new unit root test by Phillips et al. (2011) we show that the Target balances of the German Bundesbank have been exploding from the beginning of 2009 to the beginning of 2013. By implementing a full-allotment policy and reducing the required minimum quality of collaterals in October 2008, the European Central Bank (ECB) refinanced credits in the GIIPS countries to a large extent. Private capital flowed out of the GIIPS countries (Greece, Italy, Ireland, Portugal and Spain), and the Target claims of the German Bundesbank increased significantly. If the Eurozone collapses, the German Bundesbank would lose its Target claims. Because the German Bundesbank would certainly request a recapitalization from the German federal government, German government debt might increase.
Subjects: 
Eurosystem
Target
recursive unit root test
explosiveness
hidden debt
JEL: 
C22
E50
E58
F32
F34
H63
Document Type: 
Working Paper

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