The Eurosystem's Asset Purchase Programme and Target Balances

49 Pages Posted: 21 Sep 2017

See all articles by Jens Eisenschmidt

Jens Eisenschmidt

European Central Bank (ECB)

Danielle Kedan

European Central Bank (ECB)

Martin Schmitz

European Central Bank (ECB)

Ramón Adalid

European Central Bank (ECB)

Patrick Papsdorf

European Central Bank (ECB)

Date Written: September 15, 2017

Abstract

TARGET balances have risen during the period of the Eurosystem’s asset purchase programme (APP). The APP gives rise to substantial cross-border flows of reserves at the time of asset purchases and beyond, reflecting the interaction of decentralised monetary policy implementation and the integrated euro area financial structure. This financial structure, in which only a handful of locations act as gateways between the euro area and the rest of the world, leads to rising TARGET balances at the time of APP purchases and the persistence of TARGET balances in the context of subsequent portfolio rebalancing. TARGET balances per se are not necessarily an indicator of stress in bank funding markets, financial market fragmentation or unsustainable balance of payments developments.

Keywords: TARGET2, financial structure, asset purchase programme, excess liquidity, balance of payments

JEL Classification: E58, G02, F32

Suggested Citation

Eisenschmidt, Jens and Kedan, Danielle and Schmitz, Martin and Adalid, Ramón and Papsdorf, Patrick, The Eurosystem's Asset Purchase Programme and Target Balances (September 15, 2017). ECB Occasional Paper No. 196, Available at SSRN: https://ssrn.com/abstract=3039951

Jens Eisenschmidt (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Danielle Kedan

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Martin Schmitz

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Ramón Adalid

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Patrick Papsdorf

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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