Modelling the Eurozone as an Extraordinary Exchange Rate Union

The Trans-European Automated Real-Time Gross settlement Express Transfer system (TARGET) imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in theory it is more of an exchan...

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Bibliographic Details
Published in:International advances in economic research 2014-11, Vol.20 (4), p.357-367
Main Authors: Sauer, Beate, Sell, Friedrich L., Werner, Thomas
Format: Article
Language:English
Subjects:
Analysis
Automation
Balance of payments deficit
Central banks
Currency
Economic crisis
Economic Growth
Economics
Economics and Finance
Eurozone
Federal Reserve monetary policy
Fiscal policy
Fixed exchange rates
Foreign exchange
Foreign exchange rates
GDP
Gross Domestic Product
Interest rates
International Economics
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Monetary unions
Price level changes
Prices and rates
Sovereign debt
Studies
Citations: Items that this one cites
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Summary:The Trans-European Automated Real-Time Gross settlement Express Transfer system (TARGET) imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in theory it is more of an exchange rate union or a system of fixed exchange rates than a monetary union. This paper will show why the TARGET is a crucial indicator for the Eurozone not being a monetary union but instead an exchange rate union, and why countries holding TARGET liabilities against the European System of Central Banks can be compared to a reserve currency country, like the US under the Bretton-Woods System.
ISSN:1083-0898
1573-966X
DOI:10.1007/s11294-014-9482-z