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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...
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show that large TARGET balances can only arise with excess liquidity. The interpretation of TARGET balances therefore … depends on the monetary policy context in which excess liquidity is created. We distinguish three phases of TARGET balances … excess liquidity is likely to persist on account of higher demand for central bank reserves compared to the pre-crisis period …
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