| Abstract | Velika financijska kriza označila je prekretnicu u provedbi monetarne politike. Kao posljedica nekonvencionalnih mjera i instrumenata, uvjeti provedbe monetarne politike promijenjeni su iz strukturnog manjka u strukturni višak likvidnosti. Zajedno s većom transparentnosti središnjih banaka, navedeno je također imalo utjecaj i na monetarnu teoriju. Snažniji fokus na hijerarhiju i kauzalnost nastanka likvidnosti unutar monetarnog sustava doveo je do popularizacije i validacije kreditne teorije (endogenog) novca. Stoga se u radu najprije postavljaju teorijski temelji kroz sustavni prikaz i objašnjenje navedenih promjena i saznanja u monetarnoj sferi. Potom se fokus premješta na specifičan primjer Eurosustava, odnosno europodručja. Unutar europodručja, uslijed dualne krize likvidnosti (Velike financijske krize i Europske dužničke krize) došlo je do pojave fenomena TARGET2 neravnoteža. TARGET2 neravnoteže počele su se akumulirati u bilancama nacionalnih središnjih banaka Eurosustava, predstavljajući odljev kapitala s juga u centar europodručja. To je izazvalo pažnju šire ekonomske zajednice te mnogobrojne sukobljene i kontroverzne interpretacije. U suvremenosti, TARGET2 neravnoteže ostaju sekularna karakteristika europodručja. U radu se detaljno analizira kontekst i mehanika nastanka TARGET2 neravnoteža. Empirijskim istraživanjem pozicionira se TARGET2 neravnoteže kao varijablu koja ima makroekonomski važnu ulogu u razumijevanju krizne i postkrizne ekonomije europodručja. Shodno tome, istraživanjem se testiraju i potvrđuju hipoteze koje oponiraju shvaćanju TARGET2 neravnoteža kao (tek) tehničke nuspojave provedbe nekonvencionalne monetarne politike. Najprije, ističe se važnost TARGET2 sustava plaćanja u transmisiji monetarne politike Eurosustava. To posebice vrijedi s obzirom na uvjete strukturnog viška likvidnosti i fragmentiranog međubankovnog tržišta u postkriznom europodručju. Potom, dokazuje se da postoji veza ne samo monetarnih nego i nemonetarnih čimbenika s razvojem TARGET2 neravnoteža, poput financijskog (sistemskog) stresa te jaza povjerenja na relaciji centra i juga europodručja. Identifikacija postojanja i povezanosti jaza povjerenja i TARGET2 neravnoteža upućuje na makroekonomsku ulogu i interpretaciju TARGET2 neravnoteža kao simptoma nedovršenosti zajedničke ekonomske i monetarne unije. |
| Abstract (english) | The main research subject of this doctoral thesis is monetary policy and TARGET2 imbalances. First, this concerns monetary policy, as well as even broader topic of liquidity creation process. Second, the topic then narrows towards specific Eurosystem’s phenomenon of TARGET2 imbalances. The general aim is to explain and connect the process of liquidity creation in contemporary monetary economies with the accumulation of TARGET2 imbalances. The particular aim has been to find and confirm the relationship of TARGET2 imbalances with monetary and non-monetary factors. Hence, two main research problems are posed. First revolves around the transmission mechanism of the Eurosystem’s monetary policy. Second revolves around finding and generalizing macroeconomic role of TARGET2 imbalances through the identification of their connection with non-monetary factors. The Great Financial Crisis marked a turning point in the implementation of monetary policy. As a consequence of unconventional measures and instruments, the conditions for the implementation of monetary policy were changed from a structural deficit to a structural surplus of liquidity. In other words, the monetary regime of scarce reserves has become the monetary regime of abundant reserves. This - together with the greater transparency of central banks and the decreasing role of cash in modern times - also had an impact on monetary theory. Larger focus on the hierarchy and causality of the liquidity creation within the monetary system led to the popularization and validation of the credit theory of (endogenous) money. The credit theory of (endogenous) money is one of the three theories of monetary intermediation. As such, it was legitimized as valid as early as the end of the 19th century, but trends have changed due to historical and theoretical circumstances. The most important ones have been the concept of the money multiplier, Keynes' favoring the so-called RPD doctrine and historical tendency of central bankers to be ambiguous about exact operational procedures in conducting monetary policy. However, after 2008 the context has changed significantly. Central bankers and monetary theory economists have been increasingly advocating the validity of the endogeneity of money. Hence, in the first part the thesis consists of a detailed analysis of how liquidity is created and transferred in the monetary system. At the same time, the hierarchy of liquidity is explicited with the help of demarcation between public and private money. This also means different weights are assigned to liquidity depending on whose obligation (liability) they constitute. At the very top of the hierarchy is the central bank and its liabilities (legal tender). Then, other monetary institutions follow with their liabilities (credit money). Similar to how central bank's money is the means of payment for the banking sector, commercial banks' money is the dominant means of payment for the non-monetary sector. After the theoretical and accounting analysis of the hierarchy and endogeneity of liquidity, the focus shifts to the implementation of monetary policy in conditions of structural excess of liquidity. In the aftermath of the Great Financial Crisis, unconventional monetary policy (i.e. balance sheet policy) has gained more importance and prominence. In addition, the operational procedures for the implementation of monetary policy have also been changed. With the transition to a monetary regime of abundant reserves, symmetrical „corridor“ system of interest rates has been largely abandoned and replaced by the „floor“ system. Accordingly, the thesis first lays the theoretical foundations by help of systematic explanation of the aforementioned changes and findings in the monetary sphere. Afterwards, focus shifts to a specific example of the Eurosystem and the euro area. Within the euro area, the phenomenon of TARGET2 imbalances appeared in the wake of the dual liquidity crisis (Great Financial Crisis and European Debt Crisis). The TARGET2 payment system is the internal payment system of the euro area. Its purpose is to ensure (non-collateralized) settlement in the form of central bank liquidity between the national central banks of the Eurosystem. The accumulation of imbalances within the TARGET2 system coincides with the change in conditions of structural deficit to conditions of structural excess of liquidity. TARGET2 imbalances began to accumulate on the balance sheets of the Eurosystem's national central banks, representing capital outflows from the south to the center of the euro area. This attracted the attention of the wider economic community and numerous conflicting and controversial interpretations. In modern times, TARGET2 imbalances remain relevant as they have become a secular feature of the euro area. Hence, this thesis containts detailed analysis of the context and mechanics of the emergence of TARGET2 imbalances. Also, the existing literature is surveyed, along with conflicting interpretations of TARGET2 imbalances. In doing so, special emphasis is placed on the dual liquidity crisis within the euro area, the depth of which is related to the absence of a timely „Lender of Last Resort“ (LOLR) reaction of the ECB. The absence of the LOLR role originally stems from the institutional deficit from the Maastricht Treaty, and was subsequently largely corrected in Mario Draghi's mandate. Empirical research is done with the aim to position TARGET2 imbalances as macroeconomically important in understanding the crisis and post-crisis economy of the euro area. Accordingly, hypotheses are tested and confirmed that oppose the understanding of TARGET2 imbalances as (merely) technical side effects of the implementation of unconventional monetary policy. First of all, the importance of the TARGET2 payment system in the transmission of the monetary policy of the Eurosystem is highlighted. This is especially true given the conditions of structural excess liquidity and the fragmented interbank market in the post-crisis euro area. More precisely, the relative importance of TARGET2 imbalances in the implementation of unconventional monetary policy is confirmed. The comparison is made explicitly with the outcome variables of credit channel and portfolio balancing channel. Then, the link is established between the growth of TARGET2 imbalances and the decline in the volume of transactions on the overnight interbank market of the euro area. This supports the argument that TARGET2 is essential in the implementation of unconventional monetary policy, moreover, that the TARGET2 payment system served as a kind of substitute for the interbank overnight market in conditions of structural excess liquidity and zero lower bound. Then, aim was to show that there is a connection between not only monetary but also non-monetary factors and TARGET2 imbalances, such as financial (systemic) stress and the confidence gap between the center and the south of the euro area. The identification of the existence and connection of the confidence gap and TARGET2 imbalances points to the macroeconomic role and interpretation of TARGET2 imbalances as a symptom of the incompleteness of the common economic and monetary union. Consequently, it is concluded that monetary policy alone - without a homogeneous fiscal policy and common safe collateral – has not been sufficient to achieve greater convergence and growth within and of the euro area. |
