What Does It Take? Quantifying Cross-Country Transfers in the Eurozone

We compute the cross-country transfers that result from unconventional monetary policy in the Eurozone. The ECB funds the expansion of its aggregate balance sheet mostly by issuing bank reserves and cash in core countries. The national central banks (NCBs) in periphery countries then borrow from the core NCBs at below-market rates to fund the asset purchases and bank lending. In addition, NCBs in the periphery lend more to their own banks at below-market rates. To compute the cross-country transfers, we compare the resulting cross-country distribution of NCB income to a counterfactual scenario without the ECB and without non-marketable intra-Eurozone debt. We document significant and persistent transfers from the core to the periphery.