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This paper offers a meticulous description and analysis of the development of the Target balances, with a rich set of new data and detailed information that specialists will treasure and the general public will find illuminating. The last part of the paper, in which the author discusses measures to prevent Target balances from ballooning in the future and includes a comparison of settlement possibilities, is particularly thoughtprovoking and useful. In the US system, balance-of-payment imbalances between commercial banks and, much later, district Feds, were settled for two hundred years using gold and gold certificates; and the US system only recently adopted settlement with marketable securities. In Europe no settlement procedure for Target balances has been introduced to-date. Target balances are merely carried forward on the balance sheets of national central banks from year to year, with interest added to the debt and liability positions that have accumulated between the national central banks. This could imply risks that limit the policy choices of member countries. After all, Moody's decided to consider downgrading the Netherlands and Germany because of their huge outstanding Target claims. It is high time for the Eurosystem partners to discuss the settlement issue more seriously.

Abstract
The exceptional measures by central banks during the financial crisis have led to renewed interest in the redistributive effects of monetary policy. This paper adopts the perspective of central bank balance sheets to assess such effects. It uses information from the euro area National Central Banks and the US Federal Reserve Banks to analyse the regional and sectoral effects of monetary policy. Central bank balance sheets capture sustained imbalances in payment flows across the euro area countries that peaked at 10% of GDP in the so-called Target balances, and across the US districts that reached 5% of GDP in the equivalent Interdistrict Settlement Accounts. These imbalances, combined with accommodative central bank liquidity, shifted risks from the private financial sector to the public sector and among taxpayers - yet, mechanisms are in place to mitigate such risks and the associated redistributive effects. The liquidity injection, while directly channelled at the stressed regions or sectors, has indirectly supported the financial sector at large. In different institutional contexts, the financial centres in Germany and in the New York district have been strengthened. They have been net recipients of payment inflows from the rest of the respective currency areas, equivalent in amounts to a third of the liquidity injection during the crisis.

Estimates of cyclically-adjusted budget balances, correcting actual government budget balances for business cycle fluctuations, are produced by many institutions, including the European Commission, the IMF and the OECD. This paper presents an alternative approach for the cyclical adjustment of budget balances. The approach is based on a disaggregated method for the calculation of the cyclical component of the budget balance. In this approach, the effects of changes in the structure of demand and national income on government revenue and expenditure are captured. Cases where the various macroeconomic bases are in different phases of the cycle or exhibit fluctuations of different magnitude are taken into account in this way. The computation of the cyclical components of these macroeconomic bases is based on the Hodrick-Prescott filter and takes into account the latest evidence presented in the literature about the properties of this filter. The paper also presents new estimates of the elasticities of individual budget items with respect to the relevant macroeconomic variables. The method is used within the ESCB for the estimation of cyclically adjusted budget balances of the EU countries