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Is Europe Doomed to Stagnation? An Analysis of the Current Crisis and Recommendations for Reforming Macroeconomic Policymaking in Euroland

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Author Info
Joerg Bibow (University of Hamburg Germany and The Levy Economics Institute)
Abstract

This paper challenges the view that external shocks caused Euroland's 2001 slowdown and subsequent stagnation. Instead, the design of Euroland's macro policymaking arrangements is found lacking in looking after sufficient domestic demand growth. In the event the ECB has failed on its stabilization role—a rather vital role given that fiscal policy is severely constrained by the Stability and Growth Pact. As a result, Europe is in a precarious situation of stagnation today, and under the current regime there is even a risk of self-reinforcing destabilization. Hence, reforming the regime is urgent. A nominal GDP target to be pursued by fiscal and monetary policies in cooperation would provide Europe with the growth anchor that is currently missing.

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Publisher Info
Paper provided by EconWPA in its series General Economics and Teaching with number 0306002.

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Length: 52 pages
Date of creation: 05 Jun 2003
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Handle: RePEc:wpa:wuwpgt:0306002

Note: Type of Document - word perfect; prepared on PC; to print on HP/PostScript; pages: 52 ; figures: included
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Web page: http://129.3.20.41

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Related research
Keywords: policy design and consistency; stabilization policy; policy coordination;

Find related papers by JEL classification:
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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