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The Politics of Central Banks: Austerity and Unemployment in Europe

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  • Kurzer, Paulette

Abstract

This article examines the divergences in labor market-performances in four small, open economies: Austria, Belgium, the Netherlands, and Sweden. It argues that great unemployment in Belgium and the Netherlands is partly due to the implementation of deflationary policies during the 1980s. The decline of Keynesian intervention in Belgium and the Netherlands is traced to the institutional independence of their central banks to set monetary and exchange rate policies separate from government. Because the Swedish and Austrian central banks are more integrated in the policy process and their countries are not members of the Common Market or the European Monetary System, social democratic governments have been able to go against the European trend of monetary restrictiveness and fiscal austerity. Accordingly, business in Austria and Sweden is more optimistic about future profit returns and is more willing to invest in productive capital, resulting in lower unemployment.

Suggested Citation

  • Kurzer, Paulette, 1988. "The Politics of Central Banks: Austerity and Unemployment in Europe," Journal of Public Policy, Cambridge University Press, vol. 8(1), pages 21-48, January.
    • Handle: RePEc:cup:jnlpup:v:8:y:1988:i:01:p:21-48_00
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    Cited by:

    1. Stephen McBride, 2016. "Constitutionalizing Austerity: Taking the Public out of Public Policy," Global Policy, London School of Economics and Political Science, vol. 7(1), pages 5-14, February.
    2. Jocelyn Pixley & Sam Whimster & Shaun Wilson, 2013. "Central bank independence: A social economic and democratic critique," The Economic and Labour Relations Review, , vol. 24(1), pages 32-50, March.
    3. George Argitis, 2001. "Intra-capitalist Conflicts, Monetary Policy and Income Distribution," Review of Political Economy, Taylor & Francis Journals, vol. 13(4), pages 453-470.
    4. J. Matthew Clark, 1996. "The Bank of Canada, Accountability and Legitimacy: Some Proposals for Reform," Canadian Public Policy, University of Toronto Press, vol. 22(4), pages 330-341, December.

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