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Interdependence between core and peripheries of the European economy: secular stagnation and growth in the Western Balkans

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  • Will Bartlett
  • Ivana Prica

Abstract

European countries are economically dependent upon each other. This paper therefore embeds the analysis of the Western Balkan countries within a wider perspective of the European economy as a whole. It combines a simple core-periphery model with an under-consumption model to provide an explanation of the emergence of secular stagnation, the dependency relationships between the core and peripheries of the European economy, and the spillover effects of Eurozone crisis to the Western Balkans. Due to tendencies to under-consumption, the core countries have been vulnerable to secular stagnation. In order to overcome this tendency within the Eurozone they are dependent on export revenues from the peripheries to sustain their economic growth. This has led to high trade and current account deficits during the boom and placed the peripheries in a highly vulnerable position during the recession period. Financialisation of the European economy has emerged as a response to the tendency towards secular stagnation, as the provision of consumer credit stimulated demand and temporarily overcame under consumption tendencies. The paper argues that continuing austerity, as a method to create internal devaluation, is unlikely to succeed as a means to extricate the periphery countries from the crisis. Given the dependencies of the European economies upon one another, a possibly better way out of the current period of low growth and stagnation would be a coordinated fiscal expansion to stimulate domestic and Europe-wide demand.

Suggested Citation

  • Will Bartlett & Ivana Prica, 2017. "Interdependence between core and peripheries of the European economy: secular stagnation and growth in the Western Balkans," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 14(1), pages 123-139, June.
  • Handle: RePEc:liu:liucej:v:14:y:2017:i:1:p:123-139
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    References listed on IDEAS

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    1. Thomas I. Palley, 2013. "Financialization: What It Is and Why It Matters," Palgrave Macmillan Books, in: Financialization, chapter 2, pages 17-40, Palgrave Macmillan.
    2. Martin Sokol, 2001. "Central and Eastern Europe a Decade After the Fall of State-socialism: Regional Dimensions of Transition Processes," Regional Studies, Taylor & Francis Journals, vol. 35(7), pages 645-655.
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    Cited by:

    1. Joanna Błach & Monika Wieczorek-Kosmala & Joanna Trzęsiok, 2020. "Innovation in SMEs and Financing Mix," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 13(9), pages 1-19, September.
    2. Ines Kersan-Škabić, 2016. "Is Internal Devaluation Policy In The Eu Effective?," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(211), pages 29-46, October -.
    3. Sofia GOUVEIA & Leonida CORREIA & Patrícia MARTINS, 2020. "European integration and its effects on population in border and peripheral regions," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 8-27, November.
    4. Krisztina Soreg & Guillermo Bermudez-Gonzalez, 2021. "Measuring the Socioeconomic Development of Selected Balkan Countries and Hungary: A Comparative Analysis for Sustainable Growth," Sustainability, MDPI, Open Access Journal, vol. 13(2), pages 1-20, January.
    5. Maciej Stefański, 2020. "To What Extent does Convergence Explain the Slowdown in Potential Growth of the CEE Countries Following the Global Financial Crisis?," Working Papers 2020-058, Warsaw School of Economics, Collegium of Economic Analysis.
    6. Velimir Bole & Miha Dominko & Ada Guštin Habuš & Janez Prašnikar, 2019. "Countries Of Former Yugoslavia: Periphery Vs. Super-Periphery In The Great Recession And Beyond," Economic Annals, Faculty of Economics, University of Belgrade, vol. 64(223), pages 11-38, October –.
    7. Gräbner, Claudius & Hafele, Jakob, 2020. "The emergence of core-periphery structures in the European Union: A complexity perspective," ZOE Discussion Papers 6, ZOE. institute for future-fit economies, Bonn.

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    More about this item

    Keywords

    Secular stagnation; Western Balkans; core-periphery;
    All these keywords.

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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