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Divergence between the core and the periphery and secular stagnation in the Eurozone

Author

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  • Botta, Alberto
  • Tippet, Ben
  • Onaran, Özlem

Abstract

In this paper, we provide empirical evidence about the widening divergence between the macroeconomic performances of core eurozone countries and peripheral economies. We note that, while core economies operate close to full employment, there are evident signs of secular stagnation, i.e. widespread long-term unemployment and reduced growth potential, in the periphery. In such a context, we stress that the unconventional monetary policy implemented by the European Central Bank since 2015 has proved largely ineffective to stimulate investment demand and economic recovery in the periphery. More than this, it may even deepen the existing gap between core and peripheral countries. We suggest that a reform of EU industrial policy, which put emphasis on the productive development of underdeveloped regions in the euro area, stands out as the best strategy against the eurozone core-periphery divide and for improving the functioning and effectiveness of EU macro policies.

Suggested Citation

  • Botta, Alberto & Tippet, Ben & Onaran, Özlem, 2018. "Divergence between the core and the periphery and secular stagnation in the Eurozone," Greenwich Papers in Political Economy 20405, University of Greenwich, Greenwich Political Economy Research Centre.
  • Handle: RePEc:gpe:wpaper:20405
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    File URL: http://gala.gre.ac.uk/id/eprint/20405/7/20405%20Botta%20Tippet%20and%20Onaran%20GPERC%20WP63.pdf
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    References listed on IDEAS

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    1. Stefano Micossi, 2012. "Unholy Compromise in the Eurozone and How to Mend it. WWWforEurope Working Paper No. 1," WIFO Studies, WIFO, number 46060, February.
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    7. Klaus-Jürgen Gern & Nils Jannsen & Stefan Kooths & Maik Wolters, 2015. "Quantitative Easing in the Euro Area: Transmission Channels and Risks," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 50(4), pages 206-212, July.
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    10. Alberto Botta, 2014. "Structural Asymmetries at the Roots of the Eurozone Crisis: What’s New for Industrial Policy in the EU?," Economics Working Paper Archive wp_794, Levy Economics Institute.
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    Cited by:

    1. Alberto Botta & Ben Tippet, 2020. "Secular stagnation and core-periphery uneven development in post-crisis eurozone," Working Papers PKWP2002, Post Keynesian Economics Society (PKES).
    2. Maela Giofré & Oleksandra Sokolenko, 2022. "The Shrinkage After the Enlargement? The Effect of Financial Crises and Enlargement on Stock Market Integration in the Euro Area," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(3), pages 1-33, February.
    3. Helen Kavvadia & Savvakis C. Savvides, 2019. "Funding Economic Development and the Role of National Development Banks-The Case of Cyprus," Development Discussion Papers 2019-09, JDI Executive Programs.
    4. Botta, Alberto & Tippet, Ben, 2020. "The roots of a divided eurozone: rigid labour markets or asymmetric technology-macroeconomic regimes?," Greenwich Papers in Political Economy 30958, University of Greenwich, Greenwich Political Economy Research Centre.

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    More about this item

    Keywords

    Secular stagnation; Eurozone; quantitative easing; core-periphery divergence; industrial policy;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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