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Peripheral Europe beyond the Troika. Assessing the 'success' of structural reforms in driving the Spanish recovery

Author

Listed:
  • Luis Cárdenas
  • Paloma Villanueva
  • Ignacio Álvarez
  • Jorge Uxó

Abstract

Since 2014 the Spanish economy has recovered positive GDP growth, and the country has been growing well above the Eurozone average. This recovery has sparked an academic and political debate concerning the role that structural reforms, prescribed by the 'Troika', have played in peripheral Europe. For certain scholars and institutions, these structural reforms have allowed the market, through greater wage flexibility, to make the necessary adjustments to restore economic growth, resulting in a 'healthy' economic recovery. But, to what extent is this mainstream narrative solidly backed up by the empirical evidence? Can Spain be held up as an international example of the success of these reforms? The aim of this paper is to shed light on this debate. We consider that labor market reforms and wage devaluation policy are not the drivers of economic recovery. Instead, we offer an alternative explanation for recovery based on the theory of demand-led growth.

Suggested Citation

  • Luis Cárdenas & Paloma Villanueva & Ignacio Álvarez & Jorge Uxó, 2018. "Peripheral Europe beyond the Troika. Assessing the 'success' of structural reforms in driving the Spanish recovery," FMM Working Paper 40-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:fmmpap:40-2018
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    References listed on IDEAS

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    1. Jorge Uxó & Ignacio Álvarez & Eladio Febrero, 2018. "Fiscal space on the eurozone periphery and the use of the (partially) balanced-budget multiplier: The case of Spain," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(1), pages 99-125, January.
    2. Ozlem Onaran & Thomas Obst, 2016. "Wage-led growth in the EU15 member-states: the effects of income distribution on growth, investment, trade balance and inflation," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1517-1551.
    3. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-393, December.
    4. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    5. Paloma Villanueva & Luis Cárdenas del Rey & Jorge Uxó & Ignacio Álvarez, 2018. "The role of internal devaluation on the correction of the Spanish external deficit," Working Papers del Instituto Complutense de Estudios Internacionales 1805, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    6. Marta Martínez Matute & Alberto Urtasun, 2017. "The recovery of private consumption in Spain by product type and household," Economic Bulletin, Banco de España;Economic Bulletin Homepage, issue JUN, pages 1-13.
    7. Servaas Storm & C.W.M. Naastepad, 2016. "Myths, Mix-ups, and Mishandlings: Understanding the Eurozone Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(1), pages 46-71, January.
    8. C. W.M. Naastepad & Servaas Storm, 2007. "OECD demand regimes (1960-2000)," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 29(2), pages 211-246, January.
    9. Steindl, Josef, 1979. "Stagnation Theory and Stagnation Policy," Cambridge Journal of Economics, Oxford University Press, vol. 3(1), pages 1-14, March.
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    More about this item

    Keywords

    Spain; demand-led growth; structural reforms; wage devaluation;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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