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Germany's post-2000 stagnation in the European context - a lesson in macroeconomic mismanagement

  • Eckhard Hein

    ()

    (IMK at the Hans Boeckler Foundation)

  • Achim Truger

    ()

    (IMK at the Hans Boeckler Foundation)

In the present paper we question the mainstream diagnosis of Germany’s post-2000 stagnation as well as the prescribed remedies. We show that the ‘institutional sclerosis’ view of Germany’s stagnation is unfounded and that therefore the political measures proposed and actually taken are misguided. Instead, we claim that macroeconomic mismanagement explains the German absolute and relative stagnation compared with the Euro area as a whole and with the USA. If the problem of macroeconomic mismanagement is not addressed and solved, irrespective of occasional cyclical upswings, we predict a continuing stagnation tendency for the German economy. And we argue that this is not only a German problem, but a matter of European concern, because the macroeconomic policies which have caused the German constellation will have major negative feedback effects on the other Euro area countries in the near future.

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Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 03-2006.

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Length: 34 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:imk:wpaper:03-2006
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  4. Joerg Bibow, 2006. "Inflation Persistence and Tax-Push Inflation in Germany and in the Euro Area: A Symptom of Macroeconomic Mismanagement?," IMK Studies 01-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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  17. Philip Arestis & Malcolm Sawyer, 2005. "Aggregate demand, conflict and capacity in the inflationary process," Cambridge Journal of Economics, Oxford University Press, vol. 29(6), pages 959-974, November.
  18. Dimitri B. Papadimitriou & Anwar M. Shaikh & Claudio H. Dos Santos & Gennaro Zezza, 2005. "How Fragile is the U.S. Economy?," Economics Strategic Analysis Archive sa_mar_05, Levy Economics Institute.
  19. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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