IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Monetary policy, macroeconomic policy mix and economic performance in the Euro area

  • Eckhard Hein


    (IMK at the Hans Boeckler Foundation)

  • Achim Truger


    (IMK at the Hans Boeckler Foundation)

In order to explain slow growth and high unemployment in the Euro area, in particular if compared to the USA, we follow a macroeconomic policy view focussing on the more restrictive stance of monetary, fiscal and wage policies in the Euro area. In the present paper we focus on the particular role of monetary policy, because the European Central Bank (ECB) seems to be the major obstacle to higher growth and employment. Analysing the macroeconomic policy mix, wage policies and fiscal policies are taken into account at the outset, but then the determinants of ECB policies are assessed in more detail. Our analysis confirms that it is the ECB's overemphasising a too low inflation target which is a major problem for macroeconomic performance in the Euro area. The ECB is too exclusively occupied with inflation and wage developments and pays too little attention to the development of real variables. In order to improve growth and employment and to limit the risks of deflation in the largest economy of the Euro area, Germany, it is therefore required that the ECB raises its inflation target and that the central bank focuses more on real economic activity.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 06-2006.

in new window

Length: 28 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:imk:wpaper:06-2006
Contact details of provider: Postal: Hans-Böckler-Straße 39, 40476 Düsseldorf
Phone: +49 211 7778 234
Fax: +49 211 7778 4234
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:tpr:qjecon:v:115:y:2000:i:1:p:147-180 is not listed on IDEAS
  2. Jorg Bibow, 2005. "Europe's Quest for Monetary Stability: Central Banking Gone Astray," Economics Working Paper Archive wp_428, Levy Economics Institute.
  3. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
  4. Philip Arestis & Malcolm Sawyer, 2003. "Aggregate Demand, Conflict, and Capacity in the Inflationary Process," Economics Working Paper Archive wp_391, Levy Economics Institute.
  5. Allsopp, Christopher & Vines, David, 1998. "The Assessment: Macroeconomic Policy after EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 1-23, Autumn.
  6. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
  7. 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 375-93, December.
  8. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," NBER Working Papers 7461, National Bureau of Economic Research, Inc.
  9. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Macroeconomics 0004043, EconWPA.
  10. Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers 649, Stockholm University, Institute for International Economic Studies.
  11. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  12. Thomas I. Palley, 1998. "Restoring Prosperity: Why the U.S. Model Is Not the Answer for the United States or Europe," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 20(3), pages 337-353, April.
  13. 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.
  14. Ansgar Belke, 2002. "Does the ECB Follow the FED?," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 211/2002, Department of Economics, University of Hohenheim, Germany.
  15. Stephen G. Cecchetti, 1995. "Distinguishing theories of the monetary transmission mechanism," Review, Federal Reserve Bank of St. Louis, issue May, pages 83-97.
  16. Robert Solow, 2000. "Unemployment in the United States and in Europe - A Contrast and the Reasons," CESifo Working Paper Series 231, CESifo Group Munich.
  17. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  18. Richard H. Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  19. Christian E. Weller, 2002. "What Drives the Fed to Act?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 24(3), pages 391-417, April.
  20. Carlin, Wendy & Soskice, David, 2005. "Macroeconomics: Imperfections, Institutions, and Policies," OUP Catalogue, Oxford University Press, number 9780198776222, July.
  21. Eckhard Hein & Achim Truger, 2006. "Fiscal Policy and Macroeconomic Performance in the Euro area - Lessons for the Future," IMK Working Paper 07-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  22. Giuseppe Fontana, 2003. "Post Keynesian Approaches to Endogenous Money: A time framework explanation," Review of Political Economy, Taylor & Francis Journals, vol. 15(3), pages 291-314.
  23. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
  24. Miguel A. León-Ledesma & A. P. Thirlwall, 1998. "The Endogeneity of the Natural Rate of Growth," Studies in Economics 9821, School of Economics, University of Kent.
  25. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 7-33, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:imk:wpaper:06-2006. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Nemitz)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.