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Global Imbalances, Bretton Woods II, and Euroland's Role in All This

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  • Jorg Bibow

Abstract

Approaching the issue of mounting global imbalances from the perspective of the "Bretton Woods II hypothesis," this paper argues that the popular preoccupation with China's supposed export-led development strategy is misplaced. It also suggests, similar to Japan's depression, subdued growth in Euroland for most of the time since the Maastricht Treaty has been of first-order importance in these developments. Germany is identified as being at the heart of the European trouble. Globally, there is an ongoing clash between two approches to macroeconomic policy making: a highly dogmatic German approach, and a very pragmatic Anglo-Saxon one. The low levels of interest at which global demand imbalances have been smoothed out financially reflect deficient global demand in an environment of vast supply-side opportunities. After contributing greatly to the build-up of imbalances, Euroland is unlikely to play any constructive part in their unwinding. Hampered by an exchange-rate policy vacuum, a small-country mindset, and soaring intra-area imbalances, Euroland is also illpositioned to cope with fading external growth stimuli.

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  • Jorg Bibow, 2006. "Global Imbalances, Bretton Woods II, and Euroland's Role in All This," Economics Working Paper Archive wp_486, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_486
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    12. Jorg Bibow, 2005. "Bad for Euroland, Worse for Germany-The ECB's Record," Macroeconomics 0511018, EconWPA.
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