IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Coping with Imbalances in the Euro Area: Policy Alternatives Addressing Divergences and Disparities between Member Countries

Listed author(s):
  • Eckhard Hein
  • Daniel Detzer

In this paper we outline alternative policy recommendations addressing the problems of differential inflation, divergence in competitiveness, and associated current account imbalances within the euro area. The major purpose of these alternative policy proposals is to generate sustainably high demand and output growth in the euro area as a whole, providing high levels of noninflationary employment, as well as preventing "export-led mercantilist" and "debt-led consumption boom" types of development, both within the euro area and with respect to the role of the euro area in the world economy. We provide a basic framework in order to systematically address the related issues, making use of Anthony Thirlwall's model of a "balance-of-payments-constrained growth rate." Based on this framework, we outline the required stance for alternative economic policies and then discuss the implications for alternative monetary, wage/incomes, and fiscal policies in the euro area as a whole, as well as the consequences for structural and regional policies in the euro-area periphery in particular.

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: http://www.levyinstitute.org/pubs/wp_816.pdf
Download Restriction: no

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_816.

as
in new window

Length:
Date of creation: Sep 2014
Handle: RePEc:lev:wrkpap:wp_816
Contact details of provider: Web page: http://www.levyinstitute.org

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. Robert Kollmann & Marco Ratto & Werner Roeger & Jan in't Veld & Lukas Vogel, 2015. "What drives the German current account? And how does it affect other EU Member States?," Economic Policy, CEPR;CES;MSH, vol. 30(81), pages 47-93.
  2. Eckhard Hein, 2002. "Monetary policy and wage bargaining in the EMU: restrictive ECB policies, high unemployment, nominal wage restraint and inflation above the target," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 299-337.
  3. Daniel Detzer, 2012. "New instruments for banking regulation and monetary policy after the crisis," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 9(2), pages 233-254.
  4. Eckhard Hein & Achim Truger, 2004. "Macroeconomic co-ordination as an economic policy concept - opportunities and obstacles in the EMU," Macroeconomics 0408011, EconWPA.
  5. Eckhard Hein & Achim Truger & Till van Treeck, 2011. "The European Financial and Economic Crisis: Alternative Solutions from a (Post-) Keynesian Perspective," IMK Working Paper 9-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  6. Hein, Eckhard & Truger, Achim, 2010. "Finance-dominated capitalism in crisis – the case for a Global Keynesian New Deal," MPRA Paper 21175, University Library of Munich, Germany.
  7. A. P. Thirlwall & Penélope Pacheco-López, 2008. "Trade Liberalisation and The Poverty of Nations," Books, Edward Elgar Publishing, number 13089.
  8. Michael G. Arghyrou & Georgios Chortareas, 2008. "Current Account Imbalances and Real Exchange Rates in the Euro Area," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 747-764, 09.
  9. 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.
  10. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  11. Jorg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," Economics Working Paper Archive wp_780, Levy Economics Institute.
  12. Annamaria Simonazzi & Andrea Ginzburg & Gianluigi Nocella, 2013. "Economic relations between Germany and southern Europe," Cambridge Journal of Economics, Oxford University Press, vol. 37(3), pages 653-675.
  13. Carlos A. Carrasco & Patricia Peinado, 2015. "On the Origin of European Imbalances in the Context of European Integration," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(2), pages 177-191, June.
  14. Thomas I. Palley, 2010. "Asset price bubbles and counter-cyclical monetary policy: Why central banks have been wrong and what should be done," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(1), pages 91-107.
  15. Paul De Grauwe, 2011. "The European Central Bank: Lender of Last Resort in the Government Bond Markets?," CESifo Working Paper Series 3569, CESifo Group Munich.
  16. Eckhard Hein, 2013. "The crisis of finance-dominated capitalism in the euro area, deficiencies in the economic policy architecture, and deflationary stagnation policies," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 36(2), pages 325-354, January.
  17. De Grauwe, Paul, 2011. "Governance of a Fragile Eurozone," CEPS Papers 5523, Centre for European Policy Studies.
  18. Gustav A. Horn & Torsten Niechoj & Silke Tober & Till van Treeck & Achim Truger, 2010. "Reforming the European Stability and Growth Pact: Public Debt is Not the Only Factor, Private Debt Counts as Well," IMK Report 51e-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  19. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
  20. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
  21. Hein, Eckhard & Truger, Achim, 2013. "Future fiscal and debt policies: Germany in the Context of the European Monetary Union," IPE Working Papers 24/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  22. Karl Aiginger, 2012. "A Systemic Industrial Policy to Pave a New Growth Path for Europe," WIFO Working Papers 421, WIFO.
  23. Philip Arestis, 2013. "Economic theory and policy: a coherent post-Keynesian approach," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(2), pages 243-255.
  24. Karl Aiginger, 2013. "A New Strategy for the European Periphery," WIFO Working Papers 443, WIFO.
  25. Hein, Eckhard, 2012. "Finance-dominated capitalism, re-distribution and the financial and economic crises: A European perspective," IPE Working Papers 14/2012, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  26. Karl Aiginger, 2014. "Industrial Policy for a Sustainable Growth Path," WIFO Working Papers 469, WIFO.
  27. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
  28. Daniel Detzer & Hansjorg Herr, 2014. "Financial Regulation in Germany," Working papers wpaper55, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  29. Sebastian Dullien & Ferdinand Fichtner, 2013. "A Common Unemployment Insurance System for the Euro Area," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 3(1), pages 9-14.
  30. Jörg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," IMK Studies 35-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  31. Louis-Philippe Rochon & Mark Setterfield, 2007. "Interest rates, income distribution, and monetary policy dominance: Post Keynesians and the "fair rate" of interest," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(1), pages 13-42, October.
  32. Eckhard Hein & Achim Truger, 2014. "Fiscal Policy and Rebalancing in the Euro Area: A Critique of the German Debt Brake from a Post-Keynesian Perspective," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(1), pages 21-38, Februar.
  33. 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.
  34. Philip Arestis & Malcolm Sawyer, 2004. "On Fiscal Policy and Budget Deficits," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 1(2), pages 61-74.
  35. Gennaro Zezza, 2012. "The impact of fiscal austerity in the Eurozone," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 37-54.
  36. Takeo Hoshi & David S. Scharfstein & Kenneth J. Singleton, 1993. "Japanese Corporate Investment and Bank of Japan Guidance of Commercial Bank Lending," NBER Chapters,in: Japanese Monetary Policy, pages 63-94 National Bureau of Economic Research, Inc.
  37. Dodig, Nina & Herr, Hansjörg, 2014. "Previous financial crises leading to stagnation: Selected case studies," IPE Working Papers 33/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  38. 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.
  39. Jörg Bibow, 2013. "Lost at Sea:The Euro Needs a Euro Treasury," FMG Special Papers sp227, Financial Markets Group.
  40. A. P. Thirlwall, 2002. "The Nature of Economic Growth," Books, Edward Elgar Publishing, number 2579.
  41. Thomas Palley, 2004. "Asset-based reserve requirements: reasserting domestic monetary control in an era of financial innovation and instability," Review of Political Economy, Taylor & Francis Journals, vol. 16(1), pages 43-58.
  42. Hein, Eckhard & Dodig, Nina, 2014. "Financialisation, distribution, growth and crises: Long-run tendencies," IPE Working Papers 35/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
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:lev:wrkpap:wp_816. 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: (Marie-Celeste Edwards)

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.