Bad for Euroland, Worse for Germany-The ECB's Record
This paper assesses the contribution of the European Central Bank (ECB) to Germany’s ongoing economic crisis, a vicious circle of decline in which the country has become stuck since the early 1990s. It is argued that the ECB continues the Bundesbank tradition of asymmetric policymaking: the bank is quick to hike, but slow to ease. It thereby acts as a brake on growth. This approach has worked for the Bundesbank in the past because other banks behaved differently. Exporting the Bundesbank “success story” to Euroland has undermined its working, however; given its sheer size, Euroland simply cannot freeload on external stimuli forever. While Euroland cannot do without proper demand management, the Maastricht regime and especially the ECB are firmly geared against it. The ECB’s monetary policies have been biased against growth and have thus proved bad for Euroland as a whole. Meanwhile, the German disease of protracted domestic demand weakness has spread across much of Euroland. Yet, by pursuing its peculiar traditions of wage restraint and procyclical public thrift, the ECB’s policies have had even worse results for Germany. Fragility and divergence undermine the euro’s long-term survival.
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.:
- Kromphardt, Jürgen, 2003. "Lohnpolitik bei möglicher Deflation," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 83(8), pages 501-508.
- Jorg Bibow, 2004. "Assessing the ECB's Performance since the Global Slowdown A Structural Policy Bias Coming Home to Roost?," Macroeconomics 0407026, EconWPA.
- von Hagen, Jurgen, 1993.
"Monetary union, money demand, and money supply : A review of the German monetary union,"
European Economic Review,
Elsevier, vol. 37(4), pages 803-827, May.
- von Hagen, Jürgen, 1992. "Monetary Union, Money Demand and Money Supply: A Review of the German Monetary Union," CEPR Discussion Papers 719, C.E.P.R. Discussion Papers.
- Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839, November.
- Jorg Bibow, 2002. "The Markets versus the ECB, and the EURO's Plunge," Eastern Economic Journal, Eastern Economic Association, vol. 28(1), pages 45-57, Winter.
- Hans-Werner Sinn, 2005. "Basar-Ökonomie Deutschland - Exportweltmeister oder Schusslicht?," Ifo Schnelldienst, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 58(06), pages 03-42, 03.
- George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
- Joerg Bibow, 2004. "Fiscal Consolidation Contrasting Strategies & Lessons from International Experience," Macroeconomics 0402014, EconWPA.
- 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?,"
- 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.
- Jorg Bibow, 2004. "Investigating the Intellectual Origins of Euroland's Macroeconomic Policy Regime: Central Banking Institutions and Traditions in West Germany After the War," Economics Working Paper Archive wp_406, Levy Economics Institute.
- Jorg Bibow, 2004. "Assessing the ECB's Performance since the Global Slowdown: A Structural Policy Bias Coming Home to Roost?," Economics Working Paper Archive wp_409, Levy Economics Institute.
- Jorg Bibow, 2005. "Germany in crisis: the unification challenge, macroeconomic policy shocks and traditions, and EMU," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 29-50.
- C. Randall Henning, 1994. "Currencies and Politics in the United States, Germany, and Japan," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 15, January.
- Adam S. Posen, 2003. "Is Germany Turning Japanese?," Working Paper Series WP03-2, Peterson Institute for International Economics.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0511018. 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: (EconWPA)
If references are entirely missing, you can add them using this form.