Neoliberalism, trade imbalances and economic policy in the Eurozone crisis

TY - UNPB

T1 - Neoliberalism, trade imbalances and economic policy in the Eurozone crisis

AU - Constantine, Collin

AU - Reissl, Severin

AU - Stockhammer, Engelbert

PY - 2016/2/1

Y1 - 2016/2/1

N2 - This paper analyses the causes of the Eurozone crisis. In doing so it carefully surveys authors from different economic schools of thought. The paper discusses competing explanations for European current account imbalances. Remarkably, opposing views on the relative importance of cost developments and of demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics and there is a remarkable variability of policy conclusions. Regarding the assessment of fiscal and monetary policy there is a clearer polarisation, with heterodox analysis regarding austerity as unhelpful and most of orthodox economics endorsing it. We advocate a post-Keynesian view which holds that current account imbalances are not a fundamental cause of the sovereign debt crisis. Rather, the economic policy architecture of the Eurozone, which aims at restricting the role of fiscal and monetary policy, is the key to understanding the crisis in Europe.

AB - This paper analyses the causes of the Eurozone crisis. In doing so it carefully surveys authors from different economic schools of thought. The paper discusses competing explanations for European current account imbalances. Remarkably, opposing views on the relative importance of cost developments and of demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics and there is a remarkable variability of policy conclusions. Regarding the assessment of fiscal and monetary policy there is a clearer polarisation, with heterodox analysis regarding austerity as unhelpful and most of orthodox economics endorsing it. We advocate a post-Keynesian view which holds that current account imbalances are not a fundamental cause of the sovereign debt crisis. Rather, the economic policy architecture of the Eurozone, which aims at restricting the role of fiscal and monetary policy, is the key to understanding the crisis in Europe.

KW - Euro crisis

KW - neoliberalism

KW - European economic policy

KW - financial crisis

KW - sovereign debt crisis

KW - current account balance

M3 - Working paper

T3 - Economics Discussion Papers

BT - Neoliberalism, trade imbalances and economic policy in the Eurozone crisis

PB - Faculty of Arts and Social Sciences, Kingston University

CY - Kingston upon Thames, U.K.

ER -