From Panic‐Driven Austerity to Symmetric Macroeconomic Policies in the <scp>E</scp>urozone

Grauwe, Paul De; Ji, Yuemei

doi:10.1111/jcms.12042

Cited by 61 publications

(40 citation statements)

References 12 publications

(13 reference statements)

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“…In Greece spending cuts may not have been conducive to lowering deficits as growth slowed down further and a downward-spiral set in (De Grauwe and Ji 2013). Here, the European experience with the gold standard and euro are similar once more.…”

Section: Euro Area and The New Eu Member Statesmentioning

confidence: 72%

The Euro as a Proxy for the Classical Gold Standard? Government Debt Financing and Political Commitment in Historical Perspective

Hoffmann

2013

Journal Des Économistes Et Des Études Humaines

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Section: Euro Area and The New Eu Member Statesmentioning

confidence: 72%

The Euro as a Proxy for the Classical Gold Standard? Government Debt Financing and Political Commitment in Historical Perspective

Hoffmann

2013

Journal Des Économistes Et Des Études Humaines

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“…De Grauwe -Ji (2013) find a strong negative correlation between the size of fiscal consolidation and growth. They also find that in the Euro zone, consolidation does not appear to have effects on market confidence as interest rates are negatively related to consolidation efforts.…”

Section: The Debate Over Austeritymentioning

confidence: 92%

The role of expectations in austerity cycles: The political economy of crisis management in Ireland and Greece

Győrffy

2014

Acta Oeconomica

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The main goal of the paper is to explain the role of expectations in austerity cycles during financial bailouts. The paper presents a political economy model of bailouts, where the conditions, their implementation, and market reception are considered as forms of a social dilemma. In such situations, expectations about the actions of other actors approximated by the concepts of trust or distrust play a critical role. An environment of trust is conducive to mitigating the size and effects of fiscal contraction, while an environment of distrust is likely to magnify both. It is also argued that the credibility of government is the key driving force in these self-reinforcing cycles. The crisis management experiences of Greece and Ireland serve to illustrate the theoretical model.

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“…In the countries that were forced to implement the harshest fiscal austerity measures, demand was squeezed the most (e.g. de Grauwe & Ji, 2013), which contributed to a crash in imports. The process of unwinding pre-crisis imbalances and reducing the private sector debt overhang has had a strong negative effect on the real economy in the EZ (e.g.…”

Section: A Tool and Its Context: Financialization Current Account Immentioning

confidence: 99%

“…A broad literature has shown in recent years that procyclical fiscal tightening has pronounced negative effects on economic growth and employment (e.g. Blanchard & Leigh, 2014;, which explains the finding that in those European countries that implemented the harshest fiscal austerity measures, demand was squeezed the most (de Grauwe & Ji, 2013). Thereby, it is no coincidence, but rather an implicit consequence of the 'end-point bias' in Kalmanfiltering and the collapse in the growth rate of the capital stock (e.g.…”

Section: Notes All Potential Output Numbers Were Calculated At Constmentioning

confidence: 99%

The performativity of potential output: pro-cyclicality and path dependency in coordinating European fiscal policies

Heimberger

Kapeller

2017

Review of International Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper analyzes the performative impact of the European Commission's model for estimating 'potential output', which is used as a yardstick for measuring the 'structural budget balance' of EU countries and, hence, is crucial for coordinating European fiscal policies. In pre-crisis years, potential output estimates amplified the build-up of private debt, housing bubbles and macroeconomic imbalances. After the financial crisis, they were revised downwards, which increased fiscal consolidation pressures. By focusing on the euro area's economies during 1999-2014, we identify two performative aspects of the potential output model. First, the political implications of the model led to a procyclical feedback loop, reinforcing general economic developments. Second, the model has contributed to national lock-ins on path dependent debt trajectories, fueling 'structural polarization' between core and periphery.

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From Panic‐Driven Austerity to Symmetric Macroeconomic Policies in the Eurozone

Cited by 61 publications

References 12 publications

The Euro as a Proxy for the Classical Gold Standard? Government Debt Financing and Political Commitment in Historical Perspective

The Euro as a Proxy for the Classical Gold Standard? Government Debt Financing and Political Commitment in Historical Perspective

The role of expectations in austerity cycles: The political economy of crisis management in Ireland and Greece

The performativity of potential output: pro-cyclicality and path dependency in coordinating European fiscal policies

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