Working Paper No. 816 | September 2014

Coping with Imbalances in the Euro Area

Policy Alternatives Addressing Divergences and Disparities between Member Countries

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.

Publication Highlight

Working Paper No. 900
Functional Finance
A Comparison of the Evolution of the Positions of Hyman Minsky and Abba Lerner
Author(s): L. Randall Wray
January 2018

Quick Search

Search in: