Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/dar/wpaper/37280.html
   My bibliography  Save this paper

What ever happened to Germany? Is the decline of the former European key currency country caused by structural sclerosis or macroeconomic mismanagement?

Author

Listed:
  • Hein, Eckhard
  • Truger, Achim
Abstract
This paper challenges the institutional sclerosis view of the German crisis according to which rigid labour markets and generous welfare state institutions have driven Germany into its position as "Europe's sick man". In general, the view is not convincing, because the underlying hypotheses about the effects of labour market regulation and welfare state institutions on employment and growth cannot unambiguously be derived from modern labour market theory and are at least partially at odds with accepted empirical findings. In particular, the explanation is unconvincing, because in international comparison Germany's labour market and welfare state institutions are simply not as sclerotic as often supposed. In most of the aggregate indicators for structural rigidities Germany is not worse than the average OECD or EU country. Moreover, there is a macroeconomic explanation focusing on the combined effects of restrictive and pro-cyclical monetary, fiscal and wage policies in Germany that is broadly consistent with modern macroeconomic theory and is supported by empirical data.

Suggested Citation

  • Hein, Eckhard & Truger, Achim, 2004. "What ever happened to Germany? Is the decline of the former European key currency country caused by structural sclerosis or macroeconomic mismanagement?," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 37280, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:37280
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/37280/
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Unknown, 2003. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2003," Report Series 26119, Hamburg Institute of International Economics.
    2. Ronald Schettkat, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 27-33, October.
    3. Brian Snowdon & Howard R. Vane & Peter Wynarczyk, 1994. "A Modern Guide To Macroeconomics," Books, Edward Elgar Publishing, number 450.
    4. Robert Solow, 2000. "Unemployment in the United States and in Europe - A Contrast and the Reasons," CESifo Working Paper Series 231, CESifo.
    5. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    6. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    7. Paul Davidson, 1994. "Post Keynesian Macroeconomic Theory," Books, Edward Elgar Publishing, number 124.
    8. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2001. "Comparative Analysis of Labour Market Outcomes: Lessons for the US from International Long-Run Evidence," CEPR Discussion Papers 3023, C.E.P.R. Discussion Papers.
    9. Allsopp, Christopher & Vines, David, 1998. "The Assessment: Macroeconomic Policy after EMU," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 14(3), pages 1-23, Autumn.
    10. Hein, Eckhard, 2002. "Monetary policy and wage bargaining in the EMU: Restrictive ECB policies, high unemployment, nominal wage restraint and rising inflation," WSI Working Papers 103, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    11. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    12. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    13. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    14. Ronald Schettkat, 2003. "Are institutional rigidities at the root of European unemployment?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(6), pages 771-787, November.
    15. Philip Arestis & Malcolm Sawyer (ed.), 2001. "Money, Finance and Capitalist Development," Books, Edward Elgar Publishing, number 2307.
    16. Unknown, 2003. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Fruhjahr 2003," Report Series 26058, Hamburg Institute of International Economics.
    17. Eckhard Hein & Arne Heise & Achim Truger (ed.), 2003. "Neu-Keynesianismus – der neue wirtschaftspolitische Mainstream?," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, volume 6, number 6-2003, December.
    18. Eckhard Hein & Thorsten Schulten & Achim Truger, 2004. "Wage trends and deflation risks in Germany and Europe," Macroeconomics 0412008, University Library of Munich, Germany.
    19. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
    20. Peter Downes & Aaron Drew & Patrice Ollivaud, 2003. "The OECD Medium-Term Reference Scenario: Economic Outlook No.74," OECD Economics Department Working Papers 372, OECD Publishing.
    21. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 7-33, March.
    22. Robert Solow, 2000. "Unemployment in the United States and in Europe : a contrast and the reasons ; the European unemployment problem," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(01), pages 3-5, October.
    23. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2003. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2003," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 56(20), pages 3-41, October.
    24. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2002. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Frühjahr 2002," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 8(5), pages 106-155.
    25. Eckhard Hein, 2002. "Monetary policy and wage bargaining in the EMU: restrictive ECB policies, high unemployment, nominal wage restraint and inflation above the target," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 299-337.
    26. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, April.
    27. Arestis, Philip, 1996. "Post-Keynesian Economics: Towards Coherence," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(1), pages 111-135, January.
    28. Philip Arestis & Malcolm Sawyer, 2005. "Aggregate demand, conflict and capacity in the inflationary process," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 29(6), pages 959-974, November.
    29. Belot, Michele & van Ours, Jan C., 2001. "Unemployment and Labor Market Institutions: An Empirical Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 403-418, December.
    30. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2002. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2002," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 8(14), pages 394-456.
    31. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2003. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2003," HWWA Reports 235, Hamburg Institute of International Economics (HWWA).
    32. repec:ces:ifodic:v:1:y:2003:i:2:p:14567964 is not listed on IDEAS
    33. Engelbert Stockhammer, 2004. "Explaining European Unemployment: Testing the NAIRU Hypothesis and a Keynesian Approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-26.
    34. Unknown, 2002. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2002," Report Series 26116, Hamburg Institute of International Economics.
    35. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2003. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Frühjahr 2003," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 56(07), pages 3-45, April.
    36. Thomas I. Palley, 1998. "Restoring Prosperity: Why the U.S. Model Is Not the Answer for the United States or Europe," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 20(3), pages 337-353, March.
    37. Jorg Bibow, 2002. "The Monetary Policies of the European Central Bank and the Euro's (Mal-)Performance: A stability-oriented assessment," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 31-50.
    38. Stephen G. Cecchetti, 1995. "Distinguishing theories of the monetary transmission mechanism," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 83-97.
    39. Laurence Ball, 1999. "Aggregate demand and Long-Run Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 189-252.
    40. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
    41. Truger, Achim & Hein, Eckhard, 2002. "Schlusslicht Deutschland': makroökonomische Ursachen," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW - Leibniz Information Centre for Economics, vol. 82(7), pages 402-410.
    42. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
    43. Wynne Godley, 1998. "Money, Finance, and National Income Determination: An Integrated Approach," Macroeconomics 9805028, University Library of Munich, Germany.
    44. Ronald Schettkat, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(02), pages 27-33, October.
    45. Malcolm Sawyer, 2002. "The NAIRU, Aggregate Demand and Investment," Metroeconomica, Wiley Blackwell, vol. 53(1), pages 66-94, February.
    46. Marc Lavoie, 1992. "Foundations of Post-Keynesian Economic Analysis," Books, Edward Elgar Publishing, number 275.
    47. Siebert, Horst, 1997. "Labor market rigidities and unemployment in Europe," Kiel Working Papers 787, Kiel Institute for the World Economy (IfW Kiel).
    48. Dean Baker & Andrew Glyn & David Howell & John Schmitt, 2002. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," SCEPA working paper series. 2002-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    49. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2002. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2002," HWWA Reports 221, Hamburg Institute of International Economics (HWWA).
    50. Gabe J. de Bondt, 2000. "Financial Structure and Monetary Transmission in Europe," Books, Edward Elgar Publishing, number 2015.
    51. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2002. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Frühjahr 2002," HWWA Reports 218, Hamburg Institute of International Economics (HWWA).
    52. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
    53. Philip Arestis, 1990. "Money, Interest and Capital," Journal of Economic Issues, Taylor & Francis Journals, vol. 24(3), pages 939-942, September.
    54. Arbeitsgemeinschaft deutscher wirtschaftswissenschaftlicher Forschungsinstitute, 2002. "Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2002," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(20), pages 3-50, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eckhard Hein & Achim Truger, 2005. "Macroeconomic policies, wage developments, and Germany's stagnation," IMK Working Paper 01-2005, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Truger, Achim, 2003. "Germany's Poor Economic Performance in the Last Decade: It's the Macroeconomy, not Institutional Sclerosis," WSI Working Papers 118, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    3. Eckhard Hein & Achim Truger, 2007. "Germany’s Post-2000 Stagnation in the European Context — a Lesson in Macroeconomic Mismanagement," Palgrave Macmillan Books, in: Philip Arestis & Eckhard Hein & Edwin Heron (ed.), Aspects of Modern Monetary and Macroeconomic Policies, chapter 12, pages 223-247, Palgrave Macmillan.
    4. Eckhard Hein & Thorsten Schulten & Achim Truger, 2004. "Wage trends and deflation risks in Germany and Europe," Macroeconomics 0412008, University Library of Munich, Germany.
    5. Engelbert Stockhammer, 2008. "Is The Nairu Theory A Monetarist, New Keynesian, Post Keynesian Or A Marxist Theory?," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 479-510, July.
    6. Truger, Achim & Hein, Eckhard, 2004. "Macroeconomic co-ordination as an economic policy concept : opportunities and obstacles in the EMU," WSI Working Papers 125, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    7. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    8. Eckhard Hein & Achim Truger, 2007. "Monetary Policy, Macroeconomic Policy Mix and Economic Performance in the Euro Area," Chapters, in: Eckhard Hein & Achim Truger (ed.), Money, Distribution and Economic Policy, chapter 11, Edward Elgar Publishing.
    9. Hein, Eckhard, 2003. "Die NAIRU: Eine post-keynesianische Interpretation," WSI Working Papers 113, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    10. 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.
    11. 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.
    12. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 7-33, March.
    13. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa: Eine Bestandsaufnahme," University of Regensburg Working Papers in Business, Economics and Management Information Systems 389, University of Regensburg, Department of Economics.
    14. Eckhard Hein & Thorsten Schulten, 2004. "Unemployment, wages and collective bargaining in the European Union," Transfer: European Review of Labour and Research, , vol. 10(4), pages 532-551, November.
    15. Lehment, Harmen & Oskamp, Frank, 2004. "Gesamtwirtschaftliche Bedingungen für einen Anstieg des Arbeitsvolumens in Deutschland," Open Access Publications from Kiel Institute for the World Economy 3216, Kiel Institute for the World Economy (IfW Kiel).
    16. Eckhard Hein & Achim Truger, 2007. "Fiscal Policy and Macroeconomic Performance in the Euro Area: Lessons for the Future," Palgrave Macmillan Books, in: Jörg Bibow & Andrea Terzi (ed.), Euroland and the World Economy, chapter 8, pages 154-183, Palgrave Macmillan.
    17. Eckhard Hein & Torsten Niechoj, 2005. "Leitlinien für ein dauerhaftes Wachstum in der EU? Konzept und Wirkung der "Grundzüge der Wirtschaftspolitik"," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 31(1), pages 11-40.
    18. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    19. Eckhard Hein & Achim Truger, 2011. "Fiscal Policy in the Macroeconomic Policy Mix: A Critique of the New Consensus Model and a Comparison of Macroeconomic Policies in France, Germany, the UK and Sweden from a Post-Keynesian Perspective," Chapters, in: Claude Gnos & Louis-Philippe Rochon (ed.), Credit, Money and Macroeconomic Policy, chapter 12, Edward Elgar Publishing.
    20. Sujit Kapadia, 2005. "Optimal Monetary Policy under Hysteresis," Economics Series Working Papers 250, University of Oxford, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dar:wpaper:37280. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dekanatssekretariat (email available below). General contact details of provider: https://edirc.repec.org/data/ivthdde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.