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Post-Keynesian alternative policies to curb macroeconomic imbalances in the Euro area

Hein Eckhard (Berlin School of Economics and Law, Institute for International Political Economy, Berlin, Germany)
Detzer Daniel (Berlin School of Economics and Law, Institute for International Political Economy, Berlin, Germany)

In this paper we outline alternative post-Keynesian policy recommendations addressing the problems of differential inflation, divergence in competitiveness and associated current account imbalances within the Euro area. We provide a basic framework in order to systematically address the related issues making use of Anthony P. Thirlwall’s (1979, 2002) model of a “balance-of-payments-constrained growth rate” (BPCGR). Based on this framework, we outline the required stance for alternative economic policies and then we 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.

Keywords: differential inflation rates, current account imbalances, competitiveness, Euro area economic policies