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Divergence between the core and the periphery and secular stagnation in the Eurozone

Divergence between the core and the periphery and secular stagnation in the Eurozone

Botta, Alberto, Tippet, Ben and Onaran, Özlem ORCID: 0000-0002-6345-9922 (2018) Divergence between the core and the periphery and secular stagnation in the Eurozone. [Working Paper]

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Abstract

In this paper, we provide empirical evidence about the widening divergence between the macroeconomic performances of core eurozone countries and peripheral economies. We note that, while core economies operate close to full employment, there are evident signs of secular stagnation, i.e. widespread long-term unemployment and reduced growth potential, in the periphery. In such a context, we stress that the unconventional monetary policy implemented by the European Central Bank since 2015 has proved largely ineffective to stimulate investment demand and economic recovery in the periphery. More than this, it may even deepen the existing gap between core and peripheral countries. We suggest that a reform of EU industrial policy, which put emphasis on the productive development of underdeveloped regions in the euro area, stands out as the best strategy against the eurozone core-periphery divide and for improving the functioning and effectiveness of EU macro policies.

Item Type: Working Paper
Uncontrolled Keywords: Secular stagnation, Eurozone, quantitative easing, core-periphery divergence, industrial policy,
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Greenwich Political Economy Research Centre (GPERC)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 13 Jun 2018 11:46
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/20405

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