Economic Policy Coordination in the. Eurozone. Dr. iur. Armin Steinbach

Transcription

1 Economic Policy Coordination in the Eurozone Dr. iur. Armin Steinbach Dissertation zur Erlangung des Grads eines Doktors der Wirtschaftswissenschaft (Dr. rer. pol.) der Universität Erfurt, Staatswissenschaftliche Fakultät 2013

2 Table of Contents 1 INTRODUCTION Basic criticisms of economic policy coordination State of the research This study's approach 18 2 ASYMMETRIC SHOCKS AND HETEROGENEITY FOLLOWING THE CREATION OF THE EMU Theoretical studies on business cycle convergence in the EMU Empirical studies of economic convergence in the EMU Heterogeneity with regard to capacity utilization Heterogeneous Inflation levels Heterogeneous account balances Monetaiy policy transmisison differences can amplify heterogeneity Interim Undings Possible mechanisms to adjust for heterogeneous development within the eurozone Labor mobility Price and wage flexibility Fiscal transfer Fiscal policy stabilization Interim findings 67 3

3 3 Prerequisites for Coordination and Options for its Design Definition and forms of coordination: Vertical and horizontal coordination Requirements for the need for coordination Requirements for the need for cross-border coordination Requirements for the need for cross-policy coordination The Keynesian view on the need for policy coordination Monetary neoclassical assignment: The irrelevance of coordination Interim findings The existence of externalities as a basis for the need for coordination Cross-border externalities as a by-product of economic policy Cross-border fiscal policy spillovers Cross-border wage policy spillovers Cross-policy externalities as a basis for the need for coordination Interdependencies between monetary and fiscal policy Interdependencies between wage and monetary policy Interim findings Fiscal-monetary-wage interactions and the potential and conditions for fiscal policy coordination This study's approach Themodel The three-stages game: First unions, then fiscal authorities, then central bank Scenario 1: Fiscal non-coordination Scenario 2: Fiscal coordination The effects of central bank's conservativeness Conclusions Vertical forms of coordination Soft coordination Hard coordination Centralized coordination Interim findings 157 4

4 4 COORDINATION IN THE EU BEFORE THE GOVERNMENT-DEBT CRISIS Soft coordination in the EU Broad economic policy guidelines, integrated guidelines, and national reforms The Macroeconomic Dialogue The Luxembourg Process Forms of hard coordination within the EU The SGP: A hard, cross-border form of coordination Weaknesses of fiscal coordination in the eurozone The SGP and the internalization of external effects The SGP and the time inconsistency problem Monetary policy: centralized coordination The failure of coordination during the financial crisis Economic developments in the EMU before the crisis Deficits in existing systems of eurozone govemance Interim findings THE EXPANSION OF COORDINATION IN THE EU Reform of cross-border fiscal policy coordination Reform of fiscal policy coordination since the outbreak of the sovereign debt crisis Reform of the preventive components of the SGP Assessment of the reformed preventive components Reform of the corrective components Assessment of the reformed reactive components Farther-reaching forms of fiscal policy coordination Fiscal policy coordination incentive structures in different constitutional settings Incentives for debt accumulation in federal states Incentives for debt accumulation in union states Incentives for debt consolidation in federal and union states National debt brakes The development and spread of national debt brakes 232 5

5 Economic consequences of debt brakes on incentives for debt accumulation Insolvency procedures for states Fiscal coordination through eurobonds The eurobond model The European Redemption Pact Criticism of eurobonds Fiscal policy coordination for economic stabilization Interim fmdings The Expansion of cross-policy coordination through macroeconomic monitoring The techniques of macroeconomic monitoring Warning mechanism Procedure for excessive imbalance Indicator selection for macroeconomic scoreboards Account imbalances Net foreign position Real effective exchange rate based on unit labor costs Real rises in housing prices Public sector debt Private debt Assessing the indicator approach for macroeconomic monitoring The Europe 2020 strategy The European Semester The Euro-Plus Pact Cross-policy coordination for credit lines with attached conditionality Expanding wage policy coordination The problem of insufficient transparency on the part of wage and price policy actors in the eurozone Controversy on the need to coordinate wage and monetary policy Neoclassical and Keynesian views about the role of coordination and monetary policy practice Productivity-oriented wage policy as a consensus-building principle The welfare effects of coordinating monetary policy and a productivity-oriented wage policy Configuring the wage and productivity formula The relevance of wage policy as the cause and the Solution of imbalances in the eurozone Implementing productivity-oriented wage coordination 372 6

6 Previous approaches to wage policy coordination in the eurozone The instability of wage policy coordination in terms of collective actiontheory Empirical studies of previous efforts at wage policy coordination Institutional frameworks for coordinated wage policy in EU member states Classification by wage negotiation level Classification by degree of centralization Level of Organization and the scope of wage scale coverage Coordination mechanisms in national collective bargaining systems Interim findings Coordinating monetary and fiscal policy The classical argument against coordinating monetary policy The role of the ECB in a Keynesian-based coordinated economic policy The ECB's quasi-fiscal monetary policy in the sovereign-debt crisis Monetary and fiscal policy coordination between the ECB and the ESM (European Stability Mechanism) SUMMARY BIBLIOGRAPHY 446 7