Trade Imbalances and Fiscal Policy in the Eurozone: An Analysis of Economic Interrelations with a Global Supermultiplier Input-Output Model
Year: 2018
Type: article
Abstract: We investigate the potential of European-wide Keynesian policies as an alternative to the current neoliberal response to trade imbalances. In particular, we examine the implications for balancing trade of an uncoordinated fiscal policy expansion, and whether coordinated reflationary measures in core Eurozone countries could promote balanced trade and significant growth in peripheral countries. Accordingly, we analyse the structural interdependencies in income and trade between peripheral and central Eurozone countries, such as Spain and Germany. To this end, we employ a comprehensive set of accounting multipliers derived from a Keynesian supermultiplier model that accounts for interindustrial and interregional relations in a global setting. Computations rely on global input-output tables and national accounts that cover the years 1995 to 2014. We conclude that scepticism about the effectiveness of relying solely on Keynesian measures as an alternative to neoliberal policies in Europe is in order.
Source: Cambridge Journal of Economics
DOI: 10.1093/cje/bey011
Authors: Ferran Portella-Carbó, Óscar Dejuán
Institution: University of Johannesburg
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2804086333