How Deep is a Crisis? Policy Responses and Structural Factors Behind Diverging Performances

Jean-Paul Fitoussi and Francesco Saraceno ()
Additional contact information
Francesco Saraceno: Observatoire Français des Conjonctures Économiques, Postal: 69, Quai d'Orsay, Paris 75007, France, http://www.ofce.sciences-po.fr

No 2009-31, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: The effects of the current crisis on the level of output, and consequently on unemployment and poverty, are likely to be deep and long lasting; they should not be underestimated, especially now that some timid signs of recovery are appearing. The crisis was triggered by the US financial sector, but its roots are real, and can be traced to the deepening income inequality of the last three decades, which led to a chronic deficiency of aggregate demand. In the Unites States, the center of the crisis, the policy reaction has been bold, and as a consequence the effects of the crisis are less striking than in the eurozone, where only France has a comparable performance. The policy inertia of the eurozone countries, in fact, is more structural, and is related to the institutions for the economic governance of Europe. The statute of the ECB and the SGP reflect the doctrine opposed to discretionary macroeconomic policies, constrain eurozone governments and its monetary policy. The relatively better performance of France can in fact be explained with these lenses(?) as on one side it has a well developed system of automatic stabilizers, and on the other it suffered less than other OECD countries the deepening of income inequality. Developing countries, suffering from a crisis that certainly they did not originate, should be given the means to carry on policies to contrast the crisis, thus avoiding pauperization and the long term negative effects of the adverse shock they experienced.

Keywords: Economic Crisis; Fiscal Policy; Monetary Policy; Income Distribution; Policy Coordination; European Governance (search for similar items in EconPapers)
JEL-codes: E24 E50 E61 F01 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.ofce.sciences-po.fr/pdf/dtravail/WP2009-31.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:0931

Access Statistics for this paper

More papers in Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE) Contact information at EDIRC.
Bibliographic data for series maintained by Francesco Saraceno ().