Global Imbalances, Bretton Woods II, and Euroland's Role in All This

Jörg Bibow

Economics Working Paper Archive from Levy Economics Institute

Abstract: Approaching the issue of mounting global imbalances from the perspective of the "Bretton Woods II hypothesis," this paper argues that the popular preoccupation with China's supposed export-led development strategy is misplaced. It also suggests, similar to Japan's depression, subdued growth in Euroland for most of the time since the Maastricht Treaty has been of first-order importance in these developments. Germany is identified as being at the heart of the European trouble. Globally, there is an ongoing clash between two approches to macroeconomic policy making: a highly dogmatic German approach, and a very pragmatic Anglo-Saxon one. The low levels of interest at which global demand imbalances have been smoothed out financially reflect deficient global demand in an environment of vast supply-side opportunities. After contributing greatly to the build-up of imbalances, Euroland is unlikely to play any constructive part in their unwinding. Hampered by an exchange-rate policy vacuum, a small-country mindset, and soaring intra-area imbalances, Euroland is also illpositioned to cope with fading external growth stimuli.

Date: 2006-12
New Economics Papers: this item is included in nep-cba, nep-eec and nep-ifn
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Chapter: Global Imbalances, Bretton Woods II, and Euroland’s Role in All This (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_486

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