The German undervaluation regime under Bretton Woods: How Germany became the nightmare of the world economy

Martin Höpner

No 19/1, MPIfG Discussion Paper from Max Planck Institute for the Study of Societies

Abstract: Germany is an undervaluation regime, a regime that steers economic behavior towards deterioration of the real exchange rate and thereby towards export surpluses. This regime has brought the eurozone to the brink of collapse. But it is much older than the euro. It was established during the Bretton Woods years and has survived all subsequent European currency orders. The regime operates in two steps: competitive disinflation against trading partners; and resistance against correcting revaluations. The Bretton Woods order provided perfect conditions for the establishment and perpetuation of the regime: it was flexible enough for sufficient macroeconomic policy autonomy to bring about differential inflation rates, and sticky enough to delay and minimize revaluations.

Keywords: current account surpluses; exchange rate policy; inflation; political economy; undervaluation; varieties of capitalism; Inflation; Leistungsbilanzüberschüsse; Politische Ökonomie; Spielarten des Kapitalismus; Unterbewertung; Wechselkurspolitik (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-eec, nep-mon, nep-opm and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:mpifgd:191

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