Macroeconomic policies, wage developments, and Germany’s stagnation

Eckhard Hein and Achim Truger

Macroeconomics from University Library of Munich, Germany

Abstract: The paper fundamentally challenges the institutional sclerosis explanation of the present German economic stagnation. Instead, we present a macroeconomic explanation focusing on the combined effects of too restrictive monetary policies, too restrictive and sometimes pro- cyclical fiscal policies and overly moderate wage policies in Germany since the mid 1990s. This view is broadly consistent with modern macroeconomics and with empirical data. From this perspective we finally argue that Germany urgently needs more expansive fiscal and monetary policies in the short run, and that in the medium run the conditions for nominal wage growth in Germany according to the sum of long run national productivity growth and the ECB’s inflation target have to be improved. Further pursuing a policy of structural reforms with respect to the labour market and the social benefit system in combination with a restrictive macroeconomic policy mix, however, will prolong Germany’s economic stagnation and will considerably increase the risk of deflation

Keywords: Wages; macroeeconomic policies; Germany (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-08-12
Note: Type of Document - pdf; pages: 26
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0508/0508015.pdf (application/pdf)

Related works:
Working Paper: Macroeconomic policies, wage developments, and Germany's stagnation (2005)
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:wpa:wuwpma:0508015

Access Statistics for this paper

More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).