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The Challenge of Economic Rebalancing in Europe

The Challenge of Economic Rebalancing in Europe

Perspectives for CESEE Countries

Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth

In the long aftermath of the acute global financial crisis of 2008/09, “rebalancing” the economy with new sources of growth and productivity remains a persistent necessity. This book addresses the resulting trade-offs and challenges. These needs, and the corresponding policy challenges, are especially prevalent in Europe, in particular Central, Eastern and South-Eastern Europe. On this issue, this book contributes lessons learned from earlier balance sheet recessions. It also addresses the often overlooked link between macroeconomic imbalances and economic inequality. Further contributions focus on the interaction between monetary policy and financial stability, adding a regional perspective to these important issues.

Chapter 14: Policy trade-offs in CESEE and elsewhere

Raimondas Kuodis

Subjects: economics and finance, financial economics and regulation, international economics, money and banking


Rather than focusing only on monetary policy trade-offs, I will address possible changes in the overall policy mix in this chapter, taking into account two aspects: (1) macroeconomic policy failures in the developed world since the mid-1980s; and (2) what is often overlooked, distributional effects of various policies. In my view, the conventional policy mix has clearly reached its limits, and we should be looking for the (old or new) ideas in the unorthodox economic theory which, unjustifiably, have received too little attention so far among central bankers.

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