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Leila E. Davis, Charalampos Konstantinidis and Yorghos Tripodis

The ongoing crisis in the eurozone, together with growing evidence of structural imbalances, points to a role for new institutions to support a more stable European Monetary Union (EMU) structure. As is well established in the context of monetary union when business cycles are not synchronized, a system of fiscal transfers can support monetary union. Unemployment insurance (UI) is, in particular, a key component of fiscal crisis management. UI supports household incomes during downturns, and also acts as an automatic stabilizer, thereby helping individual countries respond to asymmetric shocks. This paper proposes a ‘federalized’ EMU-level UI mechanism as one program that can contribute to a system of fiscal transfers in the EMU, and estimates the cost of the proposed system under different financing and eligibility scenarios. We find that, under a variety of reasonable institutional parameters, such a system is fiscally feasible with limited reason to expect adverse employment effects in member countries. We conclude that fiscal transfers extended via automatic stabilizers are a productive avenue towards a more stable eurozone architecture.

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Martin Riese

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Robert A. Blecker

Several recent critiques have questioned the theoretical logic of standard models of balance-of-payments-constrained growth (BPCG) and the empirical support for ‘Thirlwall's law’. On the empirical side, critics charge that most econometric estimates of this model have effectively only tested whether exports and imports grow at similar rates in the long run. On the theoretical side, the criticisms have focused on the role of foreign income growth, capital accumulation, relative prices and country size in BPCG models. This article reviews the current state of the debate over these critiques and also offers a brief discussion and evaluation of three alternative models. The alternative models all highlight a significant role for the level of relative prices (or the real exchange rate) in determining long-run growth, which is consistent with recent empirical studies.

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Editorial

The spectre of stagnation? Europe in the world economy

Sebastian Gechert, Torsten Niechoj, Jan Priewe and Andrew Watt

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Stefan Ederer and Torsten Niechoj

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Werner Raza, Bernhard Tröster and Rudi von Arnim

Economic studies on trade liberalization typically highlight positive expected effects. This paper discusses those issues which are frequently neglected, but are nevertheless important for policy-makers. These are macroeconomic adjustment costs and social costs of regulatory change. Our discussion uses the most relevant studies on the economic effects of the Transatlantic Trade and Investment Partnership (TTIP) as reference points. We provide a rough estimate of macroeconomic adjustment costs of TTIP in the order of €33–60 billion over a 10-year transition period. Our analysis of regulatory change concludes that assessments have been biased and that the social costs of regulatory change due to TTIP might be substantial. Given the prominence of regulatory issues on the trade agenda, we call for full ex-ante regulatory impact assessment of future trade agreements.

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Peter Bloom

This chapter introduces the main aims and themes of the book. It desires to better understand why the more economically liberal a country becomes the greater its reliance on political authoritarianism seems to be across contexts. It asks what are the underlying dynamics driving this diverse “authoritarian capitalism” in the twenty-first century? How to explain the rise of authoritarian capitalism in the age of globalization? What does this reveal about the more fundamental relationship between political authoritarianism and economic capitalism? To answer this question it links the contemporary global spread of the free market to affective authoritarian political fantasies.