Post-Keynesian Alternative Policies to Curb Macroeconomic Imbalances in the Euro Area

Abstract

In this paper we outline alternative post-Keynesian policy recommendations addressing the problems of differential inflation, divergence in competitiveness and associated current account imbalances within the Euro area. We provide a basic framework in order to systematically address the related issues making use of Anthony P. Thirlwall’s (1979, 2002) model of a “balance-of-payments-constrained growth rate” (BPCGR). Based on this framework, we outline the required stance for alternative economic policies and then we discuss the implications for alternative monetary, wage/incomes and fiscal policies in the Euro area as a whole, as well as the consequences for structural and regional policies in the Euro area periphery, in particular.

Key words: Differential inflation rates, Current account imbalances, Competitiveness, Euro area economic policies.
JEL: E61, E62, E63, E64.