The Brexit as a Forerunner: Monetary Policy, Economic Order and Divergence Forces in the European Union
Gunther Schnabl; Sebastian Müller
Abstract
The paper analyzes the effects of the increasingly expansionary monetary policies on the economic order in Europe and the European integration process. It is argued that a liberal market order and a tight monetary policy stance shaped in postwar Germany and in United Kingdom have long served as cornerstones for growth, prosperity and social cohesion in Europe. A prolonged loose monetary policy stance of the European Central Bank has undermined these orders, thereby diminishing productivity gains and growth. Combined with negative distribution effects, those monetary policies constitute the breeding ground for divergence forces in the European Union as heralded by the Brexit.
Keywords: Brexit, divergence, economic order, European Integration, Friedrich August von Hayek, inequality, Ludwig Erhard, Margret Thatcher, Monetary policy, political polarization.
JEL Codes: B25; E58; E65.
Erschienen in
The Economists’ Voice, 16(1).