Jahr: 2019

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).

Download

via Degruyter

Gunther Schnabl

Abstract

Twenty years after the introduction of the euro, the European Monetary Union (EMU) is at its crossroads. Following the outbreak of the European financial and debt crisis in 2008, the European Central Bank (ECB) took comprehensive measures to stabilize the common currency. Interest rates were cut to and below zero and several asset purchase programs have inflated the ECB balance sheet (Riet 2018). Within the European System of Central Banks, large imbalances have emerged via the TARGET2 payments system, which can be seen as quasi-unconditional credit in favor of the southern euro area countries (Sinn 2018).

Erschienen in

Cato Journal, Vol. 39, No. 3 (Fall 2019)..

Download

via Cato

Gunther Schnabl

Abstract

For a long time, China's impressive growth performance has been driven by investment and high productivity gains. Based on a discussion of possible overcapacities and overinvestment in China, this paper investigates the sustainability of China's investment and export‐driven growth model. Since the turn of the millennium, buoyant capital inflows and low interest rates have been at the root of overinvestment and misallocation of capital, which necessitated export subsidies to clear markets. The overinvestment boom is argued to have ended around 2014. Since then, the overcapacities have weakened China's bargaining position in the US–Chinese trade conflict and have tempted Chinese authorities to postpone the restructuring of the Chinese economy by providing low‐interest credit. The gradual reemergence of quasi‐soft budget constraints is seen to undermine China's long‐term growth potential.

Keywords: credit growth, overinvestment, rebalancing, soft budget constraints, trade policy, zombification.

JEL Codes: E22, E43, E58, F13.

Erschienen in

China & World Economy, Vol. 27, Issue 5, pp. 37-62, 2019.

Download

via SSRN

Gunther Schnabl

Abstract

This chapter analyzes the evolution and effects of central bank crisis management since the mid-1980s based on a Hayek-Mises-Wicksell overinvestment framework. It is shown that given that the traditional transmission mechanism between monetary policy and consumer price inflation has collapsed, asymmetric monetary policy crisis management implies a convergence of interest rates toward zero and a gradual expansion of central bank balance sheets. From a Wicksell-Hayek-Mises perspective, asymmetric central bank crisis management has contributed to financial market bubbles, decreasing marginal efficiency of investment, increasing income inequality, and declining growth dynamics. The economic policy implication is a slow but decisive exit from ultra-expansionary monetary policies.

Keywords: Economic Theory, Economics and Finance, Financial Economics, Macroeconomics and Monetary Economics, Mathematical Models.

JEL Codes: E520, E580, E630, F420.

Erschienen in

The Oxford Handbook of the Economics of Central Banking.

Download

via Oxford Handbooks

Pablo Duarte; Gunther Schnabl

Abstract

Voters in the industrialised countries are increasingly expressing dissatisfaction by dissenting from the established political parties and candidates. Based on the concepts of justice by Hayek, Rawls and Buchanan, we argue that the growing dissatisfaction is rooted in the asymmetric pattern of monetary policies since the mid-1980s for two reasons. First, the structurally declining interest rates and the unconventional monetary policy measures have granted privileges to specific groups. Second, the increasingly expansionary monetary policies have negative growth effects, which have reduced the scope for compensation of the ones excluded from the privileges. As a result, the acceptance of the prevailing economic and political order is undermined and political instability increases.

Keywords: Buchanan, economic order, Hayek, inequality, Monetary policy, political instability, privileges, Rawls.

Erschienen in

The World Economy, 42(2), 2019, 614-634.

Download

via Wiley