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After the CrisisReform, Recovery, and Growth in Europe$
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Francesco Caselli, Mário Centeno, and José Tavares

Print publication date: 2016

Print ISBN-13: 9780198754688

Published to Oxford Scholarship Online: August 2016

DOI: 10.1093/acprof:oso/9780198754688.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 07 December 2021

Crisis Management and Economic Growth in the Eurozone

Crisis Management and Economic Growth in the Eurozone

(p.46) 2 Crisis Management and Economic Growth in the Eurozone
After the Crisis

Paul De Grauwe

Yuemei Ji

Oxford University Press

The crisis management set up in the Eurozone after the eruption of the government debt crisis was characterized by two features. The first was the asymmetric adjustment to the current account imbalances that forced the deficit countries into intense austerity without a compensating policy of stimulus in the surplus countries. This led to a deflationary bias that created strong collateral damage on investment, both private and public. The second feature of crisis management was its focus on supply policies. This chapter suggests that supply side policies have insignificant effects, and sometimes even negative effects on long-term economic growth. As a result, together with the negative effects of austerity on investment, it can be concluded that the crisis management in the Eurozone not only exacerbated a demand problem, but also harmed the long-run growth potential of the Eurozone.

Keywords:   demand and supply policies, structural reform, economic growth, asymmetric adjustment, public investment

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