Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-745bb68f8f-cphqk Total loading time: 0 Render date: 2025-01-12T18:36:20.506Z Has data issue: false hasContentIssue false

8 - Euro Crises, the Productivity Slowdown, and the EMU

from Part I - The Economic and Monetary Union

Published online by Cambridge University Press:  28 September 2023

By
Nauro F. Campos
Edited by
Dariusz Adamski ,
Fabian Amtenbrink  and
Jakob de Haan
Dariusz Adamski
Affiliation:
University of Wroclaw
Fabian Amtenbrink
Affiliation:
Erasmus Universiteit Rotterdam
Jakob de Haan
Affiliation:
University of Groningen
Get access

Summary

The objective of this chapter is to discuss the productivity implications of the financial and economic crises experienced by euro area economies since 2007. The argument is organized in three parts: the first discusses the euro crises and policy responses; the second focuses on the productivity slowdown; and the third examines productivity convergence in the European Economic and Monetary Union (EMU). The main conclusion is that the currently available evidence suggests that the crises in the euro area caused neither the productivity slowdown nor the disruptions in convergence patterns. Although this may well be because it is ‘still too early to tell’, the crises had a significant dampening effect: the productivity rebound that often follows recessions is yet to materialize, thus raising severe concerns in terms of convergence, integration, and welfare.

Type
Chapter
Information
The Cambridge Handbook of European Monetary, Economic and Financial Integration , pp. 139 - 152
Publisher: Cambridge University Press
Print publication year: 2023

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D., and Restrepo, P. (2020). Robots and jobs: Evidence from US labor markets. Journal of Political Economy 128(6), 2188–2244.Google Scholar
Adrian, T., Kiff, J., and Shin, H. S. (2018). Liquidity, leverage, and regulation 10 years after the global financial crisis. Annual Review of Financial Economics 10, 1–24.CrossRefGoogle Scholar
Alesina, A., and Barro, R. (2002). Currency unions. Quarterly Journal of Economics 117(2), 409–436.Google Scholar
Alesina, A., Barbiero, O., Favero, C., Giavazzi, F., and Paradisi, M. (2015). Austerity in 2009–13. Economic Policy 30(83), 383–437.CrossRefGoogle Scholar
Algan, Y., Guriev, S., Papaioannou, E., and Passari, E. (2017). The European trust crisis and the rise of populism. Brookings Papers on Economic Activity 2017(2), 309–400.Google Scholar
Autor, D. H., Dorn, D., and Hanson, G. H. (2016). The China shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics 8, 205–240.CrossRefGoogle Scholar
Bai, Chong-En, Hsieh, C. T., and Michael, S. Z. (2016). The long shadow of a fiscal expansion. Brookings Papers on Economic Activity 47(2), 129–181.CrossRefGoogle Scholar
Bayoumi, T., and Eichengreen, B. (1993). Shocking aspects of European monetary integration. In Torres, F. and Giavazzi, F. (eds.), Adjustment and Growth in the European Monetary Union. Cambridge: Cambridge University Press.Google Scholar
Begg, I. (2014). Genuine economic and monetary union. In Durlauf, S. and Blume, L. (eds.), The New Palgrave Dictionary of Economics. London: Palgrave Macmillan.Google Scholar
Blanchard, O. (2018). Should we reject the natural rate hypothesis? Journal of Economic Perspectives 32(1), 97–120.Google Scholar
Blanchard, O., and Quah, D. (1989). The dynamic effects of aggregate demand and aggregate supply disturbances. American Economic Review 79, 655–673.Google Scholar
Blanchard, O. J., Griffiths, M., and Gruss, B. (2013). Boom, bust, recovery: Forensics of the Latvia crisis. Brookings Papers on Economic Activity 2013(2), 325–388.CrossRefGoogle Scholar
Bordignon, M., Gatti, N., and Onorato, M. G. (2021). Getting closer or falling apart? Euro countries after the Euro crisis. University of Milan, Working Paper No. 105.CrossRefGoogle Scholar
Bordo, M., and Meissner, C. M. (2016). Fiscal and financial crises. In Taylor, J. B. and Uhlig, H. (eds.), Handbook of Macroeconomics, Vol. 2. Amsterdam: Elsevier, pp. 355–412.Google Scholar
Campos, N., and Macchiarelli, C. (2016). Core and periphery in the European Monetary Union: Bayoumi–Eichengreen 25 years later. Economics Letters 147(3), 127–130.CrossRefGoogle Scholar
Campos, N., and Macchiarelli, C. (2021). The dynamics of core and periphery in the European Monetary Union: A new approach. Journal of International Money and Finance 112, 102325.CrossRefGoogle Scholar
Campos, N., Coricelli, F., and Moretti, L. (2019). Institutional integration and economic growth in Europe. Journal of Monetary Economics 103(1), 88–104.Google Scholar
Campos, N., Eichenauer, V., and Sturm, J. E. (2020). Close encounters of the European kind: Economic integration, sectoral heterogeneity and structural reforms. European Economic Review 129, 103511.Google Scholar
Campos, N., Macchiarelli, C., and Mitropoulos, F. (2022). Unemployment and growth before and after the Global Financial Crisis: New evidence from structural Okun estimates. LSE LEQS Discussion Paper No. 175.Google Scholar
Cette, G., Fernald, J., and Mojon, B. (2016). The pre-Great Recession slowdown in productivity. European Economic Review 88, 3–20.CrossRefGoogle Scholar
Chari, V., Dovis, A., and Kehoe, P. (2020). Rethinking optimal currency areas. Journal of Monetary Economics 111, 80–94.Google Scholar
Comin, D. A., Gonzalez, J. Q., Schmitz, T. G., and Trigari, A. (2020). Measuring TFP: The role of profits, adjustment costs, and capacity utilization. NBER Working Paper No. 28008.Google Scholar
Crafts, N., and Mills, T. (2020). Is the UK productivity slowdown unprecedented? National Institute Economic Review 251, R47–R53.CrossRefGoogle Scholar
De Grauwe, P. (2006). What have we learnt about monetary integration since the Maastricht Treaty? Journal of Common Market Studies 44(4), 711–30.Google Scholar
De Grauwe, P. (2018), The Economics of Monetary Unions. Oxford: Oxford University Press.Google Scholar
De Haan, J., and Wiese, R. (2022). The impact of product and labour market reform on growth: Evidence for OECD countries based on local projections. Journal of Applied Econometrics, 37(4), 746–770.Google Scholar
De Haan, J., Inklaar, R., and Jong‐A.‐Pin, R. (2008). Will business cycles in the euro area converge? A critical survey of empirical research. Journal of Economic Surveys 22(2), 234–273.CrossRefGoogle Scholar
De Haan, J., Hessel, J., and Gilbert, N. (2016). Reforming the architecture of EMU: Ensuring stability in Europe. In Badinger, H. and Nitsch, V. (eds.), The Routledge Handbook of the Economics of European Integration. New York: Routledge, pp. 408–432.Google Scholar
De Haan, J., Jacobs, J., and Zijm, R. (2022). Coherence of output gaps in the euro area: The impact of the COVID-19 shock. CESifo Discussion Paper No. 9654.Google Scholar
European Central Bank (2017). Financial Integration in Europe. Frankfurt: ECB.Google Scholar
Fernald, J. G. (2015). Productivity and potential output before, during, and after the Great Recession. NBER Macroeconomics Annual 29(1), 1–51.Google Scholar
Fetzer, T. (2019). Did austerity cause Brexit? American Economic Review 109(11), 3849–3886.Google Scholar
Frankel, J., and Rose, A. (1998). The endogeneity of the optimum currency area criteria. Economic Journal 108(449), 1009–1025.Google Scholar
Gertler, M., and Gilchrist, S. (2018). What happened: Financial factors in the Great Recession. Journal of Economic Perspectives 32(3), 3–30.Google Scholar
Glick, R., and Rose, A. (2016). Currency unions and trade: A post-EMU reassessment. European Economic Review 87, 78–91.Google Scholar
Griffin, J. M. (2021). Ten years of evidence: Was fraud a force in the financial crisis? Journal of Economic Literature 59(4), 1293–1321.Google Scholar
Guiso, L, Morelli, M., and Sonno, T (2021). The financial drivers of populism in Europe. Bocconi University, Working Paper No. 166.CrossRefGoogle Scholar
Győrffy, D. (2015). Austerity and growth in central and eastern Europe: Understanding the link through contrasting crisis management in Hungary and Latvia. Post-Communist Economies 27(2), 129–152.Google Scholar
IMF (2014), IMF response to the financial and economic crisis. International Monetary Fund, Independent Evaluation Office.Google Scholar
Jones, C. (2016). The facts of economic growth. In Taylor, J. and Uhlig, H. (eds.), Handbook of Macroeconomics, Vol. 2. Amsterdam: Elsevier.Google Scholar
Koijen, R. S., Koulischer, F., Nguyen, B., and Yogo, M. (2021). Inspecting the mechanism of quantitative easing in the euro area. Journal of Financial Economics 140(1), 1–20.CrossRefGoogle Scholar
Korhonen, K. (2018). An institutional innovation in the euro debt crisis: The ESM. In Campos, N. and Sturm, J. (eds.), Bretton Woods, Brussels, and Beyond: Redesigning the Institutions of Europe. London: CEPR Press.Google Scholar
Martin, P., and Philippon, T. (2017). Inspecting the mechanism: Leverage and the great recession in the eurozone. American Economic Review 107(7), 1904–1937.Google Scholar
Reinhart, C., and Rogoff, K. (2010). Growth in a time of debt. American Economic Review 100(2), 573–578.CrossRefGoogle Scholar
Rose, A. K. (2000). One money, one market: The effect of common currencies on trade. Economic Policy 15(30), 8–45.CrossRefGoogle Scholar
Sandbu, M. (2015), Europe’s Orphan: The Future of the Euro and the Politics of Debt. Princeton, NJ: Princeton University Press.Google Scholar
Silva, J., and Tenreyro, S. (2010). Currency unions in prospect and retrospect. Annual Review of Economics 2(1), 51–74.Google Scholar
Shiller, R. J. (2019). Narrative Economics: How Stories Go Viral and Drive Major Economic Events. Princeton, NJ: Princeton University Press.Google Scholar
Spiegel, M. (2009). Monetary and financial integration in the EMU: Push or pull? Review of International Economics 17(4), 751–776.Google Scholar
Syverson, C. (2011). What determines productivity? Journal of Economic Literature 49(2), 326–365.Google Scholar
Tooze, A. (2018). Crashed: How a Decade of Financial Crises Changed the World. New York: Penguin.Google Scholar
Van Ark, B., O’Mahoney, M., and Timmer, M. P. (2008). The productivity gap between Europe and the United States: Trends and causes. Journal of Economic Perspectives 22(1), 25–44.CrossRefGoogle Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×