Debt patterns of the peripheral economies of Europe: from the increased growth post-implementation of the Euro to the Great Recession
Abstract
The main purpose of this article is to outline the specificities of the indebtedness process of each country of the European periphery — Greece, Italy, Ireland, Portugal, and Spain — that guided the behavior of the demand and the indebtedness of the domestic economic agents from 2000 to 2017. The main results indicated that from 2000 to 2008, all of the countries had foreign sector surpluses (current account deficits), which characterized distinct indebtedness processes of the domestic economic agents. The reversal of these processes was accompanied by larger public deficits and the replacement of private debt with public debt. With the exception of Ireland, the positive impacts on the economic performance of these countries between 2009 and 2017 came from the foreign sector through the devaluation of the euro in the period.
Downloads
References
Allen, W. A., & Moessner, R. (2012). The liquidity consequences of the Euro Area sovereign debt crisis. In BIS working papers (No. 390).
Amitrano, C. (2013). Regime de crescimento, restrição externa e financeirização; uma proposta de conciliação. Economia e Sociedade, 22(2), 285–316. doi: 10.1590/S0104-06182013000200001
Arestis, P., & Karakitsos, E. (2012). The U.S. dimension of the euro zone debt crisis. Journal of Post Keynesian Economics, 35(1), 21–44. doi: 10.2753/PKE0160-3477350102
Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82(6), 1095–1117. doi: 10.1086/260266
Barro, R. J. (1989). The Ricardian approach to budget deficits. Journal of Economic Perspectives, 3(2), 37–54. doi: 10.1257/jep.3.2.37
Bibow, J. (2013). The Euroland crisis and Germany’s Euro trilemma. International Review of Applied Economics, 27(3), 360–385. doi: 10.1080/02692171.2012.721757
Boyer, R. (2000). Is a finance-led growtIs a finance-led growth regime a viable alternative to Fordism? A preliminary analysis. Economy and Society, 29(1), 111–145.
Boyer, R. (2013). The Euro crisis: undetected by conventional economics, favoured by nationally focused polity. Cambridge Journal of Economics, 37(3), 533–569. doi: 10.1093/cje/bet013
Bresser-Pereira, L. C., & Rossi, P. (2015). Sovereignty, the exchange rate, collective deceit, and the Euro crisis. Journal of Post Keynesian Economics, 38(3), 355–375. doi: 10.1080/01603477.2015.1087807
Cardim de Carvalho, F. J. (1999). On banks liquidity preference. In P. Davidson & J. A. Kregel (Eds.), Full Employment and Price Stability in a Global Economy (1st ed.). Cheltenham: Edward Elgar Publishing.
Cardim de Carvalho, F. J. (2013). Keynes and the endogeneity of money. Review of Keynesian Economics, 1(4), 431–446. doi: 10.4337/roke.2013.04.05
Cesaratto, S. (2013). The implications of TARGET2 in the European balance of payments crisis and beyond. European Journal of Economics and Economic Policies: Intervention, 10(3), 359–382. doi: 10.4337/ejeep.2013.03.09
Cesaratto, S. (2018). The nature of the eurocrisis. A reply to Febrero, Uxò and Bermejo. Review of Keynesian Economics, 6(2), 240–251. doi: 10.4337/roke.2018.02.05
Davidson, P. (1978). Money and the Real World. London: The Macmillan Press.
Davidson, P. (2009). John Maynard Keynes (2nd ed.). doi: 10.1057/9780230235472
Epstein, G. (2005). Financialization and the world economy. In Financialization and the World Economy. Cheltenham: Edward Elgar Publishing.
Fama, E. F. (1980). Banking in the Theory of Finance. Journal of Monetary Economics, 6, 39–57.
Farhi, M. (1999). Derivativos financeiros: hedge, especulação e arbitragem. Economia e Sociedade, 13, 93–114.
Febrero, E., Uxó, J., & Bermejo, F. (2018). The financial crisis in the eurozone: a balance-of-payments crisis with a single currency? Review of Keynesian Economics, 6(2), 221–239. doi: 10.4337/roke.2018.02.04
Godley, W. (2012). Seven unsustainable processes: medium-term prospects and policies for the United States and the world. In M. Lavoie & G. Zezza (Eds.), The Stock-Flow Consistent Approach (pp. 216–254). doi: 10.1057/9780230353848_11
Goodfriend, M., & King, R. G. (1997). The New Neoclassical Synthesis and the Role of Monetary Policy. In Bernanke, Ben S & Rotemberg, Julio, NBER Macroeconomics Annual 1997 (Vol. 12, p. 361). doi: 10.2307/3585232
Gurley, J. G., & Shaw, E. S. (1955). Financial aspects of economic development. The American Economic Review, 45(4), 515–538. http://www.jstor.org/stable/pdf/1811632.pdf
Gurley, J. G., & Shaw, E. S. (1956). Financial Intermediaries and the Saving-Investment Process. The Journal of Finance, 11(2), 257–276.
Guttmann, R., & Plihon, D. (2010). Consumer debt and financial fragility. International Review of Applied Economics, 24(3), 269–283. doi: 10.1080/02692171003701420
Hein, E. (2013). The crisis of finance-dominated capitalism in the euro area, deficiencies in the economic policy architecture, and deflationary stagnation policies. Journal of Post Keynesian Economics, 36(2), 325–354. doi: 10.2753/PKE0160-3477360207
Herndon, T., Ash, M., & Pollin, R. (2014). Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Cambridge Journal of Economics, 38(2), 257–279. doi: 10.1093/cje/bet075
Hicks, J. (1989). A market theory of money. Oxford: Oxford University Press.
Kaldor, N. (1939). Speculation and economic stability. The Review of Economic Studies, 7(1), 1–27.
Keynes, J. M. (2013). The General Theory of Employment, Interest and Money. Cambridge: Cambridge University Press.
Kregel, J. A. (1976). Economic methodology in the face of uncertainty: the modelling methods of Keynes and the Post-Keynesians. The Economic Jou, 86(342), 209–225. doi: 10.2307/2230743
Kregel, J. A. (1998). Aspects of a Post-Keynesian theory of finance. Journal of Post Keynesian Economics, 21(1), 111–133.
Lavoie, M. (2014). Post-Keynesian economics: new foundations (1st ed.). Cheltenham, UK: Edward Elgar.
Lavoie, M. (2015a). The Eurozone crisis: a balance-of-payments problem or a crisis due to a flawed monetary design? International Journal of Political Economy, 44(2), 157–160. doi:10.1080/08911916.2015.1060831
Lavoie, M. (2015b). The Eurozone: similarities to and differences from Keynes’s plan. International Journal of Political Economy, 44(1), 3–17. doi: 10.1080/08911916.2015.1035980
Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91. doi: 10.1111/j.1540-6261.1952.tb01525.x
Miller, M., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, 34(4), 411–433.
Minsky, H. P. (2008a). John Maynard Keynes. New York: McGraw-Hill.
Minsky, H. P. (2008b). Stabilizing an unstable economy. New Haven: McGraw-Hill.
Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261–297.
Mundell, R. A. (1961). A theory of optimum currency areas. The American Economic Review, 51(1), 657–665.
Özgür, G., & Memis, E. (2017). Macroeconomic imbalances and the Eurozone crisis: the impact of credit expansion on asset prices. Review of Keynesian Economics, 5(3), 459–480. doi: 10.4337/roke.2017.03.07
Pasinetti, L. L. (2012). A few counter-factual hypotheses on the current economic crisis. Cambridge Journal of Economics, 36(6), 1433–1453. doi: 10.1093/cje/ber009
Reinhart, B. C. M., & Rogoff, K. S. (2010). Growth in a time of debt. The American Economic Review, 100(2), 573–578. doi: 10.1257/aer.100.2.573
Thirlwall, A., & McCombie, J. S. L. (2004). Essays on balance of payments constrained growth. doi: 10.4324/9780203495360
Tobin, J. (1958). Liquidity preference as behavior towards risk. The Review of Economic Studies, 25(2), 65–86.
Woodford, M. (2008). how important is money in the conduct of monetary policy? Journal of Money, Credit and Banking, 40(8), 1561–1598.
Woodford, M. (2009). convergence in macroeconomics: elements of the new synthesis. American Economic Journal: Macroeconomics, 1(1), 267–279. doi: 10.1257/mac.1.1.267
Wray, L. R. (2009). The rise and fall of money manager capitalism: a Minskian approach. Cambridge Journal of Economics, 33(4 SPEC. ISS.), 807–828. doi: 10.1093/cje/bep024
Copyright (c) 2019 Yasmim Dalila Barbant, Leonardo Flauzino de Souza
This work is licensed under a Creative Commons Attribution 4.0 International License.
- Authors keep copyrights and concede to the Journal the right to the first publication, with the paper simultaneously licenced under the Creative Commons Attribution 4.0 International License which allows recognised author and journal work sharing.
- Authors are authorized to assume additional contracts separately, for non-exclusive versions of the paper published in this journal (e.g.: publish in an instituional repository or as a book chapter) with the recogntion of authorship and initial publication in this journal.
- Authors are allowed (and are estimulated) to publish and distribute their work online (e.g.: in institutional repositories or at their personal websites) at any point before or during the editorial process, once this may generate productive alterations on the paper, as well as increse the factor of impact and quotation of the published paper (please, see Free Access Effect)
