Macroeconomic co-ordination as an strongeconomic policystrong concept –.pdf

Diskussionspapiere Macroeconomic co-ordination as an economic policy concept – opportunities and obstacles in the EMU Eckhard Hein and Achim Truger WSI Discussion Paper No. 125 June 2004 Eckhard Hein, Achim Truger WSI in der Hans Boeckler Stiftung Hans Boeckler Str. 39 40476 Duesseldorf Germany eckhard-hein@boeckler.de, achim-truger@boeckler.de This paper and further WSI Discussion Papers can be downloaded from: www.wsi.de. Macroeconomic co-ordination as an economic policy concept * – opportunities and obstacles in the EMU Eckhard Hein and Achim Truger Abstract This paper traces the euro zone’s inadequate macroeconomic performance in recent years back to the predominance of a restrictive macroeconomic policy mix based on a ‘new monetarist’ approach to economic policy. An approach based on a (post-)Keynesian analysis is presented as a growth and employment-oriented alternative to this restrictive policy mix. Contrary to the strict assignment of macroeconomic goals to the macroeconomic policy actors and their instruments in the ‘new monetarist’ approach, the alternative requires the co- ordination of monetary, fiscal and wage policies in order to achieve growth, high employment and price stability. The paper examines the opportunities for and the obstacles to macroeconomic co-ordination given by the institutional framework of the European Monetary Union. JEL classification: E61, E63, E64, E65 Keywords: Macroeconomic policy co-ordination, European Monetary