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Growing differently? Financial cycles, austerity, and competitiveness in growth models since the Global Financial Crisis

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  • Karsten Kohler
  • Engelbert Stockhammer
Abstract
The paper contributes to the recent growth models debate through a cross-country analysis of growth drivers before and after the 2008 Global Financial Crisis (GFC). It argues that the widely used dichotomy of export-led versus (debt-financed) consumption-led growth has lost its usefulness since the GFC. Specifically, identifying growth models through growth contributions can give misleading results when the drivers of economic growth change. The paper contends that Comparative Political Economy (CPE) has neglected the unstable nature of financial growth drivers, effectively ignores fiscal policy, and overemphasizes price competitiveness as a growth driver. It shows empirically that, first, debt-financed growth is cyclical and financial booms come with busts and debt overhang; second, post-GFC growth dynamics are strongly shaped by the fiscal policy reaction; third, price competitiveness through wage deflation has played a negligible role in driving growth. We conclude that CPE needs to broaden its analysis of growth drivers in order to understand how the GFC transformed growth models.

Suggested Citation

  • Karsten Kohler & Engelbert Stockhammer, 2022. "Growing differently? Financial cycles, austerity, and competitiveness in growth models since the Global Financial Crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 29(4), pages 1314-1341, July.
    • Handle: RePEc:taf:rripxx:v:29:y:2022:i:4:p:1314-1341
    DOI: 10.1080/09692290.2021.1899035
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    2. Karsten Kohler & Benjamin Tippet & Engelbert Stockhammer, 2023. "House price cycles, housing systems, and growth models," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 20(3), pages 461-490, December.
    3. Botta, Alberto & Porcile, Gabriel & Spinola, Danilo & Yajima, Giuliano Toshiro, 2023. "Financial integration, productive development and fiscal policy space in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 175-188.
    4. Hein, Eckhard & van Treeck, Till, 2024. "Financialisation and demand and growth regimes: A review of post-Keynesian contributions," ifso working paper series 32, University of Duisburg-Essen, Institute for Socioeconomics (ifso).
    5. Miguel Angel Casau & Daniel Herrero, 2024. "Deindustrialization paths and growth models: Germany and Spain in comparative perspective," LEM Papers Series 2024/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. Sascha Keil & Walter Paternesi Meloni, 2024. "Kaldorian cumulative causation in the Euro area: an empirical assessment of divergent export competitiveness," Chemnitz Economic Papers 063, Department of Economics, Chemnitz University of Technology.
    7. Schedelik, Michael & Nölke, Andreas & May, Christian & Gomes, Alexandre, 2022. "Dependency revisited: Commodities, commodity-related capital flows and growth models in emerging economies," IPE Working Papers 201/2022, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    8. Hein, Eckhard, 2022. "Financialisation, varieties of macroeconomic regimes and stagnation tendencies in a stylised Kaleckian model," IPE Working Papers 193/2022, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    9. Engelbert Stockhammer, 2023. "Macroeconomic ingredients for a growth model analysis for peripheral economies: a post-Keynesian-structuralist approach," New Political Economy, Taylor & Francis Journals, vol. 28(4), pages 628-645, July.
    10. Campana, Juan Manuel & Emboava Vaz, João & Hein, Eckhard & Jungmann, Benjamin, 2022. "Demand and growth regimes of the BRICs countries," IPE Working Papers 197/2022, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    11. Jungmann, Benjamin, 2021. "Growth drivers in emerging capitalist economies before and after the Global Financial Crisis," IPE Working Papers 172/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    12. Benjamin Jungmann, 2023. "Growth drivers in emerging capitalist economies: building blocks for a post-Keynesian analysis and an empirical exploration of the years before and after the Global Financial Crisis," Review of Evolutionary Political Economy, Springer, vol. 4(2), pages 349-386, July.
    13. Engelbert Stockhammer & Andre Novas Otero, 2023. "A tale of housing cycles and fiscal policy, not competitiveness. Growth drivers in Southern Europe," New Political Economy, Taylor & Francis Journals, vol. 28(3), pages 483-505, May.
    14. Walter Paternesi Meloni, 2021. "The price vs. non-price competitiveness conundrum: a post-Keynesian comparative political economy analysis," Working Papers PKWP2109, Post Keynesian Economics Society (PKES).
    15. Ramona Tiganasu & Gabriela Carmen Pascariu & Dan Lupu, 2022. "Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 667-698, September.

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    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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