[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pke/wpaper/pkwp2224.html
   My bibliography  Save this paper

A tale of housing cycles and fiscal policy, not competitiveness. Growth drivers in southern Europe

Author

Listed:
  • Engelbert Stockhammer
  • Andre Novas Otero
Abstract
Southern European countries are widely considered a distinct type of capitalism, but they have experienced a varied growth performance, both over time and across countries. This paper investigates the growth drivers in southern Europe since the mid-1990s. We consider a broad set of potential growth drivers derived from the literature on Mediterranean capitalism and Comparative Political Economy more broadly. On the demand side these include the role of house prices (as the main financial variable; highlighted in parts of the growth models approach); the ‘financial curse’ hypothesis (which posits that financial inflows caused house price booms and crowded out manufacturing activities); and Keynesian arguments on the impact of fiscal policy. On the supply side, these encompass the cost competitiveness argument (consistent with mainstream economics and the Varieties of Capitalism approach), research-led technological change; and neo-structuralist arguments regarding the productive capacity. We find strong evidence for the growth contributions of house prices and fiscal policy. While these findings are generally supportive of extant analysis of these economies as finance-led rather than export-led, they call for a more serious integration of house prices in growth model analysis and for a more systematic analysis of the growth impact of fiscal policy.

Suggested Citation

  • Engelbert Stockhammer & Andre Novas Otero, 2022. "A tale of housing cycles and fiscal policy, not competitiveness. Growth drivers in southern Europe," Working Papers PKWP2224, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp2224
    as

    Download full text from publisher

    File URL: https://www.postkeynesian.net/downloads/working-papers/PKWP2224.pdf
    File Function: First version, 2022
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
    2. Filippo Gusella & Engelbert Stockhammer, 2021. "Testing fundamentalist–momentum trader financial cycles: An empirical analysis via the Kalman filter," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 758-797, November.
    3. Philip Arestis & Malcolm Sawyer, 2005. "Reinventing Fiscal Policy," Palgrave Macmillan Books, in: Blandine Laperche & Dimitri Uzunidis (ed.), John Kenneth Galbraith and the Future of Economics, chapter 9, pages 105-125, Palgrave Macmillan.
    4. Mertens, Daniel & Nölke, Andreas & May, Christian & Schedelik, Michael & Ten Brink, Tobias & Gomes, Alexandre, 2022. "Moving the center: Adapting the toolbox of growth model research to emerging capitalist economies," IPE Working Papers 188/2022, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    6. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    7. Slacalek Jiri, 2009. "What Drives Personal Consumption? The Role of Housing and Financial Wealth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-37, October.
    8. Olivier Allain, 2015. "Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1351-1371.
    9. Luc Soete & Bart Verspagen & Thomas H W Ziesemer, 2022. "Economic impact of public R&D: an international perspective [The governance and performance of universities: evidence from Europe and the US]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 31(1), pages 1-18.
    10. Annamaria Simonazzi & Andrea Ginzburg & Gianluigi Nocella, 2013. "Economic relations between Germany and southern Europe," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(3), pages 653-675.
    11. Engelbert Stockhammer & Rafael Wildauer, 2016. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(6), pages 1609-1634.
    12. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    13. Soon Ryoo, 2016. "Household debt and housing bubbles: a Minskian approach to boom-bust cycles," Journal of Evolutionary Economics, Springer, vol. 26(5), pages 971-1006, December.
    14. Hans-Werner Sinn, 2012. "The European Balance of Payments Crisis: An Introduction," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(1), pages 03-10, February.
    15. David Aikman & Andrew G. Haldane & Benjamin D. Nelson, 2015. "Curbing the Credit Cycle," Economic Journal, Royal Economic Society, vol. 125(585), pages 1072-1109, June.
    16. 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).
    17. Eckhard Hein & Walter Paternesi Meloni & Pasquale Tridico, 2021. "Welfare models and demand-led growth regimes before and after the financial and economic crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 28(5), pages 1196-1223, October.
    18. Nicoletta Batini & Luc Eyraud & Lorenzo Forni & Anke Weber, 2014. "Fiscal Multipliers; Size, Determinants, and Use in Macroeconomic Projections," IMF Technical Notes and Manuals 14/04, International Monetary Fund.
    19. Amable, Bruno, 2003. "The Diversity of Modern Capitalism," OUP Catalogue, Oxford University Press, number 9780199261147.
    20. Servaas Storm & C.W.M. Naastepad, 2015. "Europe’s Hunger Games: Income Distribution, Cost Competitiveness and Crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(3), pages 959-986.
    21. Engelbert Stockhammer, 2015. "Rising inequality as a cause of the present crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(3), pages 935-958.
    22. 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.
    23. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1469-1513.
    24. Sebastian Gechert & Ansgar Rannenberg, 2018. "Which Fiscal Multipliers Are Regime‐Dependent? A Meta‐Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 32(4), pages 1160-1182, September.
    25. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(1), pages 139-159, January.
    26. A.P. Thirlwall, 2019. "Thoughts on balance-of-paymentsconstrained growth after 40 years," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(4), pages 554-567, October.
    27. Stockhammer, Engelbert & Wildauer, Rafael, 2018. "Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries," Review of Behavioral Economics, now publishers, vol. 5(2), pages 85-121, September.
    28. Engelbert Stockhammer & Walid Qazizada & Sebastian Gechert, 2019. "Demand effects of fiscal policy since 2008," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(1), pages 57-74, January.
    29. Servaas Storm & C.W.M. Naastepad, 2016. "Myths, Mix-ups, and Mishandlings: Understanding the Eurozone Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(1), pages 46-71, January.
    30. J. Bradford DeLong & Lawrence H. Summers, 2012. "Fiscal Policy in a Depressed Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 233-297.
    31. Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2012. "Characterising the financial cycle: don't lose sight of the medium term!," BIS Working Papers 380, Bank for International Settlements.
    32. Nicoletta Batini & Mr. Luc Eyraud & Lorenzo Forni & Miss Anke Weber, 2014. "Fiscal Multipliers: Size, Determinants, and Use in Macroeconomic Projections," IMF Technical Notes and Manuals 2014/004, International Monetary Fund.
    33. Sofia A. Perez & Manos Matsaganis, 2018. "The Political Economy of Austerity in Southern Europe," New Political Economy, Taylor & Francis Journals, vol. 23(2), pages 192-207, March.
    34. Eckhard Hein, 2019. "Financialisation and tendencies towards stagnation: the role of macroeconomic regime changes in the course of and after the financial and economic crisis 2007–09," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(4), pages 975-999.
    35. Eckhard Hein, 2018. "Autonomous government expenditure growth, deficits, debt, and distribution in a neo-Kaleckian growth model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(2), pages 316-338, April.
    36. Engelbert Stockhammer & Robert Stehrer, 2011. "Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run," Review of Radical Political Economics, Union for Radical Political Economics, vol. 43(4), pages 506-522, December.
    37. Sergio Cesaratto, 2015. "Balance of Payments or Monetary Sovereignty? In Search of the EMU’s Original Sin," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(2), pages 142-156, April.
    38. Wildauer, Rafael & Stockhammer, Engelbert, 2018. "Expenditure cascades, low interest Rates, credit deregulation or property booms? Determinants of household debt in OECD countries," Greenwich Papers in Political Economy 20882, University of Greenwich, Greenwich Political Economy Research Centre.
    39. Roberto Dieci & Frank Westerhoff, 2012. "A simple model of a speculative housing market," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 303-329, April.
    40. Alberto Bagnai, 2010. "Structural changes, cointegration and the empirics of Thirlwall's law," Applied Economics, Taylor & Francis Journals, vol. 42(10), pages 1315-1329.
    41. Olivier J Blanchard & Daniel Leigh, 2014. "Learning about Fiscal Multipliers from Growth Forecast Errors," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(2), pages 179-212, June.
    42. J. Bradford DeLong & Lawrence H. Summers, 2012. "Fiscal Policy in a Depressed Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 233-297.
    43. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. 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).
    4. Hein, Eckhard, 2022. "Varieties of demand and growth regimes: Post-Keynesian foundations," IPE Working Papers 196/2022, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2017. "Is Europe disintegrating? Macroeconomic divergence, structural polarization, trade and fragility," Economics working papers 2017-15, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Giovanni Covi, 2020. "Euro area growth differentials: diverging and reinforcing factors in a Kaleckian SVAR approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 147-180, February.
    7. 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.
    8. Philipp Heimberger & Jakob Kapeller, 2017. "The performativity of potential output: pro-cyclicality and path dependency in coordinating European fiscal policies," Review of International Political Economy, Taylor & Francis Journals, vol. 24(5), pages 904-928, September.
    9. Giovanni Covi, 2021. "Trade imbalances within the Euro Area: two regions, two demand regimes," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 181-221, February.
    10. Di Bucchianico, Stefano, 2021. "Inequality, household debt, ageing and bubbles: A model of demand-side Secular Stagnation," IPE Working Papers 160/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    11. Borsi, Mihály Tamás, 2018. "Fiscal multipliers across the credit cycle," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 135-151.
    12. Marco Bernardini & Selien De Schryder & Gert Peersman, 2020. "Heterogeneous Government Spending Multipliers in the Era Surrounding the Great Recession," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 304-322, May.
    13. James Wood & Engelbert Stockhammer, 2020. "House prices, private debt and the macroeconomics of comparative political economy," Working Papers PKWP2005, Post Keynesian Economics Society (PKES).
    14. Sascha Keil & Walter Paternesi Meloni, 2024. "Kaldorian cumulative causation in the Euro area: an empirical assessment of divergent export competitiveness," FMM Working Paper 103-2024, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    15. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    16. Ricardo Barradas & Ines Tomas, 2023. "Household indebtedness in the European Union countries: Going beyond the mainstream interpretation," PSL Quarterly Review, Economia civile, vol. 76(304), pages 21-49.
    17. Mark Setterfield & Y.K. Kim, 2024. "How financially fragile can households become? Household borrowing, the welfare state, and macroeconomic resilience," Review of Evolutionary Political Economy, Springer, vol. 5(1), pages 121-151, June.
    18. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2020. "Structural change in times of increasing openness: assessing path dependency in European economic integration," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1467-1495, November.
    19. Engelbert Stockhammer & Collin Constantine & Severin Reissl, 2020. "Explaining the Euro crisis: current account imbalances, credit booms and economic policy in different economic paradigms," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 43(2), pages 231-266, April.
    20. Engelbert Stockhammer & Karsten Kohler, 2023. "Learning from distant cousins? Post-Keynesian Economics, Comparative Political Economy, and the Growth Models approach," Chapters, in: Thomas Palley & Esteban Pérez Caldentey & Matías Vernengo (ed.), Varieties of Capitalism, chapter 3, pages 56-75, Edward Elgar Publishing.

    More about this item

    Keywords

    Comparative Political Economy; growth models; growth drivers; southern Europe; house price cycles; fiscal policy;
    All these keywords.

    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pke:wpaper:pkwp2224. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jo Michell (email available below). General contact details of provider: https://edirc.repec.org/data/pksggea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.