Secular stagnation and core-periphery uneven development in post-crisis eurozone

Abstract

In this paper, we analyse secular stagnation in the eurozone. We adopt a core-periphery perspective and analyse whether the 2007–2008 financial crisis triggered off diverging dynamics in the growth potential of core and peripheral eurozone countries. We find that secular stagnation affects the whole eurozone but is a much more serious concern in the periphery. Among the components of potential GDP, the NAIRU in particular has diverged since 2008. We find that the increase in the NAIRU is strongly related to demand-side factors such as investment demand and the fiscal policy stance, as well as to the technological level of the economy. Labour market institutions seem to play a relatively minor role, which may also change depending on the level of technological development of an economy. In line with these findings, we argue that reforms in the eurozone should focus on levelling out the core-periphery technological gap via industrial policy, and on the creation of homogenous financial and macroeconomic conditions among member countries, rather than on the generalized deregulation of labour markets.

Centre-periphery in the European Union: Analysis of wages and productivity in the transport equipment sector

“…This result is consistent with other C-P analysis in Europe focused on variables such as GDP or unemployment. Botta and Tippet (2022) even show a greater divergence from 2008. The originality of our contribution lies in the comparative analysis of productivity and wages, which sheds light on one of the main mechanisms that explains increasing inequality after the crisis.…”

“…Our first above-cited aim is not entirely original; there are other contributions (more or less recent) that have discussed the validity of C-P analysis for studying uneven development in the world economy (Di Filippo, 1998; Ebenau 2012; Fischer, 2015) or within the EU (Botta and Tippet, 2022; Celi et al, 2018; Gambarotto and Solari, 2015; Weissenbacher, 2017). Our article is framed by this literature, and we establish a dialogue with previous contributions in order to identify key elements not yet considered for a C-P analysis of the EU.…”

Research on the 2008 Financial Crisis Regarding Financial Network

“…Empirical research on the core-periphery structure in the European market found a clear downward trend of active banks in 2008 [24,27]. This is because foreign bank interactions with the Italian banks, for instance, had significantly dropped during the crisis.…”