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The Politics of Central Banks: Austerity and Unemployment in Europe

Published online by Cambridge University Press:  28 November 2008

Paulette Kurzer
Paulette Kurzer
Affiliation:
Political Science, Babson College, Wellesley, MA
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Abstract

This article examines the divergences in labor market-performances in four small, open economies: Austria, Belgium, the Netherlands, and Sweden. It argues that great unemployment in Belgium and the Netherlands is partly due to the implementation of deflationary policies during the 1980s. The decline of Keynesian intervention in Belgium and the Netherlands is traced to the institutional independence of their central banks to set monetary and exchange rate policies separate from government. Because the Swedish and Austrian central banks are more integrated in the policy process and their countries are not members of the Common Market or the European Monetary System, social democratic governments have been able to go against the European trend of monetary restrictiveness and fiscal austerity. Accordingly, business in Austria and Sweden is more optimistic about future profit returns and is more willing to invest in productive capital, resulting in lower unemployment.

Type
Articles
Information
Journal of Public Policy , Volume 8 , Issue 1 , January 1988 , pp. 21 - 48
Copyright
Copyright © Cambridge University Press 1988

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