In Search of Growth in a Future with Diminished Expectations. The Case of Austria

Fritz Breuss

No 493, WIFO Working Papers from WIFO

Abstract: The euro area has – in contrast to the USA – still not recovered from the "Great Recession" 2009 and the following euro crisis. Some fear that Europe could embark into a decade of "secular stagnation" like Japan in the recent past. The US success can be attributed to the application of the strategy of the "three arrows": a co-ordinated expansionary fiscal and monetary policy cum permanent structural reforms. In contrast, the euro area has its hands tied by a self-imposed restriction in fiscal policy (new fiscal rules). Thus, the euro area remains as a growth-stimulating strategy only an expansionary monetary policy by the ECB plus "structural reforms" at the member country level. Austria – after the expiring of the hitherto "EU growth bonus" – has also to look for new strategies to stimulate growth by its own. In simulations with a macro-growth model for Austria alternative growth scenarios are analysed: structural reforms to improve efficiency in product und labour markets, investment in knowledge and innovation (R&D), more globalisation, and traditional demand policies (monetary and fiscal). The most promising strategies are more globalisation and structural reforms plus R&D investments. Most of these strategies would stimulate growth without impairing fiscal sustainability.

Pages: 48 pages
Date: 2015-01
New Economics Papers: this item is included in nep-cse, nep-eec and nep-knm
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:wfo:wpaper:y:2015:i:493

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