2013年-CEPS欧洲政策研究中心_Fiscal_and_Monetary_Policy_for_a_Low_106页_1mb

Summary of "FISCAL AND MONETARY POLICY FOR A LOW-SPEED EUROPE"

Core Content

This report by the CEPS Macroeconomic Policy Group (MPG) examines the challenges facing European fiscal and monetary policy in the context of a significant slowdown in productivity growth. It highlights the contrast between the US and Europe in terms of productivity performance and evaluates the effectiveness of fiscal policy as a tool for demand management.

Main Findings

1. Productivity Slowdown in Europe

• Productivity Trends: Productivity growth in Europe has slowed dramatically, with the euro area performing worse than the EU-15 average in 2001. In contrast, the US experienced a sharp rebound in productivity growth, reaching a record pace of +8% in Q1 2002.
• EU Productivity: In 2001, real GDP per employed person in the EU increased by only 0.4%, the lowest since 1975. The slowdown in productivity growth is not merely a cyclical phenomenon but reflects structural issues.
• Cyclical vs Structural Factors: While the US productivity growth during the 2001 slowdown was consistent with the normal relationship between the business cycle and productivity, the euro area's productivity decline was significantly worse, indicating a structural slowdown.
• Labour Market Rigidities: European labour markets are more rigid than US markets, which may explain why productivity growth is more cyclical in Europe. However, this does not fully account for the severity of the slowdown.

2. Monetary Policy Challenges

• Inflation and Growth: The euro area is facing a situation close to stagflation, with growth below potential and inflation persistently above the ECB's 2% target.
• Monetary Policy Stance: The current monetary policy stance is appropriate if inflation declines significantly, but the ECB's 2% target is considered too low given the productivity slowdown. The authors suggest adjusting the target to 1.5% with a tolerance band of ±1%.
• Monetary Conditions: Monetary conditions are currently lax due to high inflation, which has kept real interest rates low. If inflation falls, monetary conditions will tighten automatically, even without policy rate hikes.
• Money Growth and Inflation: The acceleration of M3 growth in 2001 was likely due to increased liquidity preference, not inflation risks. The ECB should be more transparent in its communication rather than focusing on technical details in press releases.

3. Fiscal Policy Ineffectiveness

• Fiscal Multipliers: The effectiveness of fiscal policy as a demand management tool is questionable. A 1% increase in GDP through government spending leads to only a marginal increase in demand, suggesting a multiplier effect close to 1.
• Crowding Out Effect: Over the past 20 years, fiscal policy has had little to no positive impact on output and may even crowd out private demand.
• Uncertainty on Inflation Impact: There is no clear evidence that fiscal policy affects inflation, making it difficult to justify further coordination or tightening of fiscal policies at the European level.
• Recommendations: Fiscal policy should not be used as a primary tool for active demand management. The current elaborate procedures for fiscal coordination are seen as cumbersome and based on incomplete knowledge of national and international effects.

Key Information

• Productivity Gap: The productivity gap between the US and Europe is widening, despite similar IT investment levels.
• Stagflation Concerns: The euro area is experiencing a combination of low growth and high inflation, which complicates monetary policy.
• Exchange Rate Implications: The productivity growth differential between the US and the euro area is often cited as a reason for the dollar/euro exchange rate appreciation.
• Future Enlargement: The report anticipates a special report on the implications of the eurozone enlargement, particularly the entry of the UK and the challenges of maintaining efficient ECB decision-making with a larger Governing Council.

Policy Conclusions

• Productivity Decline: The productivity slowdown is a major concern, with implications for both monetary and fiscal policy.
• Monetary Policy Adjustment: The ECB should consider lowering its inflation target to 1.5% to better reflect the current economic reality.
• Fiscal Policy Caution: Fiscal policy should not be used as a primary tool for demand management due to its limited effectiveness and potential negative impact on private demand.
• Structural Reforms Needed: Restoring productivity growth in Europe requires structural reforms, particularly in the labour market, to reduce supply-side distortions.
• Coordination Risks: There is no justification for tighter fiscal coordination in the euro area at this time, as the effectiveness of fiscal policy remains uncertain.

Conclusion

The report emphasizes the need for a more realistic monetary policy framework and a cautious approach to fiscal policy. It calls for structural reforms to address the underlying causes of the productivity slowdown and highlights the importance of transparency and communication in monetary policy.