Economic Policy in the 21st Century: The Four Great Challenges

255 Pages·2022·4.799 MB·English

by  Nicola Acocella

Economic Policy in the 21st Century
Economicpolicyisfacingcrisesonmultiplefronts.Withtheeffectsof
the last financial crisis still with us, it is now faced with the new
challenges of post-Covid economic recovery and dealing with the
negative effects of over consumption on the climate. This book
exploresthefutureofeconomicpolicyinrelationtowhattheauthor
sees as the four great policy challenges of the first half of the 21st
century: the after effects of the last financial crisis and the cata-
strophic impact of the Covid pandemic, secular stagnation, growing
poverty and inequality, and globalization. The existence of these
economic problems has become increasingly relevant since some of
the tools available to public action have become useless. As econo-
mistsbegintosuggestnewinstrumentsofeconomicpolicy,thisbook
willhelpthereaderunderstandthenatureoftheeconomicandpolit-
icalfactsthatinfluencebothcurrentandfuturegenerations.
  is Emeritus of Economic Policy at the Sapienza
UniversityofRome.
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Economic Policy in the
21st Century
The Four Great Challenges
 
SapienzaUniversityofRome
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Informationonthistitle:www.cambridge.org/9781009209137
DOI:10.1017/9781009209106
©NicolaAcocella2023
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ofrelevantcollectivelicensingagreements,noreproductionofanypartmaytake
placewithoutthewrittenpermissionofCambridgeUniversityPress&Assessment.
Firstpublished2023
AcataloguerecordforthispublicationisavailablefromtheBritishLibrary.
LibraryofCongressCataloging-in-PublicationData
Names:Acocella,Nicola,1939–author.
Title:Economicpolicyinthe21stcentury:thefourgreatchallenges/
NicolaAcocella.
Description:Cambridge;NewYork,NY:CambridgeUniversityPress,2023.|
Includesbibliographicalreferencesandindex.
Identifiers:LCCN2022023677(print)|LCCN2022023678(ebook)|
ISBN9781009209137(hardback)|ISBN9781009209151(paperback)|
ISBN9781009209106(epub)
Subjects:LCSH:Economicpolicy.|Economichistory–21stcentury.|
BISAC:BUSINESS&ECONOMICS/Economics/Macroeconomics
Classification:LCCHD87.A281342023(print)|LCCHD87(ebook)|
DDC338.9–dc23/eng/20220614
LCrecordavailableathttps://lccn.loc.gov/2022023677
LCebookrecordavailableathttps://lccn.loc.gov/2022023678
ISBN978-1-009-20913-7Hardback
ISBN978-1-009-20915-1Paperback
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ToAnnaMariaandourgrandchildren,Flavia,Elena,Violaand
Matteo,andtotheirparents,FrancescaandValerio,Roberta
andFrancesco
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Contents
ListofFigures pagexi
ListofTables xv
ListofBoxes xvii
ListofAbbreviations xviii
Introduction: The Proliferation of Problems and the
Reduction of Instruments: Economic Policy as a
‘Lame Duck’ 1
1 The Great Recession and thePandemic 7
1.1 RecessionsthroughTime 7
1.1.1 PreviousFinancialCrisesofaSpeculativeNature
untilthe2000s 7
1.1.2 TheGreatRecession 11
1.2 TheCrisis:EMU’sFinancialandFiscalFragility 16
1.2.1 FinancialDeregulation 16
1.2.2 TheFunctioningofTARGETandthe
ResultingProblems 17
1.3 TheDynamicsoftheCrisisintheEMU 18
1.3.1 TheTrendintheDirectionofCapitalMovements
before2007andItsReversal 19
1.3.2 ThePublicDebt 21
1.4 TheEconomicImpactofthePandemicsoFar 25
1.5 ForecastsontheDurationandIntensityoftheImpact 36
1.6 TheDualNatureoftheShock,fromSupplyandDemand,
andthePoliciesNeeded 42
1.7 SolutionsataEuropeanLevel 53
vii
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viii 
1.8 ProblemsandSolutionsWorldwide 65
1.9 TheSearchforaVaccine 71
1.10 ConclusionsontheEffectsoftheFinancialCrisisand
thePandemic 73
2 Stagnation 76
2.1 TheTrendofGrowthbeforeandaftertheCrisesinthe
UnionandAbroad 77
2.2 TheGeneralCausesofStagnation 81
2.3 ProspectsofStagnationintheEZ:TheImpactofthe
GreatRecession,GrowingInequalities,Globalisation
andInstitutions 88
2.4 PoliciestoCounterSecularStagnation 93
2.5 Conclusions 98
3 Efficiency, Poverty and Inequalities 100
3.1 Definitions 100
3.2 EfficiencyandEquityaftertheCrises 101
3.2.1 MicroeconomicIndicatorsofDynamicEfficiency 101
3.2.2 MacroeconomicIndicatorsofStaticand
DynamicEfficiency 108
3.2.3 PovertyandEquityIndicators 110
3.3 TheCausesofInequalities 120
3.4 TheEffectsofInequalities 125
3.5 PoliciesforEfficiencyandInequalities 126
3.5.1 PoliciesforEfficiency 126
3.5.2 PoliciesforInequalities 127
3.6 Conclusions 130
4 Globalisation 131
4.1 Introduction:TheFormsandManifestations
ofGlobalisation 132
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 ix
4.2 TheFactorsContributingtoGlobalisation:Technical
FactorsandEconomicPolicyChoices 137
4.2.1 TechnicalProgress 138
4.2.2 TheChoicesofEconomicPolicyandtheFreedom
ofTrade 140
4.3 TheInternationalCooperativeInstitutionsBornafter
WorldWarII 141
4.3.1 TheInternationalOrganisations 141
4.3.1.1 BrettonWoods,theIMFandthe
WorldBank 141
4.3.1.2 TheGATT,theNegotiatingRounds
andtheWTO 145
4.3.1.3 OtherInternationalOrganisations 148
4.3.2 TheInspiringPrinciplesand
PracticalApplications 148
4.4 TheConsequencesofGlobalisation 150
4.4.1 TheEffectsinTermsofEfficiency 151
4.4.2 TheEffectsinTermsofEquity 155
4.4.3 TheConsequenceswithinaCountry 155
4.4.4 TheConsequencesofGlobalisationfromthe
PointofViewoftheDistributionofAdvantages
amongtheVariousCountries 157
4.4.5 TheConsequencesofGlobalisationfor
EconomicPolicies 158
4.5 TheImbalancesofInternationalPayments
inRecentDecades 162
4.6 TheReasonsforInternationalCoordination 166
4.7 RecentChangesofCourseandtheDangersforthe
WorldEconomicEquilibrium 171
4.7.1 TheGrowthofChinaandtheInstabilityofa
MultipolarEquilibrium 171
4.7.2 ProblemsofGlobalEquilibriumintheAbsence
ofaGlobalGovernment:Rodrik’sTrilemma 175
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