The Failure of ECB Monetary Policy from a Mises-Hayek Perspective

31 Pages Posted: 11 Apr 2017

See all articles by Gunther Schnabl

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Date Written: March 13, 2017

Abstract

The paper analyses the common European monetary policy based on a Mises-Hayek over-investment framework, which is combined with the theory of optimum currency areas. It shows how since the turn of the millennium a too expansionary monetary policy contributed to unsustainable over-investment booms in the periphery of the European Monetary Union, and more recently in Germany, dependent on the national fiscal policy stances. It is argued that the ECB's ultra-loose monetary policy as a crisis therapy puts a drag on long-term growth by conserving distorted economic structures. To preserve political stability a timely exit from the ultra-expansionary monetary policy is postulated.

Keywords: Hayek, Mises, European Monetary Union, European Central Bank, monetary overinvestment theory, optimum currency areas, fiscal policy, asymmetric shocks, secular stagnation

JEL Classification: E520, E580, F420, E630

Suggested Citation

Schnabl, Gunther, The Failure of ECB Monetary Policy from a Mises-Hayek Perspective (March 13, 2017). CESifo Working Paper Series No. 6388. Available at SSRN: https://ssrn.com/abstract=2951044

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

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