The German Undervaluation Regime Under Bretton Woods: How Germany Became the Nightmare of the World Economy

42 Pages Posted: 4 Mar 2019

See all articles by Martin Höpner

Martin Höpner

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for the Study of Societies

Date Written: February 13, 2019

Abstract

Germany is an undervaluation regime, a regime that steers economic behavior towards deterioration of the real exchange rate and thereby towards export surpluses. This regime has brought the eurozone to the brink of collapse. But it is much older than the euro. It was established during the Bretton Woods years and has survived all subsequent European currency orders. The regime operates in two steps: competitive disinflation against trading partners; and resistance against correcting revaluations. The Bretton Woods order provided perfect conditions for the establishment and perpetuation of the regime: it was flexible enough for sufficient macroeconomic policy autonomy to bring about differential inflation rates, and sticky enough to delay and minimize revaluations.

Keywords: current account surpluses, exchange rate policy, inflation, political economy, undervaluation, varieties of capitalism, wage policy, fiscal policy, monetary policy

JEL Classification: E02, N00, P16, P51, P52

Suggested Citation

Höpner, Martin, The German Undervaluation Regime Under Bretton Woods: How Germany Became the Nightmare of the World Economy (February 13, 2019). Available at SSRN: https://ssrn.com/abstract=3333760 or http://dx.doi.org/10.2139/ssrn.3333760

Martin Höpner (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for the Study of Societies ( email )

Paulstr. 3
50676 Koln
Germany

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