The German Undervaluation Regime Under Bretton Woods: How Germany Became the Nightmare of the World Economy
42 Pages Posted: 4 Mar 2019
Date Written: February 13, 2019
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: Suggested Citation