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THE EUROZONE CRISIS: PHOENIX MIRACLE OR LOST DECADE?

 

Barry Eichengreen

University of California

 

Naeun Jung

Princeton University

 

Stephen Moch

Princeton University

 

Ashoka Mody

Princeton University

 

  

ABSTRACT

We analyze why the Eurozone crisis increasingly resembles Latin America’s lost decade instead of Asia’s phoenix miracle, emphasizing the roles of the real exchange rate, the external environment, and debt restructuring. In addition, we contrast the adjustment to housing bubbles in Ireland, Spain and the U.S. Here our explanation for the contrast departs from the conventional wisdom in placing less emphasis on labor mobility but more on participation rates and bank mergers and acquisitions in the adjustment process.

 

Keywords: fiscal policy, phoenix miracle, housing bubble, banking crisis

JEL Classification: E44, E62, H63, G01

 

Acknowledgements: We thank Carlos de Sousa and Chris Krogslund for assistance. Mody thanks Bruegel for its hospitality while working on this paper.

 

  

 

Correspondence:

Barry Eichengreen

University of California, Berkeley

Department of Economics

530 Evans Hall, MC #3880

Berkeley, CA 94720, U.S.A.

Tel: 1 510 642-2772, Fax: 1 510 643-0926 

Email: eichengr@econ.berkeley.edu



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