THE EUROZONE CRISIS: PHOENIX MIRACLE OR LOST DECADE?
University of California
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.
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