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