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Deflation Risks in Germany and the EMU: The Role of Wages and Wage Bargaining

In: Wages, Employment, Distribution and Growth

Author

Listed:
  • Eckhard Hein
  • Thorsten Schulten
  • Achim Truger

Abstract

In late 2003 the deflationary dangers in Germany could hardly be denied. The GDP deflator for Germany rose by 1.0 per cent in 2003 and the forecast rise for 2004 was 0.8 per cent. Meanwhile, the consumer price index rose by 0.9 per cent in 2003 and was forecast to rise by 1.2 per cent in 2004 (Institute 2003). These figures mean that inflation in Germany has in principle already reached the level considered by the European Central Bank (ECB) to be the minimum safety margin against deflation in its reformulated monetary policy strategy for the whole of the European Monetary Union (EMU) (ECB 2003). A further fall in inflation would therefore significantly increase the danger of deflation and a cumulative deflationary spiral. In its April 2003 Task Force Report, the IMF named Germany alongside Japan, Taiwan and Hong Kong as one of the economies most at risk from deflation worldwide (IMF 2003).1

Suggested Citation

  • Eckhard Hein & Thorsten Schulten & Achim Truger, 2006. "Deflation Risks in Germany and the EMU: The Role of Wages and Wage Bargaining," Palgrave Macmillan Books, in: Eckhard Hein & Arne Heise & Achim Truger (ed.), Wages, Employment, Distribution and Growth, chapter 4, pages 67-92, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37178-1_5
    DOI: 10.1057/9780230371781_5
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    Citations

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    Cited by:

    1. Eckhard Hein & Achim Truger, 2007. "Fiscal Policy and Macroeconomic Performance in the Euro Area: Lessons for the Future," Palgrave Macmillan Books, in: Jörg Bibow & Andrea Terzi (ed.), Euroland and the World Economy, chapter 8, pages 154-183, Palgrave Macmillan.
    2. Eckhard Hein & Artur Tarassow, 2010. "Distribution, aggregate demand and productivity growth: theory and empirical results for six OECD countries based on a post-Kaleckian model," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(4), pages 727-754.
    3. Eckhard Hein & Achim Truger, 2011. "Fiscal Policy in the Macroeconomic Policy Mix: A Critique of the New Consensus Model and a Comparison of Macroeconomic Policies in France, Germany, the UK and Sweden from a Post-Keynesian Perspective," Chapters, in: Claude Gnos & Louis-Philippe Rochon (ed.), Credit, Money and Macroeconomic Policy, chapter 12, Edward Elgar Publishing.
    4. Engelbert Stockhammer & Eckhard Hein & Lucas Grafl, 2011. "Globalization and the effects of changes in functional income distribution on aggregate demand in Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 1-23.
    5. Eckhard Hein & Achim Truger, 2012. "Finance-dominated capitalism in crisis—the case for a global Keynesian New Deal," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(2), pages 187-213.
    6. Eckhard Hein & Achim Truger, 2007. "Germany’s Post-2000 Stagnation in the European Context — a Lesson in Macroeconomic Mismanagement," Palgrave Macmillan Books, in: Philip Arestis & Eckhard Hein & Edwin Heron (ed.), Aspects of Modern Monetary and Macroeconomic Policies, chapter 12, pages 223-247, Palgrave Macmillan.

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