One-Size-Fits-Some! Capitalist Diversity, Sectoral Interests and Monetary Policy in the Euro Area

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Year of publication: 2017
Author(s): Mattias Vermeiren
Appeared in: Review of International Political Economy


Abstract

In the comparative capitalism literature, the European Central Bank’s (ECB’s) ‘one-size-fits-none’ monetary policy plays a key role in the widening of trade imbalances in the euro area (EA) by being overly restrictive for the region’s coordinated market economies (CMEs) and overly expansionary for the region’s mixed market economies. According to this literature, diverging wage setting institutions mediated how the ECB’s monetary policy re-distributed resources between traded and non-traded sectors in these varieties of capitalism. By examining three separate transmission channels of the ECB’s monetary policies (wage and price setting in labor and product markets; capital costs; and the nominal exchange rate of the euro), this paper goes beyond the traditional emphasis on wage setting institutions and draws attention to those institutions that underpin the non-price competitiveness of traded sectors. Overall, the paper explains how the institutionally infrastructure of the CMEs bolstered the adaptability of their traded sectors to the ECB’s single monetary policy and its three transmission mechanisms – both during the pre-crisis era of widening imbalances and the period of asymmetrical trade rebalancing since the outbreak of the euro crisis.