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Asia Europe Journal

, Volume 15, Issue 4, pp 445–462 | Cite as

Monetary policy and overinvestment in East Asia and Europe

  • Gunther Schnabl
Original Paper

Abstract

The paper analyzes the role of monetary policy for cyclical movements of investment and asset markets in East Asia and Europe based on a Mises-Hayek overinvestment framework. It is shown how the gradual global decline of interest rates has triggered wandering overinvestment cycles in Japan, Southeast Asia, and China. Similarly, it is shown how a one-size monetary policy within the European Monetary Union has not preserved the European Monetary Union from idiosyncratic economic development and crisis because of uncoordinated fiscal policies. With monetary policy crisis management being argued to impede financial and economic restructuring, a timely exit from ultra-expansionary monetary policies is recommended for both East Asia and Europe to reconstitute economic stability and growth.

Jel classifications

E52 E58 F42 E63 

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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.Universität LeipzigLeipzigGermany

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