Open Economies Review

, Volume 23, Issue 5, pp 847–868 | Cite as

Keynesian and Austrian Perspectives on Crisis, Shock Adjustment, Exchange Rate Regime and (Long-Term) Growth

  • Mathilde Maurel
  • Gunther SchnablEmail author
Research Article


The 2010/11 European debt crisis has revived the discussion concerning the optimal adjustment strategy in the face of asymmetric shocks. This paper approaches the question from a theoretical perspective by confronting exchange rate based adjustment with crisis adjustment via price and wage cuts. Econometric estimations yield a negative impact of exchange rate flexibility/volatility on growth, which is found to be particularly strong for countries with asymmetric business cycles and during recessions. Price flexibility is found to have a positive impact on growth. Based on these findings we support a further enlargement of the European Monetary Union and recommend more exchange rate stability for the rest of the world.


Exchange rate regime Crisis Shock adjustment Theory of optimum currency areas Mundell Schumpeter Hayek Competitive depreciations 

JEL codes

F31 F32 



We thank Evcen Kočenda, Pichard Pomfret, George Tavlas and an anonymous referee for useful comments. We also benefited from comments by STUDIUM conference participants in Orléans, France, in February 2011, 3–4th.


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.CES, Université Paris 1, Panthéon-SorbonneParis cedex 13France
  2. 2.University of LeipzigLeipzigGermany

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