Macroeconomic Policy Making: Lessons from AustroKeynesianism Franz Nauschnigg - PowerPoint PPT Presentation
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Macroeconomic Policy Making: Lessons from AustroKeynesianism Franz Nauschnigg
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Combining restrictive fiscal policy 100 bn ATS (7,2 bn over 3% of GDP) with ... 90 bn ATS (6,5 bn ) Shifting of public investment to the private sector ... – PowerPoint PPT presentation
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Title: Macroeconomic Policy Making: Lessons from AustroKeynesianism Franz Nauschnigg
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Macroeconomic Policy Making Lessons from
Austro-KeynesianismFranz Nauschnigg
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Outline
- The main features of Austro-Keynesianism
- Austro-Keynesianism and EU-membership
- Innovative expansionary demand management
measures - Economic results of Austro-Keynesianism -
unemployment, growth - From Austro-Keynesianism to neo liberal paradigm
- Economic results of neo liberal paradigm -
unemployment, growth - Conclusions
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Austro-Keynesianism
- 1970s/80s Replacing the Keynesian demand
management by monetarist and neoliberal economic
policies almost everywhere in the western world! - Everywhere? NO!
- A small country - Austria - remained wedded to
Keynesian thinking Austro-Keynesianismus
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Austro-Keynesianism main features
- Counter cyclical demand management - fiscal
policy - Orthodox hard currency policy peg to DM
- Supply side policies - especially incentives for
investment - Strong role of social partners - productivity
oriented wage policy - Stabilisation of expectations of economic agents
- Combined use of policy instruments
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Austro-Keynesianism and EU-membership
- EU-Membership in 1995 - a big challenge for
Austro-Keynesianism - Biggest structural reform - short term adjustment
costs, long term benefits come only later
(J-curve) - Budget deficit 5,3 of GDP had to be brought down
fast for EMU membership - fulfilling the
convergence criteria - Room of manoeuvre for fiscal policy limited by EU
framework
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Innovative expansionary demand management
measures in Austro-Keynesianism
- Combining restrictive fiscal policy 100 bn ATS
(7,2 bn over 3 of GDP) with supply and macro
policies - Increasing the tax rate on interest income
- Lowering subsidies for saving and linking it to
interest rates - using tax exemptions in the housing sector by
spending existing reserves - Innovative expansionary package in 1996
- 90 bn ATS (6,5 bn )
- Shifting of public investment to the private
sector - A particular sort of public private partnership
(PPPs) - - creating private entities owned by the state
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Advantages of PPP demand management
- Treating investment differently - depreciation
over lifetime - Gaining efficiency and flexibility
- No increase of the budget deficit
- Low financing costs
- combination of the strength of the private and
public sector - combination of fiscal consolidation and growth
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GROSS DOMESTIC PRODUCT PER INHABITANT (in
Purchasing Power Standards) EU-15
100
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From Austro-Keynesianism to neo liberal paradigm
- Social democrats lost power (2000)
- Austro-Keynesianism replaced by neo liberalism
- IMF (2004)Since the turn of the decade, a
strategic policy shift has made Austria a
showcase of reforms and placed it at the
forefront of the EU (in terms of implementing the
Lisbon-Agenda).
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Economic results of the neo liberal paradigm
- Increase in unemployment faster than EU-average
- from 3,7 in 2000 to 4,2 in 2004
- Weak growth performance - Contrary to IMF
prognosis - Austrian GDP per capita (PPS) from 114 of
EU-average in 2000 to 110 in 2005 - Austrian budget deficit no substantial changes
- forecasted to increase to 2 in 2005
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Conclusions
- Structural reforms bring with them short term
costs, the benefits are higher only in the long
term - J curve effect - Microeconomic reforms should therefore be
supported by expansionary macroeconomic policies - Innovative demand management policies e.g. PPP
demand management, countercyclical use of the tax
system and of subsidies - In terms of growth and employment
Austro-Keynesianism was more successful than the
current economic policy approach of Austria
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