The Slump in Europe: Reconstructing Open Economy Theory

by Jean-Paul Fitoussi, Edmund S. Phelps

The subject of this book is the rise of unemployment in Europe during the eighties, which in 1985 reached levels that had not been seen since the Great Depression and which show no sign of falling dramatically. In its explanation of the slump in Europe, this book assigns a crucial role to the package of policy innovations in the US and introduces new theoretical elements to understand the mechanisms through which these shocks have been transmitted to Europe. The three processes which are central in explanation - the mark up on customer markets, the behaviour of contractural or indexed wages and the cost or supply effects of real interest rates - are new to the macroeconomic analyses of slumps such as the recent one in Europe. The book examines the distinctive features of the 1980s the fall of labour's share, the rise of productivity, and vanished excess capacity; and reviews the implications of orthodox open economy theory. The authors develop a new theory which is consistent wi

145 pages, Hardcover

First published October 1, 1989

About the author

Is a French economist of Sephardi Jewish descent. He currently is a Professor of Economics at the Institut d'Études Politiques de Paris, where he has taught since 1982. Fitoussi served as President of the Observatoire Français des Conjonctures Econoniques, an institute dedicated to economic research and forecasting, from 1989 to 2010.
His research interests includes inflation, unemployment, and the role of macroeconomic policy.
Starting from academic year 2010/11, he will teach in the first English taught Master Degree Course in International Relations at LUISS.