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Stagnation Risk

Huidan Lin

Finance & Development , 2016

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In this concise article on the myriad problems facing the euro zone, economist Huidan Lin argues that monetary policy has lost its stimulatory punch. Low investment, deep indebtedness and elevated unemployment contribute to prolonging the economic malaise, leaving the region vulnerable to shocks, including the risk of political crisis in the European Union. Lin argues that public policies to jump-start the area’s economies need to focus on debt reduction and structural changes to enhance productivity. getAbstract recommends this relevant and accessible article to policy makers and executives concerned about European economic inertia.

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The International Monetary Fund is forecasting below-capacity output through 2020 for the developed economies, and the euro zone is especially fragile.
Economic development in the euro area has not kept pace with population growth, and zero-interest-rate monetary policy has reached the limits of its effectiveness.
The region suffers from high joblessness, low investment, and unsustainable levels of public and private debt. These factors reinforce one another, exacerbating the risk of economic stagnation.

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Huidan Lin is an economist at the International Monetary Fund.

Stagnation Risk

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