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The Problem of Macroeconomic Policy Crossroads:Explaining the Economic Policy Paradox of Switzerland and Japan in the 1990s
Author(s) -
Hiwatari Nabuhiro
Publication year - 2004
Publication title -
swiss political science review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.632
H-Index - 30
eISSN - 1662-6370
pISSN - 1424-7755
DOI - 10.1002/j.1662-6370.2004.tb00035.x
Subject(s) - austerity , economics , globalization , compromise , politics , economic policy , order (exchange) , policy mix , economic globalization , international economics , political economy , economic system , development economics , macroeconomics , political science , market economy , finance , law
The 1990s, which can be characterized as a decade of disinflationary growth and austerity policies for most developed market democracies, was the decade of stagnant growth and policy complacency for Switzerland and Japan. Based on a framework that emphasizes the structure of policy choices available to governments at economic crossroads (or crisis), I show Switzerland and Japan are unique in that (a) disinflationary fundamentals spared the countries from speculative or inflationary pressure that required drastic responses and (b) the governments paradoxically maintained conservative economic policies despite room for expansion in order to continue policies based on the compromise between export and domestic sectors. The policy crossroads perspective stresses the importance of endogenous coalitions even in a world of economic globalization to explain concerted politics and conservative policies, and to assess the true impact of international finance on domestic changes.