We explore the short-term macrodynamics of stabilization policy at the effective lower bound (ELB) of the nominal interest rate, in an environment characterized by heterogenous and endogenously time-varying private-sector output and inflation expectations driven by evolutionary dynamics. We show that at the ELB, fiscal policy conducted in accordance with a well-specified policy rule is particularly effective for purposes of macroeconomic stabilization.

In Germany the policy response to the inflationary surge was initiatlly rather hesitatnt. The third packae of measures, including a gas and electricity price brake, though, mean a substantial stabilisation of incomes and demand, particularly in 2023. Measures were inadequately targeted, however. While a formal social pact was not reached, government measures have encouraged collective wage bargainers to reach settlements that do avoid a price-wage spiral.

The study analyses inflationary developments in Croatia, focusing on the structural drivers (energy dependency) and the impact of government policies to curtail price rises. It also examines the attempts by the social partners to agree on responses to the inflationary developments.

Hungary has been badly affected by the inflationary surge, with price rises reaching almost 19% in the summer. Government policies to cushion the effects of inflation on households have focused on various forms of price caps. A response by collective bargaining institutions is difficult due to low bargaining coverage.

Inflation in Austria started to rise from mid-2021 during recovery from the CORONA crisis. The Russian invasion in Ukraine and the heavy increases in energy prices made things worse and brought inflation to over 10%. The government did not enter direct formal negotiations with social partners but subsequent anti-inflation packages met many demands made by social partners. The attempt to influence wage negotiations via a tax exemption for one-off payments failed as they were not widely used in collective agreements.

Since the late 1970s, the Chinese government has been undertaking major efforts in developing their countries economy by means of industrial policy. However, a more narrow approach to industrial policy has been pursued only since 2010, with the initiation of the ‘Strategic Emerging Industries’ program. China’s state-dominated banking system is seen as playing a vital role in the financing of these endeavors.