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The post-pandemic recovery – why is the euro area growing more slowly than the United States?

Author

Listed:
  • Andersson, Malin
  • Checherita-Westphal, Cristina
  • Da Silva, António Dias
  • Soudan, Michel

Abstract

Growth has been notably weaker in the euro area than in the United States for decades. This box considers several factors that have contributed to the difference observed since the start of the pandemic, reflecting the fact that the euro area has seen less of a stimulus from private consumption, coupled with weaker labour productivity growth. The euro area has also felt a greater impact from the pandemic and Russia’s war against Ukraine. There is mixed evidence of the monetary policy impacts on activity in these two regions, albeit spillovers from the United States to the euro area appear larger than in the other direction. With regard to differences in fiscal policy, while accurate comparisons are difficult to draw, the fiscal policy impulse over 2020-23 was relatively similar in the two regions, whereas the overall level of the budget deficit was much larger in the United States. JEL Classification: E21, E24, O47, E62, E52

Suggested Citation

  • Andersson, Malin & Checherita-Westphal, Cristina & Da Silva, António Dias & Soudan, Michel, 2024. "The post-pandemic recovery – why is the euro area growing more slowly than the United States?," Economic Bulletin Boxes, European Central Bank, vol. 4.
    • Handle: RePEc:ecb:ecbbox:2024:0004:1
    Note: 427284
    as

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    More about this item

    Keywords

    consumption; fiscal and monetary policy; GDP; labour productivity; saving;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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