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The United States and the Euro Area: The Role of Financial Variables

In: Catching the Flu from the United States

Author

Listed:
  • Filippo Mauro

    (European Central Bank)

  • Stephane Dees

    (European Central Bank)

  • Marco J. Lombardi

    (European Central Bank)

Abstract

As we have seen before, the traditional analysis of the transmission of shocks views the trade channel as the main source of spillovers: a slowdown in the US would decrease its imports, and the associated reduction of European exports would therefore lead Europe to a period of lower growth. However, this direct trade channel can hardly account for the extent of observed spillovers, particularly as the 2007–9 global financial turmoil’s impacts on the euro area are still far from being settled. Looking at the euro area, US imports represent around 15% of the former’s exports, and the euro area exports contribute only 10% of its GDP growth. The stylised fact that the euro area lags US business cycles by a few quarters, which was discussed in detail in Chapter 2, can therefore be hardly justified, on account of rather limited trade openness.

Suggested Citation

  • Filippo Mauro & Stephane Dees & Marco J. Lombardi, 2010. "The United States and the Euro Area: The Role of Financial Variables," Palgrave Macmillan Books, in: Catching the Flu from the United States, chapter 5, pages 97-143, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28207-0_5
    DOI: 10.1057/9780230282070_5
    as

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