The Impact of Globalisation on the Euro Area Macroeconomy

The general acceleration of trade globalisation over the last decade –or a growing interdependence of economies via trade, production and financial market linkages– has engendered several macroeconomic implications for the euro area. This paper focuses on assessing the key impacts on the euro area macroeconomy through an analysis of prospective channels, stylised facts and review of relevant empirical findings. It takes a long-term perspective over a period predominantly characterised by the rapid growth of globalisation, nothwithstanding the more recent interruption to the growth of global trade and capital flows that emerged towards the end of 2008 associated with the global financial turmoil and the associated downturn in global economic activity. Following an overview of the salient aspects of globalisation, which highlights the increasing openness of the euro area in terms of both trade and capital flows as well as the global reduction in transportation and information costs and the rise in the effective global supply of labour, the paper then assesses the external impacts of globalisation on the euro area, focussing on trade performance, export specialisation and import prices. It then investigates euro area domestic adjustment to globalisation with a supply-side focus, analysing separately impacts on productivity, labour markets and prices.