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

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Book cover Catching the Flu from the United States

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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.

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Author information

Authors and Affiliations

  1. External Developments Division, European Central Bank, Germany

    Filippo di Mauro (Head), Stephane Dees (Principal Economist) & Marco J. Lombardi (Economist)

Authors
  1. Filippo di Mauro
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  2. Stephane Dees
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  3. Marco J. Lombardi
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© 2010 Filippo di Mauro, Stephane Dees and Marco J. Lombardi

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di Mauro, F., Dees, S., Lombardi, M.J. (2010). The United States and the Euro Area: The Role of Financial Variables. In: Catching the Flu from the United States. Palgrave Macmillan, London. https://doi.org/10.1057/9780230282070_5

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