The Post-Crisis Slump in the Euro Area and the US: Evidence from an Estimated Three-Region DSGE Model

Lukas Vogel, Robert Kollmann (), Beatrice Pataracchia, Marco Ratto and Werner Roeger

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: The global financial crisis (2008-09) led to a sharp contraction in both Euro Area (EA) and US real activity, and was followed by a long-lasting slump. However, the post-crisis adjustment in the EA and the US shows striking differences—in particular, the EA slump has been markedly more protracted. We estimate a three-region (EA, US and Rest of World) New Keynesian DSGE model (using quarterly data for 1999-2014) to quantify the drivers of the divergent EA and US adjustment paths. Our results suggest that financial shocks were key drivers of the 2008-09 Great Recession, for both the EA and the US. The post-2009 slump in the EA mainly reflects a combination of adverse aggregate demand and supply shocks, in particular lower productivity growth, and persistent adverse shocks to capital investment, linked to the continuing poor health of the EA financial system. Adverse financial shocks were less persistent for the US. The dynamics of financial shocks identified by the model is consistent with observed performance indicators of the EA and US banking systems.

JEL-codes: C11 E32 F41 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (92)

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Related works:
Journal Article: The post-crisis slump in the Euro Area and the US: Evidence from an estimated three-region DSGE model (2016)
Working Paper: The Post-Crisis Slump in the Euro Area and the US: Evidence from an Estimated Three-Region DSGE Model (2016)
Working Paper: The post-crisis slump in the Euro area and the US: evidence from an estimated three-region DSGE model (2016)
Working Paper: The post-crisis slump in the Euro Area and the US: evidence from an estimated three-region DSGE model (2016)
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