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

Filippo Mauro, Stephane Dees and Marco Lombardi
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Filippo Mauro: European Central Bank

Chapter 5 in Catching the Flu from the United States, 2010, pp 97-143 from Palgrave Macmillan

Abstract: 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.

Keywords: Stock Market; Monetary Policy; Euro Area; Financial Variable; Stock Market Return (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-28207-0_5

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DOI: 10.1057/9780230282070_5

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