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Euro Area & US External Adjustment: The Role of Commodity Prices & Emerging Market Shocks

Massimo Giovannini, Stefan Hohberger, Robert Kollmann (), Marco Ratto (), Werner Roeger and Lukas Vogel ()

No 106, European Economy - Discussion Papers 2015 - from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The trade balances of the Euro Area (EA) and of the US have improved markedly after the Global Financial Crisis. This paper quantifies the drivers of EA and US economic fluctuations and external adjustment, using an estimated (1999-2017) three-region (US, EA, rest of world) DSGE model with trade in manufactured goods and in commodities. In the model, commodity prices reflect global demand and supply conditions. The paper highlights the key contribution of the post-crisis collapse in commodity prices for the EA and US trade balance reversal. Aggregate demand shocks originating in the rest of the world, including Emerging markets, too had a significant impact on EA and US trade balances.

JEL-codes: F2 F3 F4 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-08
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