Apocalypse then: The Evolution of the North Atlantic Economy and the Global Crisis
International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)
Trung Thanh Bui
International Monetary Fund (IMF)
CEPR Discussion Paper No. DP8688
The financial crisis that struck the global economy in late 2008 had its origins in excesses in the US housing market. Its reverberations, however, were felt around the world and nowhere more keenly than in Western Europe. While North Atlantic trade links were in relative stasis, the North Atlantic furnished a uniquely close relationship across financial institutions, as a combination of dominant US financial markets, European competition policy, and differences in financial regulation made the European banking system heavily dependent on dollar wholesale funding. Empirical estimates and macroeconomic model simulations indicate that growth spillovers predominantly flow westwards across the North Atlantic. The bellwether nature of US financial markets creates uniquely large spillovers to the rest of the world even in normal times, and these spillovers are only enhanced if disruptions to bank wholesale funding markets are added -- as occurred during the recent global crisis.
Number of Pages in PDF File: 41
Keywords: economic crisis, financial deregulation, financial integration, North Atlantic economy
JEL Classification: E02, F34, N00, N10working papers series
Date posted: December 22, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.890 seconds