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

35 Pages Posted: 3 Mar 2016

See all articles by Robert Kollmann

Robert Kollmann

ECARES, Université Libre de Bruxelles; University of Paris XII - Department of Economics; Centre for Economic Policy Research (CEPR)

Beatrice Pataracchia

JRC-Ispra, European Commission

Rafal Raciborski

European Union - European Commission

Marco Ratto

European Commission - Joint Research Center

Werner Roeger

European Commission, DGECFIN

Lukas Vogel

European Union - European Commission

Multiple version iconThere are 3 versions of this paper

Date Written: 2016-02-29

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 financial shocks identified by the model are consistent with observed performance indicators of the EA and US banking systems.

JEL Classification: C5, E2, E3, E5, E6, F3, F4

Suggested Citation

Kollmann, Robert and Pataracchia, Beatrice and Raciborski, Rafal and Ratto, Marco and Roeger, Werner and Vogel, Lukas, The Post-Crisis Slump in the Euro Area and the Us: Evidence from an Estimated Three-Region DSGE Model (2016-02-29). Globalization and Monetary Policy Institute Working Paper No. 269, Available at SSRN: https://ssrn.com/abstract=2741562 or http://dx.doi.org/10.24149/gwp269

Robert Kollmann (Contact Author)

ECARES, Université Libre de Bruxelles ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

University of Paris XII - Department of Economics ( email )

61 avenue du General de Gaulle
Creteil cedex, 94010
France

HOME PAGE: http://www.robertkollmann.com

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Beatrice Pataracchia

JRC-Ispra, European Commission ( email )

Via Enrico Fermi 2749, Ispra, VA
Ispra (VA), 21027
Italy

HOME PAGE: http://https://ec.europa.eu/jrc/en/institutes/ipsc

Rafal Raciborski

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Marco Ratto

European Commission - Joint Research Center ( email )

Via E. Fermi 2749
Brussels, B-1049
Belgium

Werner Roeger

European Commission, DGECFIN ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

Lukas Vogel

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

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