Euro Area and U.S. External Adjustment: The Role of Commodity Prices and Emerging Market Shocks

37 Pages Posted: 17 Sep 2018 Last revised: 29 Apr 2020

See all articles by Massimo Giovannini

Massimo Giovannini

Boston College - Department of Economics

Stefan Hohberger

European Union - JRC-Ispra, European Commision; University of Bayreuth - Faculty of Law, Business and Economics; University of Bayreuth

Robert Kollmann

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

Marco Ratto

European Commission - Joint Research Center

Werner Roeger

European Commission, DGECFIN

Lukas Vogel

European Union - European Commission

Multiple version iconThere are 2 versions of this paper

Date Written: 2018-08-06

Abstract

The trade balances of the Euro Area (EA) and of the U.S. have improved markedly after the Global Financial Crisis. This paper quantifies the drivers of EA and U.S. economic fluctuations and external adjustment, using an estimated (1999-2017) three-region (U.S., 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 U.S. trade balance reversal. Aggregate demand shocks originating in Emerging Markets too had a significant impact on EA and U.S. trade balances. The broader lesson of this paper is that Emerging Markets and commodity shocks are major drivers of advanced countries’ trade balances and terms of trade.

Keywords: EA and U.S. external adjustment, commodity markets, emerging markets

JEL Classification: F2, F3, F4

Suggested Citation

Giovannini, Massimo and Hohberger, Stefan and Kollmann, Robert and Ratto, Marco and Roeger, Werner and Vogel, Lukas, Euro Area and U.S. External Adjustment: The Role of Commodity Prices and Emerging Market Shocks (2018-08-06). Globalization and Monetary Policy Institute Working Paper No. 344, Available at SSRN: https://ssrn.com/abstract=3249355 or http://dx.doi.org/10.24149/gwp344

Massimo Giovannini (Contact Author)

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Stefan Hohberger

European Union - JRC-Ispra, European Commision ( email )

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

University of Bayreuth - Faculty of Law, Business and Economics ( email )

Universitätsstraße 30
Bayreuth, 95447
Germany

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Robert Kollmann

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

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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