Understanding the Impact of the External Dimension on the Euro Area: Trade, Capital Flows and Other International Macroeconomic Linkages

74 Pages Posted: 24 Jul 2007

See all articles by Robert Anderton

Robert Anderton

European Central Bank (ECB)

Filippo di Mauro

European Central Bank (ECB)

Fabio Moneta

Telfer School of Management, University of Ottawa

Date Written: April 2004

Abstract

Overall, the paper underlines the difficulties in spelling out the transmission and the final effects of external shocks on the euro area, and highlights the complexity of the various direct and indirect mechanisms. We describe the main channels by which potential spillovers from external economic shocks may affect the euro area. Although the evidence is unclear on the extent to which the synchronisation of international cycles may have changed, the conclusion of the paper is that the "external dimension" of the euro area has a complex impact on economic developments in the euro area, while the relative importance of the various transmission channels may have changed rather substantially over time. Accordingly, this calls for continuous monitoring and further study of the evidence available. Finally, an efficient reaction to external shocks requires a flexible economy which allows an appropriate and rapid response to external shocks. Therefore, the continuation of structural reforms in the labour and product markets in the euro area countries is essential, and will encourage a better allocation and utilisation of capital and human resources, while enhancing the euro area's growth potential.

Suggested Citation

Anderton, Robert and di Mauro, Filippo and Moneta, Fabio, Understanding the Impact of the External Dimension on the Euro Area: Trade, Capital Flows and Other International Macroeconomic Linkages (April 2004). ECB Occasional Paper No. 12. Available at SSRN: https://ssrn.com/abstract=748976

Robert Anderton (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Filippo Di Mauro

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Fabio Moneta

Telfer School of Management, University of Ottawa ( email )

136 Jean-Jacques Lussier Street
Ottawa, Ontario K1N 6N5
Canada

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