Apocalypse Then: The Evolution of the North Atlantic Economy and the Global Crisis
AbstractThe 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.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8688.
Date of creation: Dec 2011
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Other versions of this item:
- Tamim Bayoumi & Trung Bui, 2011. "Apocalypse Then: The Evolution of the North Atlantic Economy and the Global Crisis," RBA Annual Conference Volume, in: Hugo Gerard & Jonathan Kearns (ed.), The Australian Economy in the 2000s Reserve Bank of Australia.
- Trung Bui & Tamim Bayoumi, 2011. "Apocalypse Then: The Evolution of the North Atlantic Economy and the Global Crisis," IMF Working Papers 11/212, International Monetary Fund.
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- N00 - Economic History - - General - - - General
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-EEC-2011-12-13 (European Economics)
- NEP-MAC-2011-12-13 (Macroeconomics)
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