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Differences in Resilience Between the Euro-Area and US Economies

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Author Info
Aaron Drew
Mike Kennedy
Torsten Sløk ()

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Abstract

This paper is concerned with how stylised differences in monetary policy transmission mechanisms and product and labour market rigidities between the US and euro-area economies affect their resilience to temporary shocks. To address this issue, a small general equilibrium model with long-run neoclassical and short-run neo-Keynesian features is calibrated to replicate the key properties of the US economy (as in the US Fed’s FRB-US model). To this model, features of the euro area’s financial and then product and labour markets are added sequentially with a view to replicating what is generally agreed are aspects of the functioning of the euro-area economy (as captured by the ECB’s Area-Wide Model). Most of the analysis is conducted assuming identical monetary policy reaction functions, although the sensitivity of the results to this assumption is tested. The results illustrate the importance of adjustment patterns in financial, product and labour markets for economies’ ...

Les différences, en termes de résilience, entre l’économie américaine et celle de la zone euro

Ce document étudie les principales différences en matière de transmission de la politique monétaire et de rigidités des marchés des produits et du travail, et leurs effets sur la résilience des économies des États-Unis et de la zone euro aux chocs temporaires. Un petit modèle d’équilibre général, de facture néo-classique sur le long terme et néo-keynésienne sur le court terme, est calibré pour reproduire les comportements clés de l’économie américaine (tels que les décrit le modèle FRB-US de la Banque de réserve fédérale des États-Unis). Des caractéristiques des marchés financiers puis des marchés des produits et du travail de la zone euro sont ensuite incorporées dans le modèle afin de mieux capter certains aspects du fonctionnement de l’économie de la zone euro (tels que les décrit le modèle de la BCE couvrant la zone euro). L’analyse repose largement sur des fonctions de réaction de la politique monétaire identiques, mais l'importance de cette hypothèse est testée. Les résultats ...

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Paper provided by OECD Economics Department in its series OECD Economics Department Working Papers with number 382.

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Date of creation: 04 Mar 2004
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Handle: RePEc:oec:ecoaaa:382-en

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Related research
Keywords: modèle EGC zone Euro euro area transmission mechanism resilience labour and product market rigidities CGE modelling mécanisme de transmission résilience rigidités des marchés des produits et du travail

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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  1. Adam Elbourne & Debby Lanser & Bert Smid & Martin Vromans, 2008. "Macroeconomic resilience in a DSGE model," CPB Discussion Papers 96, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
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