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Apocalypse Then: The Evolution of the North Atlantic Economy and the Global Crisis

In: The Australian Economy in the 2000s

Author

Listed:
  • Tamim Bayoumi

    (International Monetary Fund)

  • Trung Bui

    (International Monetary Fund)

Abstract

The 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • 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.
  • Handle: RePEc:rba:rbaacv:acv2011-04
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    File URL: http://www.rba.gov.au/publications/confs/2011/pdf/bayoumi-bui.pdf
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    References listed on IDEAS

    as
    1. Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, September.
    2. Francis Vitek, 2012. "Policy Analysis and Forecasting in the World Economy; A Panel Unobserved Components Approach," IMF Working Papers 12/149, International Monetary Fund.
    3. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
    4. Francis Vitek, 2010. "Monetary Policy Analysis and Forecasting in the Group of Twenty; A Panel Unobserved Components Approach," IMF Working Papers 10/152, International Monetary Fund.
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    Cited by:

    1. Tamim Bayoumi, 2014. "After the Fall; Lessons for Policy Cooperation from the Global Crisis," IMF Working Papers 14/97, International Monetary Fund.

    More about this item

    Keywords

    North Atlantic economies; financial linkages; financial regulation; spillovers;

    JEL classification:

    • 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

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