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Does Europe Grow More Slowly Than the United States?

Paper Session

Saturday, Jan. 4, 2020 12:30 PM - 2:15 PM (PDT)

Marriott Marquis, Marina Ballroom D
Hosted By: Society of Policy Modeling
  • Chair: Dominick Salvatore, Fordham University

United States and Euro Area Growth Performances: Are They So Different?

Moreno Bertoldi
,
European Commission
Kristian Orsini
,
European Commission

Abstract

The Great Recession and the European Sovereign Debt crisis plunged the Euro area into a double-dip recession, tainting the image of Europe as a content mired in economic stagnation. However, if we look at a longer time horizon that narrative is not fully justified: since its creation, with the exception of the 2009-2014 period, Euro area's per-capita GDP has actually grown as fast as the US. Therefore, the critical issue behind the different growth performance of the US and the EA over the last twenty years seems to be the difficulty of the latter in countering in a timely and effective manner economic recessions. Completing the EMU architecture will be crucial to prevent contagion and bank-sovereign feedback loops from developing in the future and ensure that the Euro area grows at its potential, which in per-capita terms is similar to that of the United States.

Why Does Europe Grow More Slowly Than the United States? Comparisons Before and After the Global Financial Crisis

Anastasios Malliaris
,
Loyola University Chicago

Abstract

The paper reviews US and EU growth, employment and inflation in the 1950-2019 period and argues that the EU made great efforts in keeping up in economic growth with the US in at least three broad strategic rounds: the formation on a customs union to stimulate growth via trade; the formation of a common currency for a subset of the trading partners to increase efficiency and growth (pre-crisis), and finally via the recent efforts of its common monetary policy. The slower growth in EU compared to that of the US may be due both to structural issues such as competition in output markets, labor markets, banking and regulation but also to serious constraints that exist in the EU monetary policy with its emphasis containing on inflation and harmonizing the fiscal policies of its members.

Integration of Capital Markets and Economic Growth in the European Union

Lucjan Orlowski
,
Sacred Heart University

Abstract

This paper argues that deep, integrated and resilient equity and bond markets are essential for accelerated economic growth of the EU members. The empirical analysis aims at identifying phases and cycles in the integration of the EU-wide capital markets by employing multiple breakpoint and Markov switching regressions on daily series of equity market returns and sovereign bond yields. The analysis shows that advanced integration phases are associated with a faster economic growth. The paper concludes that further integration of capital markets will expand access to capital funds, improve the allocation of capital and help mitigate market and systemic risks. Therefore, the implementation of the Capital Market Union is an important step towards achieving financial stability and supporting a counter-cyclical, sustained economic growth.

When and How Will Europe's Growth Crisis End?

Fred Campano
,
Fordham University
Dominick Salvatore
,
Fordham University

Abstract

Recovery from the recent global financial crisis and "great recession" has been slower than after previous recessions in most advanced countries and areas, especially Europe. But Europe's growth problem is structural in character and started much earlier. This paper analyzes the structural causes of the European growth problem, evaluates the policies that Europe adopted to overcome it, and concludes that even with the appropriate policies, the prospects for accelerating growth in Europe will be difficult, especially in the context of the current US-China trade war.
Discussant(s)
Fred Campano
,
Fordham University
Pellegrino Manfra
,
City University of New York
Dominick Salvatore
,
Fordham University
JEL Classifications
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
  • F4 - Macroeconomic Aspects of International Trade and Finance