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Growth Spillover Dynamics from Crisis to Recovery

Author/Editor: Poirson, Hélène | Weber, Sebastian
Authorized for Distribution: September 1, 2011
Electronic Access: Free Full Text (PDF file size is 2,607KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Can positive growth shocks from the faster-growing countries in Europe spill over to the slower growing countries, providing useful tailwinds to their recovery process? This study investigates the potential relevance of growth spillovers in the context of the crisis and the recovery process. Based on a VAR framework, our analysis suggests that the U.S. and Japan remain the key source of growth spillovers in this recovery, with France also playing an important role for the European crisis countries. Notwithstanding the current export-led cyclical upswing, Germany generates relatively small outward spillovers compared to other systemic countries, but likely plays a key role in transmitting and amplifying external growth shocks to the rest of Europe given its more direct exposure to foreign shocks compared to other European countries. Positive spillovers from Spain were important prior to the 2008 - 09 crisis, however Spain is generating negative spillovers in this recovery due to a depressed domestic demand. Negative spillovers from the European crisis countries appear limited, consistent with their modest size.
 
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Series: Working Paper No. 11/218
Subject(s): Cross country analysis | Economic growth | Economic recovery | Euro Area | Europe | Financial crisis | Germany | Global Financial Crisis 2008-2009 | Spillovers
Author's keyword(s): Spillovers | Growth | Crisis | Recovery | Euro zone | Germany
 
English  
    Published:   September 1, 2011        
            Format:   Paper
    Stock No:   WPIEA2011218   Pages:   50
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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