Regional Economic Outlook, October 2008, Euope: Dealing with Shocks
Europe, October 28, 2008
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- Regional Economic Outlook, October 2008, Euope: Dealing with Shocks
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Bibliographic details
- Published: October 28, 2008
- Series: Europe
- DOI: https://doi.org/10.5089/9781589067608.086
Summary findings
- The confluence of multiple adverse shocks—the turbulence in financial markets, high commodity prices, and the appreciation of the exchange rate—have depressed growth in Europe.
- Commodity prices increases have boosted headline inflation.
- While containing inflation remains a major concern, supporting the recovery is likely to gain policy prominence in the advanced economies.
- Improvements in prudential regulation could mitigate the procyclicality of credit standards, which should help reduce macroeconomic volatility.
- Cross-border labor flows are generally seen to have beneficial macroeconomic effects.
Major shocks and macroeconomic impacts
- Financial markets turbulence: depressed growth across Europe (no quantitative growth figures provided on the page).
- High commodity prices: raised headline inflation (no specific inflation rates provided on the page).
- Exchange rate appreciation: contributed to depressed growth.
- Interaction of shocks: simultaneous shocks have compounded downside growth pressures while lifting headline inflation.
Policy implications and recommendations
- Contain inflation: remain a major policy concern.
- Support recovery: likely to gain policy prominence in advanced economies.
- Prudential regulation: improvements could mitigate procyclicality of credit standards and reduce macroeconomic volatility.
- Labor mobility: cross-border labor flows produce generally beneficial macroeconomic effects and are relevant to policy discussion.