Financial asymmetries between Euro area and the United States: An international political economy perspective

Abstract

This paper assesses financial asymmetries between the Euro area and the United States using a financial accelerator framework. We estimate a GVAR model from 1995Q1 to 2016Q4 and find (i) that American financial shocks have a global influence whereas those of the Euro area are regional and (ii) that American financial shocks have larger effects in size than those of the Euro area. We develop an International Political Economy framework based on the concept of asymmetrical interdependence to point out policy suggestions whose main objective is to increase the autonomy of the Euro area.