The Real Impacts of the 2008-09 Financial Crisis

Filippo Di Mauro

Head External Developments Division
European Central Bank, Frankfurt

Filippo di Mauro is Head of the External Developments Division of Directorate General Economics at the European Central Bank, which he joined in 1998. His division of approximately 30 members is in charge of international forecasts, medium-term foreign exchange analysis and the balance of payments of the Euro area. Filippo started his career in 1984 at the Research Department of the Central Bank of Italy, following a short period of consulting at the OECD. Prior to joining the ECB, he also held various economist positions at the International Monetary Fund in 1986-1987 and 1994-1996, and the Asian Development Bank in 1990-1994. Recent research includes work on international trade and competitiveness, also using firm level data, global linkages and the impact of external shocks on the euro area. His latest book, "Catching the Flu from the US: Synchronisation and Transmission Mechanisms to the Euro Area" will be published in June 2010 by Palgrave McMillan. Filippo holds a PhD in Economics from The American University and an MA from University of Chicago.

Abstract

The 2008-09 financial crisis had severe impacts bringing the global economy to its deepest and most widespread recession since WW II. One important characteristic of this recession has been its broad-based nature - not only across countries, but also across demand components. Thus, while countries have been exposed to a different degree to the impact of the financial crisis – as soon as world trade dropped and substantial balance-sheet correction took place across sectors - none of them could remain unaffected. Overall, this paper examines some selected aspects related to international linkages – most notably the ones originated in the US and for their impact on the rest of the world - from several different perspectives. The overall lesson we have learned in the light of the most recent turmoil (2007-2009), is that trade remains the most important cross-border transmission channel. This notwithstanding, the financial crisis has highlighted the role financial channels may have in magnifying global economic interactions. The inability so far of business-cycle related literature to fully spell out the role of financial variables calls for additional research.

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