The Interdependence of the US and European Economies

Abstract

This paper analyzes the interdependence of the economies of the US and Western European countries, using panel data from the years 1979 to 2011. The model specified uses the GDP per capita of the European nation as the dependent variable, and the components of US GDP as testing variables. The countries used include the UK, France, Germany, Spain, and Italy. The model seeks to establish a relationship between the developed economies of Europe and the United States, in order to better show the correlation between world economies. After developing the model and corrected it for error term violations, the testing variables of US personal consumption, government expenditures, and net exports were found to be significant.