What are the effects of the gap in productivity gains between the United States and the euro zone?

The gap between productivity gains in the United States and the euro zone stems from the gap between levels of investment in new technologies and levels of R&D spending. This gap has a number of consequences: It reduces the rise in unit labour costs, and therefore wage inflation, in the United States relative to the euro zone; It leads to higher profitability for US companies, and therefore to a faster rise in US stock market indices; It makes the United States more attractive than the euro zone, thanks to higher returns on investments in equities, bonds and corporate equity in the United States, resulting in much greater capital inflows into the United States than into the euro zone; As long as these capital inflows into the United States continue, the dollar will appreciate against the euro (and against all currencies ); These capital inflows into the United States have enabled it to run a larger external deficit and fiscal deficit than the euro zone.