Cross-Border Effects of Car Scrapping Schemes: The Case of the German Car Scrapping Programme and its Effects on the Czech Economy

Petr Maleček and Ota Melcher

Prague Economic Papers, 2016, vol. 2016, issue 5, 560-576

Abstract: Many countries decided to launch car scrapping schemes during the 2009 crisis in order to support their car industries and to boost domestic demand. Owing to the existence of significant international trade links in the automotive sector, there is also a strong theoretical foundation for cross-border effects of such scrappage programmes. This paper explores spillovers of the German scheme to the Czech economy on the basis of a close mutual trade link between these two countries and the size of the Czech automotive sector. It is demonstrated that the German programme provided for a significant boost for Czech personal car exports, which were also coupled with increased imports due to large import requirements of the Czech automotive segment. Overall, the contribution of first-round effects of the German car scrapping scheme to the Czech real GDP growth in 2009 is estimated to have reached between 0.4 and 0.5 percentage points.

Keywords: input-output tables; vector error correction model; international trade in personal cars; car scrapping scheme (search for similar items in EconPapers)
JEL-codes: C32 C67 F47 H20 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.18267/j.pep.567

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