Cars in Europe: Supply Chains and Spillovers during COVID-19 Times

Vizhdan Boranova, Raju Huidrom, Ezgi Ozturk, Ara Stepanyan, Petia Topalova and Shihangyin (Frank) Zhang

No 2022/006, IMF Working Papers from International Monetary Fund

Abstract: The auto sector is macro-critical in many European countries and constitutes one of the main supply chains in the region. Using a multi-sector and multi-country general equilibrium model, this paper presents a quantitative assessment of the impact of global pandemic-induced labor supply shocks—both directly and via supply chains—during the initial phase of the COVID-19 pandemic on the auto sector and aggregate activity in Europe. Our results suggest that these labor supply shocks would have a significant adverse impact on the major auto producers in Europe, with one-third of the decline in the value added of the car sector attributable to spillovers via supply chains within and across borders. Within borders, the pandemic-induced labor supply shocks in the services sector have a bigger adverse impact, reflecting their larger size and associated demand effects. Across borders, spillovers from the pandemic-induced labor supply shocks that originate in other European countries are larger than those that originate outside the region, though the latter are still sizable.

Keywords: Auto sector; supply chains; spillovers; Europe; auto sector; Labor supply shocks; car sale; vehicle production; Labor supply; Supply shocks; Spillovers; COVID-19; Automobile industry; Global (search for similar items in EconPapers)
Pages: 42
Date: 2022-01-14
New Economics Papers: this item is included in nep-eec, nep-ind and nep-ore
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