EconPapers    
Economics at your fingertips  
 

Austrian Linkages to the European Economy and the Transmission Mechanisms of Economic Crisis

Joseph Francois, Mario Holzner and Olga Pindyuk

No III-006, FIW Research Reports series from FIW

Abstract: Like most of the global economy, Austria suffered from recession in 2008-2009. In this paper we deconstruct the pattern of recession, and the transmission of the global recession to Austria’s economy. We provide a new a new breakdown of the value added in Austrian exports, tracing both upstream and downstream linkages and their role in the recession. We also employ a multi-region computable general equilibrium (CGE) model, focused on Austria and its major trading partners. We estimate the combined impacts of the crisis, as implemented through stylized shocks to investment and household demand across major trading partners. These are based on the actual global demand shocks that occurred in 2008-2009. As we are focused on recession, we work with a short-run version of the model, where labor markers are modeled with unemployment and sticky wages, and where industry structure (number of varieties and allocation of capital stock across industries) is fixed. We introduce demand shocks (changes) to global investment demand calibrated from actual investment demand changes during the recession. We also calibrate output shocks based on actual changes in GDP in this period. The focus on backward and forward linkages provides new insight into the transmission channels for focused demand shocks at the border into more diffuse shocks within the broader Austrian economy. While the drop in global demand during the recent recession was focused on sectors producing heavy investment goods, the actual pressure this placed on the Austrian economy also hinged on the linkages of these sectors to other elements of the Austrian economy.

Keywords: economic crisis; transmission mechanisms; Austria; Europe; CGE (search for similar items in EconPapers)
JEL-codes: F14 F44 F47 C68 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-eec and nep-eur
Date: 2011-04
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.fiw.ac.at/fileadmin/Documents/Publikati ... ropean%20Economy.pdf full text (application/pdf)
none

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsr:ecbook:2011:i:iii-006

Ordering information: This working paper can be ordered from
FIW Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna

Access Statistics for this paper

More papers in FIW Research Reports series from FIW
Bibliographic data for series maintained by ().

 
Page updated 2019-12-11
Handle: RePEc:wsr:ecbook:2011:i:iii-006