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The Dynamic Interrelations between Unequal Neighbors: An Austro-German Case Study

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This article investigates the effects and transmission channels of shocks between two asymmetric neighboring countries. In particular, we investigate Austria and Germany which are highly integrated due to their common language and common membership of the European Monetary Union. Generalized impulse response functions reveal that there are large and significant effects of shocks to the German economy on Austria. In contrast, the effects of shocks to the Austrian economy on Germany are barely significant and if they are, their magnitude is comparatively small. Furthermore we can show that multiplier effects are present in Germany but not in Austria and we identify hysteretic properties in Austrian unemployment.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0913.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0913.

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Date of creation: Aug 2009
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Handle: RePEc:vie:viennp:0913

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Cited by:
  1. Prettner, Catherine & Prettner, Klaus, 2014. "How interdependent are Eastern European economies and the Euro area?," Center for European, Governance and Economic Development Research Discussion Papers 187, University of Goettingen, Department of Economics.
  2. Catherine Prettner & Klaus Prettner, 2012. " After Two Decades of Integration: How Interdependent are Eastern European Economies and the Euro Area?," Department of Economics Working Papers wuwp138, Vienna University of Economics, Department of Economics.

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