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Why Growth Performance Differed across Countries in the Recent Crisis: the Impact of Pre-crisis Conditions

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  • Karl Aiginger

    () (Austrian Institute of Economic Research WIFO, AUSTRIA)

Abstract

The growth performance of countries proved to be very different during the recent financial crisis. The objective of the paper is to investigate why, despite the fact that the crisis hit countries simultaneously, the length and depth of the crisis turned out to be very different across countries. We apply principal component analysis to derive a single indicator for growth performance which includes different aspects of GDP dynamics before and after the crisis. Then we apply multivariate regressions analysis to analyze whether pre-crisis economic conditions and/or structural characteristics can explain the differences in growth performance in a sample of 37 countries. We focus primarily on industrialized countries but also include dynamic emerging economies. The pre-crisis conditions we investigate include the fiscal situation, trade competitiveness, output and credit growth; the structural characteristics we selected were country size, openness, the share of specific sectors and per capita income. The three indicators which proved to explain most robustly the cross country differences in the recent crisis and thus could also be used as predictors for future crises are the current account position, credit growth and GDP growth in the run-up period. Trade competitiveness improved the performance in the crisis. Past credit and GDP growth impaired country performance.

Suggested Citation

  • Karl Aiginger, 2011. "Why Growth Performance Differed across Countries in the Recent Crisis: the Impact of Pre-crisis Conditions," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 35-52, August.
  • Handle: RePEc:bap:journl:110403
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ádám Török & Gyöngyi Csuka & Bernadett Kovács & Anita Veres, 2013. "The "resurrection" of industrial policy in the European Union and its impact on industrial policy in the New Member Countries," WWWforEurope Working Papers series 26, WWWforEurope.
    2. Concha Betrán & María A. Pons, 2013. "Understanding Spanish Financial crises, 1850-2000: What determined their severity?," Working Papers 0048, European Historical Economics Society (EHES).
    3. Dodescu D.B. Anca, 2015. "State Aid And Competitiveness Composed Indicators For Romania And Slected Eu Member States. A Comparative Analisys," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 173-183, July.
    4. Karl Aiginger & Susanne Bärenthaler-Sieber & Johanna Vogel, 2013. "Competitiveness under New Perspectives," WWWforEurope Working Papers series 44, WWWforEurope.
    5. Miklós Antal & Jeroen C.J.M. van den Bergh, 2014. "Macroeconomics, Financial Crisis and the Environment. Strategies for a Sustainability Transition," WIFO Working Papers 464, WIFO.
    6. Karl Aiginger & Susanne Bärenthaler-Sieber & Johanna Vogel, 2015. "Competitiveness of EU vs. US," WWWforEurope Policy Paper series 29, WWWforEurope.

    More about this item

    Keywords

    Financial crisis; Cross country performance; Trade competitiveness;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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