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Economic Exposure and Crisis Resilience in Exogenous Shock — The Short-Term Economic Impact of the Covid-19 Pandemic in the EU

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  • Czeczeli, Vivien
  • Kolozsi, Pál Péter
  • Kutasi, Gábor
  • Marton, Ádám

Abstract

The coronavirus epidemic arrived in Europe in the spring of 2020, causing a significant slowdown in economic activity. The study examines the preparedness, vulnerability, exposure and performance of 25 European countries during the economic crisis caused by the Covid-19 epidemic. Countries can be divided into seven groups with the cluster analysis executed during the research, based on fiscal, social, and external vulnerability indicators. Specific patterns of country groups are explored in the value and evolution of crisis period indicators of production, labor market, mobility and risk premium. The aim of the analysis is to find a correlation between pre-crisis preparedness and the extent of the economic shock caused by the crisis. The research divided the countries into seven groups based on their fiscal and social stance and external vulnerability. Then, specific patterns of country groups are explored in the value and evolution of production, labour market, mobility and risk premium indicators during the crisis. The analysis concludes that a clear link can be established merely between the state of public finances and the indicator of financial risk in the examination of the behaviour of clusters. For all clusters, it was confirmed that the decline in mobility was mostly accompanied by a slowdown in industrial production, but not by unemployment, which may indicate the impact of economic policy measures aimed at maintaining jobs. The results support the initial theoretical assumption that in an economic crisis caused by a exogenous shock originated in non-economic factor, the explanatory power in terms of short-term effects is much lower than in crises caused by economic risks.

Suggested Citation

  • Czeczeli, Vivien & Kolozsi, Pál Péter & Kutasi, Gábor & Marton, Ádám, 2020. "Economic Exposure and Crisis Resilience in Exogenous Shock — The Short-Term Economic Impact of the Covid-19 Pandemic in the EU," Public Finance Quarterly, Corvinus University of Budapest, vol. 65(3), pages 321-347.
    • Handle: RePEc:pfq:journl:v:65:y:2020:i:3:p:321-347
    DOI: https://doi.org/10.35551/PFQ_2020_3_1
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    References listed on IDEAS

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    More about this item

    Keywords

    Covid-19; fiscal policy; crisis; cluster-analysis; EU;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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