IDEAS home Printed from https://ideas.repec.org/a/prg/jnlaop/v2012y2012i4id372p3-25.html
   My bibliography  Save this article

Possible Impact of the 2008-2009 Economic Crisis on Czech Potential Output Through the Labour Market

Author

Listed:
  • Martin Janíčko
  • Marek Mičúch
  • Zdeněk Chytil

Abstract

The paper deals with the possible impact of the 2008-2009 financial and economic crisis on the potential output in the Czech Republic. Given the general difficulty in sketching out all the consequences of the crisis itself, the article is primarily focused on the labour market, which is regarded as an important driving force in terms of potential output fall or its growth slowdown. First, principal reasons why the potential output could have been hit by the 2008-2009 crisis are discussed in detail. The paper then analyzes a number of transmission mechanisms through which potential output could be generally impacted by severe recessions. Further, the output gap of the Czech Republic is estimated and a potential output development is drawn up. Finally, an approximate impact of the crisis on the potential product through the labour market is demonstrated. The results show that the potential output in the Czech Republic has been partially and temporarily affected in volume. This is specifically due to an adverse long-term unemployment and, to a much lesser extent, employment behaviour, in both cases seemingly in relation to the recent crisis. Likewise, Okun's law has been found to be relatively weak in the case of the Czech economy, thus further supporting the "hysteresis explanation". However, such a drop in potential output will likely not persist in the long run, provided that appropriate economic policies - in particular aiming at re-integration of long-term unemployed/discouraged workers and an increase in the employment and participation rates - are implemented.

Suggested Citation

  • Martin Janíčko & Marek Mičúch & Zdeněk Chytil, 2012. "Possible Impact of the 2008-2009 Economic Crisis on Czech Potential Output Through the Labour Market," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2012(4), pages 3-25.
  • Handle: RePEc:prg:jnlaop:v:2012:y:2012:i:4:id:372:p:3-25
    DOI: 10.18267/j.aop.372
    as

    Download full text from publisher

    File URL: http://aop.vse.cz/doi/10.18267/j.aop.372.html
    Download Restriction: free of charge

    File URL: http://aop.vse.cz/doi/10.18267/j.aop.372.pdf
    Download Restriction: free of charge

    File URL: https://libkey.io/10.18267/j.aop.372?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.
    2. Olivier Blanchard, 2009. "The Crisis: Basic Mechanisms and Appropriate Policies," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(01), pages 3-14, April.
    3. Assaf Razin, 2004. "Aggregate Supply and Potential Output," NBER Working Papers 10294, National Bureau of Economic Research, Inc.
    4. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    5. Edward S. Knotek, 2007. "How useful is Okun's law?," Economic Review, Federal Reserve Bank of Kansas City, vol. 92(Q IV), pages 73-103.
    6. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Fiscal increasing returns, hysteresis, real wages and unemployment," European Economic Review, Elsevier, vol. 31(3), pages 543-560, April.
    7. Millard, Stephen & Scott, Andrew & Sensier, Marianne, 1997. "The Labour Market over the Business Cycle: Can Theory Fit the Facts?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(3), pages 70-92, Autumn.
    8. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edward S. Knotek & Stephen J. Terry, 2009. "How will unemployment fare following the recession?," Economic Review, Federal Reserve Bank of Kansas City, vol. 94(Q III), pages 5-33.
    2. Christian Keuschnigg, 2008. "Corporate Taxation and the Welfare State," Working Papers 0813, Oxford University Centre for Business Taxation.
    3. Lindé, Jesper & Smets, Frank & Wouters, Rafael, 2016. "Challenges for Central Banks´ Macro Models," Working Paper Series 323, Sveriges Riksbank (Central Bank of Sweden).
    4. Ludger Linnemann, 2004. "Tax Base and Crowding‐in Effects of Balanced Budget Fiscal Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 273-297, June.
    5. Oscar Jorda & Alan Taylor & Sanjay Singh, 2019. "The Long-Run Effects of Monetary Policy," 2019 Meeting Papers 1307, Society for Economic Dynamics.
    6. Lindbeck, A & Snower, D-J, 1996. "Centralized Bargaining, Multi-Tasking, and Work Incentives," Papers 620, Stockholm - International Economic Studies.
    7. Robert J. Barro, 1989. "New Classicals and Keynesians, or the Good Guys and the Bad Guys," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 125(III), pages 263-273, September.
    8. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    9. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
    10. Juan Paez-Farrell, 2008. "Assessing sticky price models using the Burns and Mitchell approach," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1387-1397.
    11. Yunjong Eo & James Morley, 2022. "Why Has the U.S. Economy Stagnated since the Great Recession?," The Review of Economics and Statistics, MIT Press, vol. 104(2), pages 246-258, May.
    12. Jordi Gali, 2005. "Trends in hours, balanced growth, and the role of technology in the business cycle," Review, Federal Reserve Bank of St. Louis, vol. 87(Jul), pages 459-486.
    13. Joseph E. Gagnon, 2009. "The World Needs Further Monetary Ease, Not an Early Exit," Policy Briefs PB09-22, Peterson Institute for International Economics.
    14. Giorgio Canarella & Stephen M. Miller, 2017. "Did Okun’s law die after the Great Recession?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(4), pages 216-226, October.
    15. Bordo, Michael D. & Haubrich, Joseph G., 2010. "Credit crises, money and contractions: An historical view," Journal of Monetary Economics, Elsevier, vol. 57(1), pages 1-18, January.
    16. Zhang, Yan & Chen, Yan, 2008. "Tariff and Equilibrium Indeterminacy--A Note," MPRA Paper 10044, University Library of Munich, Germany.
    17. Ulrike Malmendier & Leslie Sheng Shen, 2024. "Scarred Consumption," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(1), pages 322-355, January.
    18. Laurence Ball, 2014. "Long-term damage from the Great Recession in OECD countries," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 149-160, September.
    19. Rui M. Pereira, 2013. "Okun's Law across the Business Cycle and during the Great Recession: A Markov Switching Analysis," Working Papers 139, Department of Economics, College of William and Mary.
    20. Jim Malley & Anton Muscatelli & Ulrich Woitek, 1999. "Real Business Cycles or Sticky Prices? The Impact of Technology Shocks on US Manufacturing," Working Papers 1999_15, Business School - Economics, University of Glasgow.

    More about this item

    Keywords

    potential output; total factor productivity; financial and economic crisis; external economic shocks; labour market hysteresis; human capital investment; discouraged workers;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlaop:v:2012:y:2012:i:4:id:372:p:3-25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.