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The Propagation of Business Sentiment within the European Union?

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  • Anja Kukuvec
  • Harald Oberhofer

Abstract

This paper empirically investigates the propagation of business sentiment within the EU and adds to the literature on shock absorption via a common market's real economy. To this end, we combine EU-wide official business sentiment indicators with world input-output data and information on indirect wage costs. Econometrically, we model interdependencies in economic activities via input-output linkages and apply space-time models. The resulting evidence provides indication for the existence of substantial spillovers in business sentiment formation. Accordingly, and highlighted by the estimated impacts of changes in indirect labour costs, policy reforms aiming at increasing the resilience of the European single market need to take these spillovers into account in order to increase its effectiveness.

Suggested Citation

  • Anja Kukuvec & Harald Oberhofer, 2018. "The Propagation of Business Sentiment within the European Union?," WIFO Working Papers 549, WIFO.
  • Handle: RePEc:wfo:wpaper:y:2018:i:549
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    File URL: https://www.wifo.ac.at/wwa/pubid/60861
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    References listed on IDEAS

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    More about this item

    Keywords

    Business sentiment; propagation; economic fluctuations; input-output linkages; networks; space-time model; policy reforms;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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