IDEAS home Printed from https://ideas.repec.org/p/wsr/ecbook/2011iiii-006.html
   My bibliography  Save this paper

Austrian Linkages to the European Economy and the Transmission Mechanisms of Economic Crisis

Author

Listed:
  • Joseph Francois
  • Mario Holzner
  • Olga Pindyuk

Abstract

Like most of the global economy, Austria suffered from recession in 2008-2009. In this paper we deconstruct the pattern of recession, and the transmission of the global recession to Austria’s economy. We provide a new a new breakdown of the value added in Austrian exports, tracing both upstream and downstream linkages and their role in the recession. We also employ a multi-region computable general equilibrium (CGE) model, focused on Austria and its major trading partners. We estimate the combined impacts of the crisis, as implemented through stylized shocks to investment and household demand across major trading partners. These are based on the actual global demand shocks that occurred in 2008-2009. As we are focused on recession, we work with a short-run version of the model, where labor markers are modeled with unemployment and sticky wages, and where industry structure (number of varieties and allocation of capital stock across industries) is fixed. We introduce demand shocks (changes) to global investment demand calibrated from actual investment demand changes during the recession. We also calibrate output shocks based on actual changes in GDP in this period. The focus on backward and forward linkages provides new insight into the transmission channels for focused demand shocks at the border into more diffuse shocks within the broader Austrian economy. While the drop in global demand during the recent recession was focused on sectors producing heavy investment goods, the actual pressure this placed on the Austrian economy also hinged on the linkages of these sectors to other elements of the Austrian economy.

Suggested Citation

  • Joseph Francois & Mario Holzner & Olga Pindyuk, 2011. "Austrian Linkages to the European Economy and the Transmission Mechanisms of Economic Crisis," FIW Research Reports series III-006, FIW.
  • Handle: RePEc:wsr:ecbook:2011:i:iii-006
    as

    Download full text from publisher

    File URL: http://www.fiw.ac.at/fileadmin/Documents/Publikationen/Studienpool_II/06.ResearchReport.Francois_Holzner_Pindyuk.Austrian%20Linkages%20to%20the%20European%20Economy.pdf
    File Function: full text
    Download Restriction: none

    References listed on IDEAS

    as
    1. Dirk WILLENBOCKEL & Sherman ROBINSON, "undated". "The Global Financial Crisis, LDC Exports and Welfare: Analysis with a World Trade Model," EcoMod2009 21500092, EcoMod.
    2. Freund, Caroline, 2009. "The trade response to global downturns : historical evidence," Policy Research Working Paper Series 5015, The World Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    economic crisis; transmission mechanisms; Austria; Europe; CGE;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:wsr:ecbook:2011:i:iii-006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.