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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

Czeczeli, Vivien, Kolozsi, Pál Péter, Kutasi, Gábor and 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 = Pénzügyi Szemle, 65 (3). pp. 321-347. DOI https://doi.org/10.35551/PFQ_2020_3_1

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Official URL: https://doi.org/10.35551/PFQ_2020_3_1


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.

Item Type:Article
Uncontrolled Keywords:Covid-19, fiscal policy, crisis, cluster-analysis, EU
JEL classification:C38 - Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Principal Components; Factor Models
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
H12 - Crisis Management
H60 - National Budget, Deficit, and Debt: General
J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers
Subjects:Finance
DOI:https://doi.org/10.35551/PFQ_2020_3_1
ID Code:8649
Deposited By: Alexa Horváth
Deposited On:12 Sep 2023 08:40
Last Modified:12 Sep 2023 08:40

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