Economic shocks and growth: spatio-temporal perspectives on Europe's economies in a time of crisis

Doran, Justin and Fingleton, Bernard (2012): Economic shocks and growth: spatio-temporal perspectives on Europe's economies in a time of crisis. Forthcoming in: Papers in Regional Science

Abstract

The response by regional and national economies to exogenous impulses has a well-established literature in both spatial econometrics and in mainstream econometrics and is of considerable importance given the current economic crisis. This paper focuses on dynamic counterfactual predictions and impulse-response functions to provide insight regarding the question of whether responses to economic shocks are transitory or permanent. Analysis shows that output shocks have permanent effects on productivity with economies adjusting to new levels following a shock. This suggests that the current recession will be embodied permanently within the memory of some of Europe's leading economies as a hysteretic effect.

• Item Type: MPRA Paper
• Language: English
• Keywords: vector error correction, European Union, economic shocks, crisis, Verdoorn law, productivity
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and Applications; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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