The dynamic interrelations between unequal neighbors: an Austro-German case study |
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Authors: | Klaus Prettner Robert M Kunst |
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Institution: | 1. Vienna Institute of Demography, Wohllebengasse 12-14, 1040, Vienna, Austria 2. Institute of Mathematical Methods in Economics, Vienna University of Technology, Argentinierstrasse 8/4/105-3, 1040, Vienna, Austria 3. Department of Economics, University of Vienna, Bruenner Strasse 72, 1210, Vienna, Austria 4. Department of Economics & Finance, Institute for Advanced Studies, Stumpergasse 56, 1060, Vienna, Austria
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Abstract: | This article investigates the effects and the transmission of shocks between asymmetric neighboring countries. In particular, we investigate Austria and Germany which are highly integrated due to their common language and common membership of the European Monetary Union. Generalized impulse response functions reveal large and significant effects of shocks to the German economy on Austria. By contrast, the effects of shocks to the Austrian economy on Germany are barely significant and if they are, their magnitude is small. Furthermore, we can show that multiplier effects exist in Germany but not in Austria and we identify hysteretic properties in Austrian unemployment. |
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