Cars in Europe: Supply Chains and Spillovers during COVID-19 Times

The auto sector is macro-critical in many European countries and constitutes one of the main supply chains in the region. Using a multi-sector and multi-country general equilibrium model, this paper presents a quantitative assessment of the impact of global pandemic-induced labor supply shocks—both...

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Bibliographic Details
Main Author: Boranova, Vizhdan
Other Authors: Huidrom, Raju, Ozturk, Ezgi, Stepanyan, Ara
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2022
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Income economics 
653 |a International finance 
653 |a Supply and demand 
653 |a Economic & financial crises & disasters 
653 |a Externalities 
653 |a Economic Theory 
653 |a Labour 
653 |a Economics: General 
653 |a Automobiles 
653 |a Supply shocks 
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653 |a Automobile industry 
653 |a Economic theory & philosophy 
653 |a Demand and Supply of Labor: General 
653 |a Economic sectors 
653 |a Health Behavior 
653 |a Spillovers 
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520 |a The auto sector is macro-critical in many European countries and constitutes one of the main supply chains in the region. Using a multi-sector and multi-country general equilibrium model, this paper presents a quantitative assessment of the impact of global pandemic-induced labor supply shocks—both directly and via supply chains—during the initial phase of the COVID-19 pandemic on the auto sector and aggregate activity in Europe. Our results suggest that these labor supply shocks would have a significant adverse impact on the major auto producers in Europe, with one-third of the decline in the value added of the car sector attributable to spillovers via supply chains within and across borders. Within borders, the pandemic-induced labor supply shocks in the services sector have a bigger adverse impact, reflecting their larger size and associated demand effects. Across borders, spillovers from the pandemic-induced labor supply shocks that originate in other European countries are larger than those that originate outside the region, though the latter are still sizable