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

Author/Editor:

Vizhdan Boranova ; Raju Huidrom ; Ezgi O. Ozturk ; Ara Stepanyan ; Petia Topalova ; Shihangyin (Frank) Zhang

Publication Date:

January 14, 2022

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 2022/006

Frequency:

regular

English

Publication Date:

January 14, 2022

ISBN/ISSN:

9781616356897/1018-5941

Stock No:

WPIEA2022006

Pages:

42

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