Subsidising Car Purchases in the Euro Area: Any Spill-Over on Production?

34 Pages Posted: 25 Aug 2017

Date Written: August 23, 2017

Abstract

Due to input-output linkages, an industry level shock can widely transmit to the rest of the economy. We identify government policies on the automobile industry, which change final prices and estimate their effect on sales and production. An example could be the scrappage schemes that many European governments introduced at the start of the Great Recession. In line with previous studies, we con rm that the effect on car sales is positive. More interestingly, we extend the literature that explores the effects of these policies on domestic and foreign production to disentangle the potential spill-overs.

Keywords: Bayesian GVAR, Fiscal Policy, Production, Automotive Industry, Spill-Overs

JEL Classification: C32, C54, E23, E62, H25

Suggested Citation

Paredes, Joan, Subsidising Car Purchases in the Euro Area: Any Spill-Over on Production? (August 23, 2017). ECB Working Paper No. 2094. Available at SSRN: https://ssrn.com/abstract=3025244

Joan Paredes (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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