Study: Macroeconomic effects of the measures taken by the German government in the context of the COVID-19 crisis

This study was carried out in cooperation with the Austrian Institute of Economic Research, the Institute for Advanced Studies and the University of Vienna on behalf of the Federal Ministry of Finance.

The study examined the links between the economic policy measures taken during the COVID-19 pandemic to support domestic companies and subsequent economic development.

In a first approach, the measures are examined for their impact on the liquidity of domestic companies. The microsimulation carried out on the basis of a semi-synthetic data set indicates that around 11% of Austrian companies could be protected from illiquidity by the end of 2021 as a result of the measures, thereby safeguarding around 203,000 jobs.

Another approach attempts to link the expansion of public budgets with macroeconomic development at EU level. A panel econometric analysis shows a statistically significant and robust correlation between the discretionary expansion of the budget deficit and the subsequent economic recovery across different estimation approaches. An increase in the structural budget deficit by 1 percentage point (in relation to GDP) was accompanied by an increase in GDP of 0.7% to 1.0% in the following year, with corresponding positive effects on employment. The data does not indicate that the measures taken in Austria were less effective than in other EU countries.

Authors: Marcus Scheiblecker, Serguei Kaniovski, Thomas Url (WIFO), Martin Ertl, Helmut Hofer, Michael Reiter, Klaus Weyerstrass (IHS), Johannes Berger, Wolfgang Schwarzbauer, Ludwig Strohner (EcoAustria), Paul Pichler (University of Vienna)