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Empirical Economics

, Volume 43, Issue 2, pp 741–761 | Cite as

The dynamic interrelations between unequal neighbors: an Austro-German case study

  • Klaus PrettnerEmail author
  • Robert M. Kunst
Article

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.

Keywords

Structural vector error correction model Open economies Economic integration Generalized impulse response analysis 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Vienna Institute of DemographyViennaAustria
  2. 2.Institute of Mathematical Methods in EconomicsVienna University of TechnologyViennaAustria
  3. 3.Department of EconomicsUniversity of ViennaViennaAustria
  4. 4.Department of Economics & FinanceInstitute for Advanced StudiesViennaAustria

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