3/2011 Karin Kondor and Karsten Staehr. The impact of the global financial crisis on output performance across the European Union: Vulnerability and resilience

Working Papers of Eesti Pank. No. 3/2011

This paper uses regression analyses to explain the different output performance in the 27 countries in the EU based on measures of their pre-existing vulnerability and resilience. Rapid financial deepening and high financial leverage, both domestically and externally, were followed by larger output losses during the crisis. The level of financial depth, on the other hand, did not affect output negatively. A large degree of trade openness was associated with weaker output performance, possibly because of falling export demand during the crisis. Finally, government deficits and debt stocks do not seem have impacted negatively on output. The Baltic States stand out as having much explanatory power in the sample due to their large output losses during the crisis.
JEL Code: E32, F4, G01, H12
Key words: global financial crisis, contagion, business cycles, GDP

* Karin Kondor is an analyst at the Estonian Ministry of Finance. Karsten Staehr is a professor at Tallinn University of Technology and a part-time research supervisor at Eesti Pank. The paper was partly written while Karin Kondor was visiting Eesti Pank. The authors would like to thank Martti Randveer and participants in the conference "Financial and Economic Crisis: Causes, Consequences and the Future" held 25-26 November 2010 at Mendel University, Brno, for useful comments. All errors remain the responsibility of the authors.

Corresponding author's e-mail addresses: karsten.staehr [at] tseba.ttu.ee, karsten.staehr [at] eestipank.ee

The views expressed are those of the authors and do not necessarily represent the official views of Eesti Pank or the Ministry of Finance of the Republic of Estonia.


1. Introduction
2. A conceptual framework
3. Data and variables
4. Empirical results with only vulnerability variables
5. Controling for trade partner growth
6. Final comments
Appendix A. Data sources
Appendix B. Regression results using different measures of GDP performance

The impact of the global financial crisis on output performance across the European Union: vulnerability and resilience, Working Papers of Eesti Pank No 3/2011 (PDF*)