Macroeconomic Effects of Economic Policy Measures in Reaction to the COVID-19 Pandemic

Study Commissioned by the Federal Ministry of Finance
A recent study tries to investigate the relation between the economic policy measures set during the COVID-19 pandemic for supporting domestic enterprises and the following economic performance.

In a first approach, the effects of liquidity supporting measures were explored. A microsimulation based on a semi-synthetic data sample suggests that until the end of 2021, around 11 percent of domestic enterprises were shielded from illiquidity, combined with a protection of their 203,000 employees.

In a second approach, a panel econometric model based on EU data tries to estimate the correlation between the discretionary deterioration of public budget deficits and the ensuing macroeconomic performance. A statistically significant and over different specifications robust correlation suggests that a deterioration of public deficit by 1 percent (measured in relation to GDP) is followed by an increase of GDP by 0.7 to 1.0 percent in the following year. The used data does not support any hypothesis about a lower effectiveness of the Austrian measures as compared to EU member countries.

The study was conducted by the Austrian Institute of Economic Research (WIFO) in cooperation with Eco Austria, the Institute for Advanced Studies (IHS), the University of Vienna and the Vienna CESAR Institute (Centre of Economic Scenario Analysis and Research).