Politická ekonomie
Politická ekonomie
Prague Economic Papers
University of Economics, Prague

Prague Economic Papers Vol. 25 No. 5

Cross-Border Effects of Car Scrapping Schemes: The Case of the German Car Scrapping Programme and its Effects on the Czech Economy

DOI: https://doi.org/10.18267/j.pep.567

[full text (PDF)]

Petr Maleček, Ota Melcher

Many countries decided to launch car scrapping schemes during the 2009 crisis in order to support their car industries and to boost domestic demand. Owing to the existence of significant international trade links in the automotive sector, there is also a strong theoretical foundation for cross-border effects of such scrappage programmes. This paper explores spillovers of the German scheme to the Czech economy on the basis of a close mutual trade link between these two countries and the size of the Czech automotive sector. It is demonstrated that the German programme provided for a significant boost for Czech personal car exports, which were also coupled with increased imports due to large import requirements of the Czech automotive segment. Overall, the contribution of first-round effects of the German car scrapping scheme to the Czech real GDP growth in 2009 is estimated to have reached between 0.4 and 0.5 percentage points.

Keywords: car scrapping scheme, input-output tables, international trade in personal cars, vector error correction model

JEL Classification: C32, C67, F47, H20

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