Transformative Economic Challenges: The Impact of COVID-19 and the War in Ukraine on the European Union

Ivan  Todorov; Gergana  Angelova; Aleksandar  Aleksandrov

doi:10.2478/ngoe-2024-0017

Ivan Todorov
Gergana Angelova
Aleksandar Aleksandrov

DOI: https://doi.org/10.2478/ngoe-2024-0017

Keywords: European Union, COVID-19, War in Ukraine, Economic effects

Abstract

This paper aims to explore the economic effects of the COVID-19 pandemic and the war in Ukraine on the twenty-seven European Union (EU) member states, known as the EU-27. A vector autoregression (VAR) of quarterly data for the period 2020–2022 was employed to study the impact of the coronavirus and the Russian invasion of Ukraine on growth, unemployment and inflation in the EU-27. The results from the empirical analysis indicated that the war in Ukraine lowered growth and raised inflation and unemployment, while the COVID-19 pandemic did not affect growth, increased unemployment and decreased inflation in the EU-27. It may be concluded that the war in Ukraine shifted the EU aggregate supply curve to the left, whereas the coronavirus pandemic resulted in inflation-unemployment trade-off in the EU.

Downloads

Download data is not yet available.

References

Ahmed, S., Hasan, M. M., & Kamal, M. R. (2022). Russia-Ukraine crisis: The effects on the European stock market. European Financial Management, 1–41. DOI: https://doi.org/10.1111/eufm.12386

Almeida, V., Barrios, S., Christl, M., et al. (2021). The impact of COVID-19 on households' income in the EU. Journal of Economic Inequality, 19, 413–431. DOI: https://doi.org/10.1007/s10888-021-09485-8

Aven, T. (2013). On the meaning of a black swan in a risk context. Safety Science, 57, 44–51. DOI: https://doi.org/10.1016/j.ssci.2013.01.016

Aven, T., & Krohn, B. (2014). A New Perspective on how to Understand, Assess and Manage Risk and The Unforeseen. Reliability Engineering and System Safety, 121, 1–10. DOI: https://doi.org/10.1016/j.ress.2013.07.005

Berben, R. et al. (2022). Consequences of the war in Ukraine for the economy of the Netherlands. Amsterdam: De Nederlandsche Bank N.V.

Bourgon, J. (2009). New Directions in Public Administration: Serving Beyond the Predictable. Public Policy and Administration, 24(3), 309–330. DOI: https://doi.org/10.1177/0952076709103813

Castles, F. G. (2010). Black swans and elephants on the move: the impact of emergencies on the welfare state. Journal of European Social Policy, 20(2), 91–101. DOI: https://doi.org/10.1177/0958928709358793

Celi, G., Guarascio, D., Reljic, J., Simonazzi, A., & Zezza, F. (2022). The Ripple Effects of the War in Ukraine, Intereconomics, 57(3), 141–147.

Chen (2022). The Impact of the Russia-Ukraine War on the European Economy. Proceedings of the 2022 International Conference on Economics, Smart Finance and Contemporary Trade, 619–626. DOI: https://doi.org/10.2991/978-94-6463-052-7_72

Christianto, E., & Murhadi, W. (2016). Pengujian Black Swan Anomalies. Journal of Management and Business, 15(1), 99–116.

Congressional Research Service (2022). Russia’s 2022 War Against Ukraine: Global Economic Effects. Retrieved from https://crsreports.congress.gov/

Congressional Research Service (2021). Global Economic Effects of Covid-19. Retrieved from https://crsreports.congress.gov/de la Porte, C., & Heins, E. (2022). Introduction: EU Constraints and Opportunities in the COVID-19 Pandemic: The Politics of NGEU: The Politics of NGEU. Comparative European Politics, 20(2), 135–143. DOI: https://doi.org/10.1057/s41295-022-00276-7

De Vet et al. (2021). Impacts of the COVID-19 pandemic on EU industries. Retrieved from https://www.europarl.europa.eu

Economist Impact (2023). Understanding the future economic consequences of the Covid-19 pandemic. Retrieved from https://impact.economist.com

Eurochambers (2022). Eurochambres flash survey on the economic impact of the war in Ukraine. Retrieved from https://www.eurochambres.eu/

Estrada, J. (2009). Black swans, market timing and the Dow. Applied Economics Letters, 16(11), 1117–1121. DOI: https://doi.org/10.2139/ssrn.1086300

Garicano, L., Rohner, D., & di Mauro, B. (2022). A silver lining: Increased urgency for the green transition in Europe. In Global Economic Consequences of the War in Ukraine (208–217). London: CEPR Press.

Guenette, J., Kenworthy, P., & Wheeler, C. (2022). Implications of the War in Ukraine for the Global Economy. World Bank Group. Retrieved from https://thedocs.worldbank.org/en/doc/.

Heinonen, S. (2013). The Dance of the Black Swans. The Concept and Manifestations. In Black Swans – What Will Change the World Next? Entries from the writing contest of the Committee for the Future of the Parliament of Finland. Publish Ser Comm Future 5, 20–40.

ILO-OECD Paper (2020). The impact of the COVID-19 pandemic on jobs and incomes in G20 economies. Retrieved from https://www.ilo.org/global/about-the-ilo/how-the-ilo-works/multilateral-system/g20/reports/WCMS_756331/lang--en/index.htm

Kalogiannidis, S., Chatzitheodoridis, F., Kalfas, D., Kontsas, S., & Toska, E. (2022). The Economic Impact of Russia’s Ukraine Conflict on the EU Fuel Markets. International Journal of Energy Economics and Policy, 12(6), 37–49. DOI: https://doi.org/10.32479/ijeep.13493

Korosteleva, J. (2022). The Implications of Russia’s Invasion of Ukraine for the EU Energy Market and Businesses. British Journal of Management, 0, 1–5. ol. 0, 1–5 (2022) DOI: https://doi.org/10.1111/1467-8551.12654

Krupa, J., & Jones, C. (2013). Black Swan Theory: Applications to energy market histories and technologies. Energy Strategy Reviews, 1, 286–290. DOI: https://doi.org/10.1016/j.esr.2013.02.004

Lin, W., Tsai, I. (2019). Black swan events in China's stock markets: Intraday price behaviors on days of volatility. International Review of Economics & Finance, 59(C), 395-411. DOI: https://doi.org/10.1016/j.iref.2018.10.005

Manhire, J. T. (2018). Measuring Black Swans in Financial Markets. Journal of Mathematical Finance, 8, 227–239. https://doi.org/10.4236/jmf.2018.81016

Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Iosifidis, C., Agha, M., & Agha, R. (2020). The Socio-Economic Implications of the Coronavirus Pandemic (COVID-19): A Review. International Journal of Surgery, 78, 185–193. DOI: https://doi.org/10.1016/j.ijsu.2020.04.018

OECD (2022). Economic and Social Impacts and Policy Implications of the War in Ukraine. Retrieved from https://www.oecd-ilibrary.org/

Pavolová, H., Čulková, K., & Šimková, Z. (2022). Influence of COVID-19 Pandemic on the Economy of Chosen EU Countries. World, 3(3), 672–680. DOI: https://doi.org/10.3390/world3030037

Pekhnyk, A., & Borzak, Y. (2022). The impact of the COVID-19 pandemic on the European economy: A first glance and long-term perspectives. Zeszyty Naukowe Wyższej Szkoły Bankowej w Poznaniu, 90(3), 13–27. DOI: https://doi.org/10.26349/zn.wsb.w.poznaniu.0090.01

Petraškevičius, V., Ginevičius, R., Bracio, K., Menet, G., & Visokavičius, R. (2022). Impact of the COVID-19 pandemic on the economic development of EU countries. Problems and Perspectives in Management, 20(3), 204-214. DOI: https://doi.org/10.21511/ppm.20(3).2022.17

Pesa, A., & Brajkovic, A. (2016). Testing the 'Black Swan Effect' on Croatian Stock Market between 2000 and 2013. EMAJ: Emerging Markets Journal, 6(1), 1–16. DOI: https://doi.org/10.5195/emaj.2016.92

Prohorovs A. (2022). Russia’s War in Ukraine: Consequences for European Countries’ Businesses and Economies. Journal of Risk and Financial Management, 15(7), 295. DOI: https://doi.org/10.3390/jrfm15070295

Sazmaz, E., Ozkok, E., Simsek, H., & Gulseven, O. (2021). The Impact of COVID-19 on European Unemployment and Labor Market Slack. Available at SSRN: https://ssrn.com/abstract=3766376 or http://dx.doi.org/10.2139/ssrn.3766376

Skaliotou, I. (2022). Economic Impact of Russia’s Invasion in Ukraine. Retrieved from https://mof.gov.cy/assets/modules/wnp/articles/202209/1208/docs/impact_of_russia_invasionis.pdf

Smit, et al. (2023). Social and Economic Consequences of COVID-19. Retrieved from https://www.europarl.europa.eu

Stavrova, E., Paskaleva, M., & Stoykova, A. (2020). Black Swan Event: Evidence from China's Economics Effects. International Conference on Innovations in Science and Education. Prague: Czech Republic.

Sülün, D. (2020). The Impact of Covid-19 on France's Economy with an Overview on The European Economy. Journal of Research in Economics, Politics & Finance, 5(SI), 115– 136. DOI: https://doi.org/10.30784/epfad.810739

Székely, P. (2020). The Covid-19 pandemic and Europe. Köz-gazdaság, 15(2), 13–24. DOI: https://doi.org/10.14267/RETP2020.02.22

Taleb, N. (2007a). Fooled by Randomness: The hidden role of chance in the markets and life. New York, NY: Random House.

Taleb, N. (2007b). The Black Swan: The Impact of the Highly Improbable. The New York Times. Retrieved from https://www.nytimes.com/2007/04/22/books/chapters/0422-1st-tale.html

Tsvetanova, Y. (2022). Professional Profile and Training of the Specialist Educator in France. BON Publishing.

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (2022). Impact of the COVID-19 PANDEMIC on Trade and Development. Retrieved from https://unctad.org/publication/impact-covid-19-pandemic-trade-and-development-lessons-learned

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (2022). The impact on trade and development of the war in Ukraine. Retrieved from https://unctad.org/publication/impact-trade-and-development-war-ukraine

Wildman, D. (2015). Geopolitical Risk: The Butterfly Effect and Black Swans. FTI Journal, 2–5.Retrieved from https://www.garp.org/hubfs/Whitepapers/a1Z1W0000054xShUAI.pdf

Yeyati, E., & Filippini, F. (2021). Social and economic impact of COVID-19. Brookings Global Working Paper 158.

Zhao, X., Yang, J., Zhao, L., & Li, Q. (2011). The Impact of News on Stock Market: Quantifying the Content of Internet-based Financial News. In The 11th International DSI and the 16th APDSI Joint Meeting, Taipei, Taiwan, July 12-16.

Zuleeg, F. (2020). The economic impact of COVID-19 on the EU: From the frying pan into the fire. Retrieved from https://www.epc.eu