Abstract

With the Russian war against Ukraine, global economic conditions changed abruptly. We provide first causal evidence of effects of the energy crisis on Germany as Europe’s most important economy. Combining cost structure data, national accounts and administrative labour market data, we identify effects in a sectoral panel setting. In addition, large parts of western exports to Russia have collapsed. We use this as a natural experiment to estimate the elasticity of substitution of sales into different markets. Based on a panel model for German industry, we estimate the extent to which canceled exports to Russia were replaced by exports to other countries and by domestic sales, or production fell. We also examine whether new markets have been opened up.