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Consumption-contagion dynamics during epidemic with voluntary social distancing

Author

Listed:
  • Pakasa Bary

    (Bank Indonesia)

  • Rani Setyodewanti

    (International Monetary Fund)

Abstract

This paper discusses causal dynamics between epidemic and consumption by incorporating different consumption behavior among those susceptible, infected and recovered from the disease. This paper finds that endogenous voluntary social distancing induces recession in the short-term, but limits the permanent output loss in the medium-term. It slows contagion, lowers the peak of active cases, reduces the total infections and deaths.

Suggested Citation

  • Pakasa Bary & Rani Setyodewanti, 2021. "Consumption-contagion dynamics during epidemic with voluntary social distancing," Economics Bulletin, AccessEcon, vol. 41(2), pages 696-701.
    • Handle: RePEc:ebl:ecbull:eb-20-01233
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I2-P62.pdf
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    References listed on IDEAS

    as
    1. Scott R Baker & Robert A Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis & Jeffrey Pontiff, 0. "How Does Household Spending Respond to an Epidemic? Consumption during the 2020 COVID-19 Pandemic," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 834-862.
    2. Dirk Krueger & Harald Uhlig & Taojun Xie, 2022. "Macroeconomic dynamics and reallocation in an epidemic: evaluating the ‘Swedish solution’," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(110), pages 341-398.
    3. Cook, Jonathan & Newberger, Noah & Smalling, Sami, 2020. "The spread of social distancing," Economics Letters, Elsevier, vol. 196(C).
    4. Dirk Kruger & Harald Uhlig & Taojun Xie, 2020. "Macroeconomic Dynamics and Reallocation in an Epidemic," Working Papers 2020-43, Becker Friedman Institute for Research In Economics.
    5. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    6. Robert S. Pindyck, 2020. "COVID-19 and the Welfare Effects of Reducing Contagion," NBER Working Papers 27121, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    epidemic; pandemic; COVID-19; recession; consumption; SIR model;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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