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Countermeasures against economic crisis from COVID-19 pandemic in China: An analysis of effectiveness and trade-offs

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  • Liu, Yawen
  • Cui, Qi
  • Liu, Yu
  • Zhang, Jinzhu
  • Zhou, Meifang
  • Ali, Tariq
  • Yang, Lingyu
  • Feng, Kuishuang
  • Hubacek, Klaus
  • Li, Xinbei

Abstract

The effectiveness of different countermeasures to economic crisis from the public health emergency is still inadequately understood. We establish an illustrative scenario, specifying the shocks of COVID-19 pandemic and countermeasures applying a general equilibrium model to analyze the effectiveness of countermeasures with a particular focus on trade-offs in the impacts of monetary and fiscal policies. We find that both monetary and fiscal countermeasures could effectively mitigate the economic damages to GDP and employment. However, they would also produce adverse side-effects such as an increase in consumer price by 1.05% and 0.57%, respectively, and a decline in exports by 2.61% and 1.05%, respectively. Monetary policies would exacerbate the damages to external demand by supply-side shocks of the pandemic, but they are more suitable for mitigating demand-side shocks. While fiscal policies would benefit nearly all producing sectors, monetary policies would mainly affect export-oriented manufacturing sectors negatively.

Suggested Citation

  • Liu, Yawen & Cui, Qi & Liu, Yu & Zhang, Jinzhu & Zhou, Meifang & Ali, Tariq & Yang, Lingyu & Feng, Kuishuang & Hubacek, Klaus & Li, Xinbei, 2021. "Countermeasures against economic crisis from COVID-19 pandemic in China: An analysis of effectiveness and trade-offs," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 482-495.
    • Handle: RePEc:eee:streco:v:59:y:2021:i:c:p:482-495
    DOI: 10.1016/j.strueco.2021.09.017
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    2. Shiqi Jiang & Lingli Qi & Xinyue Lin, 2022. "The Impacts of COVID-19 Shock on Intergenerational Income Mobility: Evidence from China," IJERPH, MDPI, vol. 19(18), pages 1-20, September.
    3. Shah, Sayar Ahmad & Garg, Bhavesh, 2023. "Testing policy effectiveness during COVID-19: An NK-DSGE analysis," Journal of Asian Economics, Elsevier, vol. 84(C).
    4. Jin Fan & Hongshu Wang & Xiaolan Zhang, 2022. "A General Equilibrium Analysis of Achieving the Goal of Stable Growth by China’s Market Expectations in the Context of the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(22), pages 1-22, November.
    5. Víctor Manuel Cuevas Ahumada & Cuauhtémoc Calderón Villarreal, 2023. "Government policies and manufacturing production during the COVID-19 pandemic," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 18(4), pages 1-19, Octubre -.
    6. Jiang, Shiqi & Lin, Xinyue & Qi, Lingli & Zhang, Yongqiang & Sharp, Basil, 2022. "The macro-economic and CO2 emissions impacts of COVID-19 and recovery policies in China," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 981-996.
    7. Qi Zhang & Xinxin Zhang & Qi Cui & Weining Cao & Ling He & Yexin Zhou & Xiaofan Li & Yunpeng Fan, 2022. "The Unequal Effect of the COVID-19 Pandemic on the Labour Market and Income Inequality in China: A Multisectoral CGE Model Analysis Coupled with a Micro-Simulation Approach," IJERPH, MDPI, vol. 19(3), pages 1-21, January.

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