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Study on Impacts of COVID-19 Pandemic Recession Based on Monte Carlo Simulation

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  • Di Shang
  • Chang Yu
  • Gang Diao

Abstract

We analyse the economic impact of the economic recession caused by the unprecedented COVID-19 pandemic by estimating the amplitude, duration and scope of influence of the recession. We employ the turning point method to extract the characteristics of the historical recessions since 1980 in 153 countries and use the information to obtain the distribution characteristics of the GDP growth rate in these countries during the current pandemic-induced recession with Monte Carlo simulation. We then make judgment on the scope of influence of this pandemic-induced recession by investigating the co-movement relationship between the historical recessions in the 153 countries. The results show that this pandemic-induced recession is likely to be a severe global recession. The mean of the average simulated ΔGDP of the 153 countries will plunge into a trough at -1.16% in 2020 with a recession amplitude of approximately 4.50% and recover to the pre-crisis level of 3.29% in 2023.

Suggested Citation

  • Di Shang & Chang Yu & Gang Diao, 2021. "Study on Impacts of COVID-19 Pandemic Recession Based on Monte Carlo Simulation," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(6), pages 724-747.
    • Handle: RePEc:prg:jnlpep:v:2021:y:2021:i:6:id:786:p:724-747
    DOI: 10.18267/j.pep.786
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    Cited by:

    1. Dejan Živkov & Suzana Balaban & Marijana Joksimović, 2022. "Making a Markowitz portfolio with agricultural commodity futures," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 68(6), pages 219-229.

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    More about this item

    Keywords

    COVID-19 pandemic; economic recession; GDP growth rate forecasting; turning points; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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