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Working Paper 338 - 'Not a Good Time': Economic Impact of COVID-19 in Africa

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Abstract

The paper studies the effects of the COVID-19 pandemic on African economies and household welfare using a top-down sequential macro-micro simulation approach. The pandemic is modeled as a supply shock that disrupts economic activities of African countries and then affects households' consumption behavior, the level of their welfare, and businesses' investment decisions. The DSGE model is calibrated to account for informality, a key feature of African economies. We find that COVID-19 could diminish employment in the formal and informal sectors and contract consumption of savers and non-savers, especially for savers. These contractions would lead to an economic recession in Africa and widen both fiscal and current account deficits. Extreme poverty is expected to increase further in Africa, in particular if the welfare of the poorest households grows at lower rates. We also use the DSGE model to analyze the effects of different fiscal policy responses to the COVID-19 pandemic.

Suggested Citation

  • Hanan Morsy & Lacina Balma & Adamon N. Mukasa, 2020. "Working Paper 338 - 'Not a Good Time': Economic Impact of COVID-19 in Africa," Working Paper Series 2464, African Development Bank.
    • Handle: RePEc:adb:adbwps:2464
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    Citations

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    Cited by:

    1. Donald Kemajou Njatang, 2021. "Impact économique de la COVID‐19 au Cameroun: Les résultats du modèle SIR‐macro," African Development Review, African Development Bank, vol. 33(S1), pages 126-138, April.
    2. Christian Estmann & Henrik Hansen & John Rand, 2021. "Fiscal policy responses to COVID-19 in Danida priority countries in Sub-Saharan Africa," DERG working paper series 21-09, University of Copenhagen. Department of Economics. Development Economics Research Group (DERG).

    More about this item

    Keywords

    COVID-19; Macro-micro simulation; Welfare; Fiscal policy; Africa JEL Classification: E17; E62; I18; I3;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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