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The global macroeconomic impacts of COVID-19: Seven scenarios

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  • Warwick McKibbin
  • Roshen Fernando

Abstract

The outbreak of coronavirus named COVID-19 has disrupted the Chinese economy and is spreading globally. The evolution of the disease and its economic impact is highly uncertain which makes it difficult for policymakers to formulate an appropriate macroeconomic policy response. In order to better understand possible economic outcomes, this paper explores seven different scenarios of how COVID-19 might evolve in the coming year using a modelling technique developed by Lee and McKibbin (2003) and extended by McKibbin and Sidorenko (2006). It examines the impacts of different scenarios on macroeconomic outcomes and financial markets in a global hybrid DSGE/CGE general equilibrium model.The scenarios in this paper demonstrate that even a contained outbreak could significantly impact the global economy in the short run. These scenarios demonstrate the scale of costs that might be avoided by greater investment in public health systems in all economies but particularly in less developed economies where health care systems are less developed and popultion density is high.

Suggested Citation

  • Warwick McKibbin & Roshen Fernando, 2020. "The global macroeconomic impacts of COVID-19: Seven scenarios," CAMA Working Papers 2020-19, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2020-19
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2020-03/19_2020_mckibbin_fernando_0.pdf
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    Keywords

    Pandemics; infectious diseases; risk; macroeconomics; DSGE; CGE; G-Cubed;
    All these keywords.

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