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Macroeconomic consequences of pandexit

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  • Phurichai Rungcharoenkitkul

Abstract

This paper proposes a quantitative framework to analyse the interactions between epidemiological and economic developments, and assesses the macroeconomic impact of managing the late stage of the Covid-19 pandemic. The framework features a susceptible-exposed- infectious-recovered (SEIR)-type model that describes the pandemic evolution conditional on society's mobility choice, and a policy unit that chooses mobility optimally to balance lives and livelihood objectives. The model can be matched to daily data via a fast and robust empirical procedure, allowing a timely policy analysis as situations evolve. As of 10 March 2021, the projected median output loss across 27 advanced and emerging market economies in 2021 is about 2 1/4% of pre-pandemic trends. This projected outcome hinges on a sustained progress in vaccination and no major epidemiological setbacks. Vaccination impediments or a third-wave surge in infection rate could raise median output loss to 3 - 3 3/4%. In the most severe scenario, virus mutations that compromise existing immunity could require more protracted lockdowns. In this case, median output loss may reach 5% in 2021 alone, with further repercussions in subsequent years.

Suggested Citation

  • Phurichai Rungcharoenkitkul, 2021. "Macroeconomic consequences of pandexit," BIS Working Papers 932, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:932
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    References listed on IDEAS

    as
    1. 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]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    2. Phurichai Rungcharoenkitkul, 2021. "Macroeconomic effects of COVID‐19: A mid‐term review," Pacific Economic Review, Wiley Blackwell, vol. 26(4), pages 439-458, October.
    3. Greg Kaplan & Benjamin Moll & Giovanni L. Violante, 2020. "The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S," NBER Working Papers 27794, National Bureau of Economic Research, Inc.
    4. Fernández-Villaverde, Jesús & Jones, Charles I., 2022. "Estimating and simulating a SIRD Model of COVID-19 for many countries, states, and cities," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
    5. Korinek, Anton & Bethune, Zachary, 2020. "COVID-19 Infection Externalities: Trading Off Lives vs. Livelihoods," CEPR Discussion Papers 14596, C.E.P.R. Discussion Papers.
    6. Fernando E. Alvarez & David Argente & Francesco Lippi, 2020. "A Simple Planning Problem for COVID-19 Lockdown," NBER Working Papers 26981, National Bureau of Economic Research, Inc.
    7. Frederic Boissay & Phurichai Rungcharoenkitkul, 2020. "Macroeconomic effects of Covid-19: an early review," BIS Bulletins 7, Bank for International Settlements.
    8. Frederic Boissay & Daniel Rees & Phurichai Rungcharoenkitkul, 2020. "Dealing with Covid-19: understanding the policy choices," BIS Bulletins 19, Bank for International Settlements.
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    Cited by:

    1. Phurichai Rungcharoenkitkul, 2021. "Macroeconomic effects of COVID‐19: A mid‐term review," Pacific Economic Review, Wiley Blackwell, vol. 26(4), pages 439-458, October.
    2. Sabina Marchetti & Alessandro Borin & Francesco Paolo Conteduca & Giuseppe Ilardi & Giorgio Guzzetta & Piero Poletti & Patrizio Pezzotti & Antonino Bella & Paola Stefanelli & Flavia Riccardo & Stefano, 2022. "An Epidemic Model for SARS-CoV-2 with Self-Adaptive Containment Measures," Questioni di Economia e Finanza (Occasional Papers) 681, Bank of Italy, Economic Research and International Relations Area.
    3. International Economics and Euro Area Department, 2021. "Report on the Latin American economy. First half of 2021. Outlook, vulnerabilities and policy space," Economic Bulletin, Banco de España, issue 2/2021.
    4. Departamento de Economía Internacional y Área del Euro, 2021. "Report on the Latin American Economy. Second half of 2021. Outlook, vulnerabilities and policy space," Economic Bulletin, Banco de España, issue 4/2021.

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    More about this item

    Keywords

    Covid-19 pandemic; health-economic tradeoffs; SEIR model; lockdown; vaccines;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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