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Modelling pandemic risks for policy analysis and forecasting

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  • Angelini, Elena
  • Damjanović, Milan
  • Darracq Pariès, Matthieu
  • Zimic, Srečko

Abstract

What were the economic effects of vaccination campaign, agents’ adaptation to containment measures, and fiscal and monetary measures during the COVID-19 pandemic? To quantify these effects, we augment the ECB’s macro-econometric model with an endogenous epidemiological block, providing one of the first institutional policy models with epidemiological elements. The model tracks closely actual pandemic developments by relying on detailed epidemiological data and by nesting a wide range of features, including vaccination campaigns, emergence of new variants and learning effects. Importantly, it includes an endogenous policy reaction function for containment measures, allowing counterfactual simulations. Our simulation results show that: (i) agents’ adaptation to containment measures over time was key in reducing negative macroeconomic consequences of lockdowns, (ii) the vaccination campaign slowed down infection rates and hospitalizations, enabling a relaxation of containment measures and avoiding a sharp double dip in economic activity and (iii) complementary fiscal and monetary policy interventions provided support to the economy.

Suggested Citation

  • Angelini, Elena & Damjanović, Milan & Darracq Pariès, Matthieu & Zimic, Srečko, 2023. "Modelling pandemic risks for policy analysis and forecasting," Economic Modelling, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322003996
    DOI: 10.1016/j.econmod.2022.106162
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    Cited by:

    1. Cavalli, Fausto & Naimzada, Ahmad & Visetti, Daniela, 2024. "Dynamical analysis of healthcare policy effects in an integrated economic-epidemiological model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 221(C), pages 315-336.
    2. da Silva, Nelson & Caetano, Sidney, 2024. "Intensity of labor shocks behind the changes in Brazilian hours worked during the pandemic," Economic Modelling, Elsevier, vol. 131(C).
    3. Adjemian, Stéphane & Bokan, Nikola & Darracq Pariès, Matthieu & Müller, Georg & Zimic, Srečko, 2024. "ECB-(RE)BASE: Heterogeneity in expectation formation and macroeconomic dynamics," Working Paper Series 2965, European Central Bank.
    4. Luca Portoghese & Patrizio Tirelli, 2024. "Getting ready for the next pandemic: supply- side policies to escape the health-vs-economy dilemma," DEM Working Papers Series 219, University of Pavia, Department of Economics and Management.

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    Keywords

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    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • I1 - Health, Education, and Welfare - - Health

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