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Global models for a global pandemic: The impact of COVID-19 on small euro area economies

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  • Garcia, Pablo
  • Jacquinot, Pascal
  • Lenarčič, Črt
  • Lozej, Matija
  • Mavromatis, Kostas

Abstract

We analyse the COVID-19 pandemic shock on small open economies (SOEs) in the euro area in a unified modelling framework: the Euro Area and the Global Economy model. We find strong negative international spillovers affecting each of the modelled SOEs, stemming not only from the rest of the euro area, but also from the United States and the rest of the world. A lower bound on nominal interest rates in the euro area amplifies these spillovers, especially within the euro area. Furthermore, we find some positive spillovers from the fiscal measures implemented in the Euro area to combat the pandemic, including the new Next Generation EU instrument.

Suggested Citation

  • Garcia, Pablo & Jacquinot, Pascal & Lenarčič, Črt & Lozej, Matija & Mavromatis, Kostas, 2023. "Global models for a global pandemic: The impact of COVID-19 on small euro area economies," Journal of Macroeconomics, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:jmacro:v:77:y:2023:i:c:s0164070423000514
    DOI: 10.1016/j.jmacro.2023.103551
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    2. Daniel Stempel & Johannes Zahner, 2022. "DSGE Models and Machine Learning: An Application to Monetary Policy in the Euro Area," MAGKS Papers on Economics 202232, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Lorena Skufi & Adam Geršl, 2023. "Using Macrofinancial Models to Simulate Macroeconomic Developments During the COVID-19 Pandemic: The Case of Albania," Eastern European Economics, Taylor & Francis Journals, vol. 61(5), pages 517-553, September.
    4. Stempel, Daniel & Zahner, Johannes, 2023. "Whose inflation rates matter most? A DSGE model and machine learning approach to monetary policy in the Euro area," IMFS Working Paper Series 188, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    5. Damjanović, Milan & Lenarčič, Črt, 2023. "Constructing a house price misalignment indicator: revisited and revamped," MPRA Paper 118489, University Library of Munich, Germany.

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    More about this item

    Keywords

    DSGE modelling; International spillovers; Monetary union; Euro area; COVID-19;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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