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An Epidemiological Model of Economic Crisis Spread across Sectors in the United States

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  • EVA F. JANSSENS
  • ROBIN L. LUMSDAINE
  • SEBASTIAAN H.L.C.G. VERMEULEN

Abstract

This paper develops a discrete‐time epidemiological model to characterize the spread of economic deterioration across sectors in the United States for the period 1952–2015. It is the first model to apply an epidemiological approach to consider such spread using macroeconomic Flow of Funds data. By extending the usual one‐period Markov model to a two‐period setting, we incorporate the possibility that an initial slow growth period may either continue further or improve such that further economic deterioration is averted. The estimated model can be used to classify more versus less contagious sectors and identify their channels of transmission.

Suggested Citation

  • Eva F. Janssens & Robin L. Lumsdaine & Sebastiaan H.L.C.G. Vermeulen, 2022. "An Epidemiological Model of Economic Crisis Spread across Sectors in the United States," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(4), pages 885-919, June.
    • Handle: RePEc:wly:jmoncb:v:54:y:2022:i:4:p:885-919
    DOI: 10.1111/jmcb.12862
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