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Asset Prices and Pandemics: The Effects of Lockdowns

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  • Jerome Detemple

    (Questrom School of Business, Boston University, 595 Commonwealth Avenue, Boston, MA, 02215, USA)

Abstract

We examine the impact of pandemics on equilibrium in an integrated epidemic-economy model with production. Two types of technologies are considered: a neo-classical technology and one capturing the notion of time-to-produce. The impact of a shelter-in-place policy with and without layoffs is studied. The paper documents adjustments in interest rate, market price of risk, stock market and real wage as the epidemic propagates. It shows the qualitative effects of a shelter-in-place policy in the model are consistent with the patterns displayed by the stock market and real wage during the COVID-19 outbreak. Puzzles emerging from the analysis are outlined.

Suggested Citation

  • Jerome Detemple, 2022. "Asset Prices and Pandemics: The Effects of Lockdowns," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-43, March.
    • Handle: RePEc:wsi:qjfxxx:v:12:y:2022:i:01:n:s201013922240002x
    DOI: 10.1142/S201013922240002X
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    Cited by:

    1. Li, Shilin & Li, Tongtong & Yang, Jinqiang, 2022. "Optimal consumption and portfolio choices in the stochastic SIS model," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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