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Macrofinancial information on the post-COVID-19 economic recovery: Will it be V, U or L-shaped?

Author

Listed:
  • De Backer, Bruno
  • Dewachter, Hans
  • Iania, Leonardo

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

Abstract

We use standard macrofinancial no-arbitrage term structure models to forecast key macroeconomic variables such as GDP. Simple adaptations to the models are proposed in order to generate plausible forecasts in the context of the COVID-19 crisis. The financial market variables included in the models are shown to improve GDP forecasts. Forecasts of real GDP conditioned on macrofinancial information up to August 2020 suggest that the shape of the recovery will most likely be between a U and an L in most euro area countries considered, with substantial persistent losses.

Suggested Citation

  • De Backer, Bruno & Dewachter, Hans & Iania, Leonardo, 2021. "Macrofinancial information on the post-COVID-19 economic recovery: Will it be V, U or L-shaped?," LIDAM Reprints LFIN 2021007, Université catholique de Louvain, Louvain Finance (LFIN).
    • Handle: RePEc:ajf:louvlr:2021007
    DOI: https://doi.org/10.1016/j.frl.2021.101978
    Note: In: Finance Research Letters, 2021, 101978
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    Cited by:

    1. Cugno, Monica & Castagnoli, Rebecca & Büchi, Giacomo & Pini, Marco, 2022. "Industry 4.0 and production recovery in the covid era," Technovation, Elsevier, vol. 114(C).
    2. Iyer, Subramanian Rama & Simkins, Betty J., 2022. "COVID-19 and the Economy: Summary of research and future directions," Finance Research Letters, Elsevier, vol. 47(PB).
    3. Xin‐Xin Zhao & Jun Wen & Xing‐Yun Zou & Quan‐jing Wang & Chun‐Ping Chang, 2023. "Strategies for the sustainable development of China in the post‐epidemic era," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(1), pages 426-438, February.
    4. Ruqia Ayoub & Saloni Devi, 2024. "Subjective well-being of entrepreneurs during COVID-19 pandemic: a bibliometric analysis," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 14(1), pages 1-18, December.
    5. Liu, Lihua & Kong, Dongmin, 2024. "Epidemic experience, analyst sentiment, and earnings forecasts: Evidence from SARS exposure," The British Accounting Review, Elsevier, vol. 56(6).

    More about this item

    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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