A dynamic disequilibrium input–output model of the Belgian COVID-19 pandemic

We adapt the dynamic disequilibrium input-output model of Pichler et al. (2022). [Journal of Economic Dynamics and Control, 144, 104527.] to the Belgian economy and conduct a cross-context validation of the COVID-19 pandemic. Labor supply and export demand shocks are refined using business surveys and observed trade flows, while household demand shocks are calibrated to 115 time series on GDP, revenue, employment, and interindustry transactions. The refined shocks improve the model’s ability to reproduce the observed evolution of GDP, revenue, and employment. However, the model systematically underestimates the persistence of interindustry trade, suggesting structural limitations in its ability to represent firms’ incentives to sustain trade. Relaxing the Leontief production function based on input criticality improves the model’s accuracy, consistent with the original model, though differentiation across degrees of relaxation proved unidentifiable despite a larger dataset. Overall, our results confirm the original model’s validity for assessing epidemic-driven economic impacts, thereby strengthening its credibility as a policy tool.