Page 11 - Book of Abstracts 2020

Anti COVID-19 #16 Macroeconomic policy during the coronavirus epidemic April 2020
IDEA anti COVID-19 # 16
Macroeconomic policy during
the coronavirus epidemic1 APRIL 2020
Summary
 This paper summarizes the relevant economic literature to date, combining SIR models and macroeconomic models and discussing the consequences of the pandemic for fiscal and monetary policy.
 SIR models imply that our fight against the pandemic will only succeed if we are able to achieve a long-term reduction of the reproduction number.
 Macroeconomic epidemiological models highlight the mutual interaction between the spread of the infection and human economic behaviour. They show that there is a negative relationship between the depth of the economic recession and the rate at which the epidemic spreads. They also reveal that the epidemic creates negative externalities implying that spontaneously limiting activities is an inadequate response.
 The economic consequences of the pandemic are modelled as a mixture of supply and demand shocks; it is not entirely clear which type of shock will dominate. While the negative supply shock came first, the demand shock may end up dominating because certain sectors are hit harder than others.
 The macroeconomic literature also points out that the pandemic affects different groups of people to different extents: for example, quarantine measures affect young people and
1 This study represents the authors’ views and not the official position of the Czech Academy of Sciences' Economics Institute nor of the Charles University Centre for Economic Research and Graduate Education (CERGE). We are grateful to Danielu Münich for his helpful comments on the working version of the text. Any innaccuracies or errors are the authors’ responsibility. The study was produced with support from the Czech Academy of Sciences as part of its AV21 Strategy programme and thanks to a donation from the Experientia Foundation.
2 The authors work at CERGE-EI, a joint academic workplace encompassing the Charles University Centre for Economic Research and Graduate Education and the Czech Academy of Sciences’ Economics Institute. Marek.Kapicka@cerge- ei.cz, Michal.Kejak@cerge-ei.cz, Ctirad Slavik@cerge-ei.cz.
Marek Kapička, Michal Kejak, Ctirad Slavík
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