COVID-19 and Emerging Markets: A SIR Model, Demand Shocks and Capital Flows

Kalemli-Özcan, Sebnem, Çakmaklı, Cem, Selva Demiralp and Sevcan Yesiltas

No 15154, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We quantify the macroeconomic effects of COVID-19 for a small open economy. We use a two country framework combined with a sectoral-SIR model to estimate the effects of collapses in foreign demand and supply. The small open economy suffers from domestic demand and supply shocks due to its own pandemic. In addition, there are external shocks coming from rest of the world (country two). Aggregate exports of the small open economy go down when foreign demand goes down, and aggregate imports suffer from lockdowns in the rest of the world. We calibrate the model to Turkey. Our results show that the optimal policy, which yields the lowest output loss and saves the maximum number of lives, for the small open economy, is an early and globally coordinated full lockdown of 39 days.

Keywords: Globalization; Infections; External finance; I-o tables; Sectoral heterogeneity (search for similar items in EconPapers)
JEL-codes: C51 E61 F00 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-ara and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: COVID-19 and emerging markets: A SIR model, demand shocks and capital flows (2023)
Working Paper: COVID-19 and Emerging Markets: A SIR Model, Demand Shocks and Capital Flows (2020)
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