The COVID-19 recession on both sides of the Atlantic: A model-based comparison

Roberta Cardani, Philipp Pfeiffer, Marco Ratto and Lukas Vogel

European Economic Review, 2023, vol. 158, issue C

Abstract: This paper compares the COVID-19 recession in the euro area (EA) and the US using an estimated multi-region New Keynesian macroeconomic model. To capture quarterly dynamics from 2020 onwards, we introduce relevant extensions such as ‘forced’ savings, extensive versus intensive employment margins, and trade in commodities as inputs to production and final demand. Transitory (‘forced’) savings are central to account for the behaviour of economic activity in both regions during the pandemic, which was strongly driven by private consumption, alongside other shocks to domestic demand and shocks to foreign activity. The model highlights the importance of demand recovery and rising commodity prices for the inflation acceleration during 2021–22. EA inflation has a stronger supply component (including commodity prices) compared to a stronger demand component in the US.

Keywords: DSGE model; Bayesian estimation; COVID-19; Euro Area; United States; Inflation; Business cycles (search for similar items in EconPapers)
JEL-codes: C11 E1 E20 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: The COVID-19 recession on both sides of the Atlantic: A model-based comparison (2023)
Working Paper: The COVID-19 Recession on Both Sides of the Atlantic: A Model-Based Comparison (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:158:y:2023:i:c:s0014292123001848

DOI: 10.1016/j.euroecorev.2023.104556

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