Macroepidemics and unconventional monetary policy

Verónica Acurio Vásconez, Olivier Damette and David Shanafelt ()
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David Shanafelt: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Although the current covid-19 pandemic was neither the first nor the last disease to threaten a pandemic, only recently have studies incorporated epidemiology into macroeconomic theory. This paper uses a dynamic stochastic general equilibrium (dsge) model with a financial sector to study the economic impacts of epidemics and the potential for unconventional monetary policy to remedy those effects. By coupling a macroeconomic model with a traditional epidemiological model, we can evaluate the pathways by which an epidemic affects a national economy. We find that no unconventional monetary policy can completely remove the negative effects of an epidemic crisis, save perhaps an exogenous increase in the shares of claims coming from the Central Bank (''epi loans''). To the best of our knowledge, our paper is one of the first to incorporate disease dynamics into a dsge-sir model with a financial sector and examine the use of an unconventional monetary policy.

Keywords: New-Keynesian model; Financial dsge; Covid-19; Epidemiology; Unconventional monetary policy (search for similar items in EconPapers)
Date: 2023-07-05
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-04220462
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Citations: View citations in EconPapers (1)

Published in Economic Modelling, 2023, 126, pp.106431. ⟨10.1016/j.econmod.2023.106431⟩

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Journal Article: Macroepidemics and unconventional monetary policy (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04220462

DOI: 10.1016/j.econmod.2023.106431

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