Macroeconomic Impacts of the Covid-19 Pandemic in Some European Union Countries: A Counterfactual Analysis

António Portugal Duarte and Fátima Sol Murta

No 161, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: The aim of this paper is to analyze the macroeconomic impacts of the Covid-19 pandemic in the European Union (27 countries) and, particularly, in four of its economies – Germany, Spain, Italy and Portugal. For this purpose, a counterfactual analysis was conducted based on an ARIMA forecasting model through which the behavior of a set of macroeconomic variables (Gross Domestic Product, public debt, inflation rate, public deficit, and unemployment rate) is examined in the context of the Covid-19 pandemic against a hypothetical scenario without pandemic. In general, the results point to a significantly better performance of all variables in the four countries and in the European Union if the Covid-19 pandemic had not existed. In a scenario without the Covid-19 pandemic, all countries would have achieved higher product levels, showing, however, relatively weaker economic growth rates when compared to the pandemic situation, namely in 2021 and 2022. The results also point to budget surpluses in Germany and Portugal, in 2020, 2021 and 2022, as well as a sharp reduction (over 20 percentage points) in Spanish public debt. In 2021 and 2022, there is also a lower inflationary pressure for the European Union, Germany, Spain and Italy, after a very sharp rise in prices in 2020. Regarding the labor market, with the exception of Germany and European Union, where the unemployment rate would be relatively higher, especially in 2022, the remaining countries would register lower unemployment rates.

Keywords: ARIMA; Counterfactual; Covid-19 pandemic; macroeconomic impacts (search for similar items in EconPapers)
JEL-codes: C15 E63 F47 F62 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-05, Revised 2022-05
New Economics Papers: this item is included in nep-eec and nep-mac
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https://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_161.pdf First version, 2022 (application/pdf)

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Working Paper: Macroeconomic Impacts of the Covid-19 Pandemic in Some European Union Countries: A Counterfactual Analysis (2022)
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