Viral shocks to the world economy

Konstantin A. Kholodilin and Malte Rieth

EconStor Open Access Articles and Book Chapters, 2023, vol. 158, No 104526, 15 pages

Abstract: We construct a global index of epidemic news based on text analysis of newspapers from 17 countries. We apply the index to study the economic consequences of epidemics on the world economy in structural vector autoregressions. Epidemic shocks exert significantly and persistently negative effects on output and prices that last for up to two years. There is no quick recovery and no overshooting. The output losses are permanent. Country studies show that the direct effects are substantially larger than the indirect effects through trade and financial markets. Furthermore, the simultaneous fall of output and prices suggests that demand dominate supply contractions and that monetary and fiscal stimuli are appropriate crisis responses to minimize permanent output losses.

Keywords: Epidemics; pandemics; text analysis; structural vector autoregressions; Covid-19; world economy (search for similar items in EconPapers)
JEL-codes: C32 E62 H12 I18 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:338554

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