Testing policy effectiveness during COVID-19: An NK-DSGE analysis

Sayar Ahmad Shah and Bhavesh Garg

Journal of Asian Economics, 2023, vol. 84, issue C

Abstract: We examine the effectiveness of fiscal and monetary policy in mitigating the impact of COVID-19 in India using the NK-DSGE framework. In terms of policy effectiveness, our findings imply that expansionary monetary policy is effective in reviving economic growth both from the demand side and supply side. In contrast, expansionary fiscal policy is effective only from the supply side. Our findings recommend the implementation of optimal policy mix in a coordinated and staggered framework for effective mitigation of ill-effects of the COVID-19, such as reviving employment and capacity utilization to its pre-pandemic level with minimal inflationary effects.

Keywords: COVID-19; NK-DSGE; Monetary policy; Fiscal policy (search for similar items in EconPapers)
JEL-codes: C11 C68 E52 E62 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:84:y:2023:i:c:s1049007822001336

DOI: 10.1016/j.asieco.2022.101577

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