The macroeconomic impacts of the COVID-19 pandemic: A SIR-DSGE model approach

Ying Tung Chan

China Economic Review, 2022, vol. 71, issue C

Abstract: This paper proposes a susceptible-infected-removed dynamic stochastic general equilibrium (SIR-DSGE) model to assess the macroeconomic impact of the recent COVID-19 outbreak. The parameters of the SIR setting are calibrated to COVID-19 data from China. Using the model, we illustrate how the pandemic could result in consumption and output loss. We show that a combination of quarantine policy and random testing of the uninfected is effective in reducing the number of infected individuals and outperforms the alternative scenarios in which only one of the policies is implemented. Moreover, the economic impacts of both policies are evaluated. Compared with the decentralized equilibrium, we find that the Ramsey social planner allows output to decrease more substantially during the pandemic, in exchange for a faster economic recovery.

Keywords: DSGE model; SIR model; COVID-19 (search for similar items in EconPapers)
JEL-codes: E30 E58 I10 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:71:y:2022:i:c:s1043951x21001437

DOI: 10.1016/j.chieco.2021.101725

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