Modelling pandemic risks for policy analysis and forecasting

Elena Angelini, Milan Damjanović, Matthieu Darracq Paries and Srečko Zimic

Economic Modelling, 2023, vol. 120, issue C

Abstract: What were the economic effects of vaccination campaign, agents’ adaptation to containment measures, and fiscal and monetary measures during the COVID-19 pandemic? To quantify these effects, we augment the ECB’s macro-econometric model with an endogenous epidemiological block, providing one of the first institutional policy models with epidemiological elements. The model tracks closely actual pandemic developments by relying on detailed epidemiological data and by nesting a wide range of features, including vaccination campaigns, emergence of new variants and learning effects. Importantly, it includes an endogenous policy reaction function for containment measures, allowing counterfactual simulations. Our simulation results show that: (i) agents’ adaptation to containment measures over time was key in reducing negative macroeconomic consequences of lockdowns, (ii) the vaccination campaign slowed down infection rates and hospitalizations, enabling a relaxation of containment measures and avoiding a sharp double dip in economic activity and (iii) complementary fiscal and monetary policy interventions provided support to the economy.

Keywords: Epidemic; Modelling; COVID-19; ECB-BASE (search for similar items in EconPapers)
JEL-codes: E1 E3 I1 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322003996

DOI: 10.1016/j.econmod.2022.106162

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