Macroeconomic impact of the supply shock during COVID-19 pandemic in India

Apica Sharma and Paras Sachdeva

Journal of Economic Studies, 2023, vol. 51, issue 1, 145-164

Abstract: Purpose - The study focuses on examining the impact of the supply shock on the Indian macroeconomic variables during the COVID-19 period. Design/methodology/approach - Time-varying factor augmented vector autoregressive model has been employed to study the asymmetry in transmission of supply shock on Indian economy during pre- and post-COVID-19 times. Findings - The authors find that with supply shock, retail food inflation outpaced in COVID-19 times. Production levels reported by IIP fell to abysmally low levels in the post-COVID-19 times when the economy stalled. The liquidity stimulus provided by the central bank led to the negative response of policy rates to the supply shocks during the COVID-19 times. Originality/value - The study stands novel in examining the impact of COVID-19 pandemic on Indian economy through the lenses of asymmetric transmission of supply shock during pre- and post-COVID-19 times.

Keywords: Supply and demand shocks; COVID-19; TVP-FAVAR; Indian economy; E10; E31; E52; Q11 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-09-2022-0474

DOI: 10.1108/JES-09-2022-0474

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