The Macroeconomic Consequences of Stimulating Offline Consumption during COVID-19

Dawis Kim, Minseung Kim and Myungkyu Shim

Global Economic Review, 2021, vol. 50, issue 1, 20-42

Abstract: This paper analyses the macroeconomic consequences of a fiscal policy implemented in South Korea during COVID-19, ‘Korean Economic Impact Payment (KEIP)’ program, that aims to stimulate offline consumption. In doing so, we modify a SIR-macro model by explicitly distinguishing online- and offline consumption goods. Benchmark analysis predicts that (1) there are positive effects on key macro variables at the impact while progress of the epidemic hardly changes and (2) the transfer multiplier from the KEIP is estimated to be about 0.5 at the impact, a value with what we expect from the usual neo-classical business cycle model.

Date: 2021
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DOI: 10.1080/1226508X.2021.1875868

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