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Macrofinancial information on the post- COVID-19 economic recovery: will it be V, U or L-shaped?

Bruno De Backer (), Hans Dewachter and Leonardo Iania
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Leonardo Iania: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2021002, LIDAM Discussion Papers LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: We use a standard macrofinancial no-arbitrage term structure model to forecast key macroe-conomic variables such as GDP. Simple adaptations to the model are proposed in order to generate plausible forecasts in the context of the COVID-19 crisis. The financial market variables included in the model are shown to improve GDP forecasts. The model forecasts of real GDP conditioned on macrofinancial information up to August 2020 suggest that the shape of the recovery will most likely be between a U and an L in most euro area countries considered, with substantial persistent losses.

Keywords: COVID-19; shape of the recovery; term structure; sovereign yields (search for similar items in EconPapers)
Pages: 22
Date: 2021-02-17
New Economics Papers: this item is included in nep-mac
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Related works:
Working Paper: Macrofinancial information on the post-COVID-19 economic recovery: Will it be V, U or L-shaped? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlf:2021002

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