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Macroeconomic consequences of pandexit

Phurichai Rungcharoenkitkul

No 932, BIS Working Papers from Bank for International Settlements

Abstract: This paper proposes a quantitative framework to analyse the interactions between epidemiological and economic developments, and assesses the macroeconomic impact of managing the late stage of the Covid-19 pandemic. The framework features a susceptible-exposed- infectious-recovered (SEIR)-type model that describes the pandemic evolution conditional on society's mobility choice, and a policy unit that chooses mobility optimally to balance lives and livelihood objectives. The model can be matched to daily data via a fast and robust empirical procedure, allowing a timely policy analysis as situations evolve. As of 10 March 2021, the projected median output loss across 27 advanced and emerging market economies in 2021 is about 2 1/4% of pre-pandemic trends. This projected outcome hinges on a sustained progress in vaccination and no major epidemiological setbacks. Vaccination impediments or a third-wave surge in infection rate could raise median output loss to 3 - 3 3/4%. In the most severe scenario, virus mutations that compromise existing immunity could require more protracted lockdowns. In this case, median output loss may reach 5% in 2021 alone, with further repercussions in subsequent years.

Keywords: Covid-19 pandemic; health-economic tradeoffs; SEIR model; lockdown; vaccines (search for similar items in EconPapers)
JEL-codes: E00 I18 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2021-03
New Economics Papers: this item is included in nep-mac
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