Covid-19 Coronavirus and Macroeconomic Policy

Luca Fornaro and ,
Authors registered in the RePEc Author Service: Martin Wolf

No 14529, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We provide a simple model to understand some macroeconomic implications of the coronavirus epidemic. We focus on a scenario in which the Covid-19 outbreak causes a persistent supply disruption, potentially extending beyond the end of the epidemic. We show that the spread of the virus might generate a demand-driven slump, give rise to a supply-demand doom loop, and open the door to stagnation traps induced by pessimistic animal spirits. Aggressive policies to support investment can reverse the supply-demand doom loop and jumpstart the economy out of stagnation traps.

Keywords: Coronavirus pandemic; Covid-19; Supply-demand doom loop; Stagnation traps; Monetary policy; Fiscal policy; Productivity growth; Hysteresis (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 E62 F43 O42 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (164)

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Working Paper: Covid-19 Coronavirus and Macroeconomic Policy (2020)
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