Epidemics in the Neoclassical and New-Keynesian Models

Martin Eichenbaum, Rebelo, Sérgio and Mathias Trabandt

No 14903, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse the e§ects of an epidemic in three standard macroeconomic models. We Önd that the neoclassical model does not rationalize the positive comovement of consumption and investment observed in recessions associated with an epidemic. Intro- ducing monopolistic competition into the neoclassical model remedies this shortcoming even when prices are completely áexible. Finally, sticky prices lead to a larger recession but do not fundamentally alter the predictions of the monopolistic competition model.

Keywords: Epidemic; Comovement; investment; Recession (search for similar items in EconPapers)
JEL-codes: E1 H0 I1 (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-cwa, nep-dem, nep-dge, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
https://cepr.org/publications/DP14903 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14903

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14903

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().