The COVID-19 Recession on Both Sides of the Atlantic: A Model-Based Comparison

Roberta Cardani, Philipp Pfeiffer, Marco Ratto and Lukas Vogel

No 191, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper compares the COVID-19 recession in the euro area (EA) and the US using an estimated multiregion New Keynesian macroeconomic model. To capture quarterly dynamics from 2020 onwards, we introduce relevant extensions such as `forced' savings, extensive versus intensive employment margins, and trade in commodities as inputs to production and final demand. Transitory (`forced') savings are central to account for the behaviour of economic activity in both regions during the pandemic, which was strongly driven by private consumption, alongside shocks to domestic demand and foreign activity. The model highlights the importance of demand recovery and rising commodity prices for the inflation acceleration during 2021-22. EA inflation has a stronger supply component (including commodity prices) compared to a stronger demand component in the US.

JEL-codes: C11 E1 E20 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2023-07
New Economics Papers: this item is included in nep-dge and nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The COVID-19 recession on both sides of the Atlantic: A model-based comparison (2023)
Working Paper: The COVID-19 recession on both sides of the Atlantic: A model-based comparison (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:191

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