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COVID-19 and Emerging Markets: A SIR Model, Demand Shocks and Capital Flows

Cem Çakmaklı, Selva Demiralp, Sebnem Kalemli-Ozcan (), Sevcan Yesiltas and Muhammed A. Yildirim

No 27191, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We quantify the macroeconomic effects of COVID-19 for a small open economy. We use a two country framework combined with a sectoral-SIR model to estimate the effects of collapses in foreign demand and supply. The small open economy suffers from domestic demand and supply shocks due to its own pandemic. In addition, there are external shocks coming from rest of the world (country two). Aggregate exports of the small open economy go down when foreign demand goes down, and aggregate imports suffer from lockdowns in the rest of the world. We calibrate the model to Turkey. Our results show that the optimal policy, which yields the lowest output loss and saves the maximum number of lives, for the small open economy, is an early and globally coordinated full lockdown of 39 days.

JEL-codes: E01 F23 F41 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-mac and nep-opm
Note: IFM
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