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COVID-19-无代写
时间：2023-05-12
Application 2: Analysing the macroeconomic impact of
COVID-19 pandemic
ECOS3007 International Macroeconomics
Semester 1 2023
Lecture Slides, Topic 8
Week 10
Relevant Readings
See slides.
2 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) Source: IMF (April 2021)
4 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) Source: IMF (October 2022)
5 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) I Source: IMF (April 2021)
6 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) II Source: IMF (April 2021)
7 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) I Source: IMF (October 2022)
C H A P T E R 1 G LO B A L P R O S P E C TS A N D P O L I C I E S
9International Monetary Fund | October 2022
Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2022 WEO Update1
Difference from April
2022 WEO1
2021 2022 2023 2022 2023 2022 2023
World Output 6.0 3.2 2.7 0.0 –0.2 –0.4 –0.9
Advanced Economies 5.2 2.4 1.1 –0.1 –0.3 –0.9 –1.3
United States 5.7 1.6 1.0 –0.7 0.0 –2.1 –1.3
Euro Area 5.2 3.1 0.5 0.5 –0.7 0.3 –1.8
Germany 2.6 1.5 –0.3 0.3 –1.1 –0.6 –3.0
France 6.8 2.5 0.7 0.2 –0.3 –0.4 –0.7
Italy 6.6 3.2 –0.2 0.2 –0.9 0.9 –1.9
Spain 5.1 4.3 1.2 0.3 –0.8 –0.5 –2.1
Japan 1.7 1.7 1.6 0.0 –0.1 –0.7 –0.7
United Kingdom2 7.4 3.6 0.3 0.4 –0.2 –0.1 –0.9
Canada 4.5 3.3 1.5 –0.1 –0.3 –0.6 –1.3
Other Advanced Economies3 5.3 2.8 2.3 –0.1 –0.4 –0.3 –0.7
Emerging Market and Developing Economies 6.6 3.7 3.7 0.1 –0.2 –0.1 –0.7
Emerging and Developing Asia 7.2 4.4 4.9 –0.2 –0.1 –1.0 –0.7
China 8.1 3.2 4.4 –0.1 –0.2 –1.2 –0.7
India4 8.7 6.8 6.1 –0.6 0.0 –1.4 –0.8
ASEAN-55 3.4 5.3 4.9 0.0 –0.2 0.0 –1.0
Emerging and Developing Europe 6.8 0.0 0.6 1.4 –0.3 2.9 –0.7
Russia 4.7 –3.4 –2.3 2.6 1.2 5.1 0.0
Latin America and the Caribbean 6.9 3.5 1.7 0.5 –0.3 1.0 –0.8
Brazil 4.6 2.8 1.0 1.1 –0.1 2.0 –0.4
Mexico 4.8 2.1 1.2 –0.3 0.0 0.1 –1.3
Middle East and Central Asia 4.5 5.0 3.6 0.2 0.1 0.4 –0.1
Saudi Arabia 3.2 7.6 3.7 0.0 0.0 0.0 0.1
Sub-Saharan Africa 4.7 3.6 3.7 –0.2 –0.3 –0.2 –0.3
Nigeria 3.6 3.2 3.0 –0.2 –0.2 –0.2 –0.1
South Africa 4.9 2.1 1.1 –0.2 –0.3 0.2 –0.3
Memorandum
World Growth Based on Market Exchange Rates 5.8 2.9 2.1 0.0 –0.3 –0.6 –1.0
European Union 5.4 3.2 0.7 0.4 –0.9 0.3 –1.8
Middle East and North Africa 4.1 5.0 3.6 0.1 0.2 0.0 0.0
Emerging Market and Middle-Income Economies 6.8 3.6 3.6 0.1 –0.2 –0.2 –0.7
Low-Income Developing Countries 4.1 4.8 4.9 –0.2 –0.3 0.2 –0.5
World Trade Volume (goods and services) 10.1 4.3 2.5 0.2 –0.7 –0.7 –1.9
Imports
Advanced Economies 9.5 6.0 2.0 –0.2 –0.8 –0.1 –2.5
Emerging Market and Developing Economies 11.8 2.4 3.0 1.3 –0.3 –1.5 –1.8
Exports
Advanced Economies 8.7 4.2 2.5 –0.3 –1.0 –0.8 –2.2
Emerging Market and Developing Economies 11.8 3.3 2.9 0.1 –0.4 –0.8 –0.7
Commodity Prices (US dollars)
Oil6 65.9 41.4 –12.9 –9.0 –0.6 –13.3 0.4
Nonfuel (average based on world commodity import
weights) 26.3 7.3 –6.2 –2.8 –2.7 –4.1 –3.7
World Consumer Prices7 4.7 8.8 6.5 0.5 0.8 1.4 1.7
Advanced Economies8 3.1 7.2 4.4 0.6 1.1 1.5 1.9
Emerging Market and Developing Economies7 5.9 9.9 8.1 0.4 0.8 1.2 1.6
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 22, 2022–August 19, 2022. Economies are listed on
the basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1Difference based on rounded figures for the current, July 2022 WEO Update, and April 2022 WEO forecasts.
2See the country-specific note for the United Kingdom in the “Country Notes” section of the Statistical Appendix.
3Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
4For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as
a base year.
8 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) II Source: IMF (October 2022)
C H A P T E R 1 G LO B A L P R O S P E C TS A N D P O L I C I E S
9International Monetary Fund | October 2022
Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2022 WEO Update1
Difference from April
2022 WEO1
2021 2022 2023 2022 2023 2022 2023
World Output 6.0 3.2 2.7 0.0 –0.2 –0.4 –0.9
Advanced Economies 5.2 2.4 1.1 –0.1 –0.3 –0.9 –1.3
United States 5.7 1.6 1.0 –0.7 0.0 –2.1 –1.3
Euro Area 5.2 3.1 0.5 0.5 –0.7 0.3 –1.8
Germany 2.6 1.5 –0.3 0.3 –1.1 –0.6 –3.0
France 6.8 2.5 0.7 0.2 –0.3 –0.4 –0.7
Italy 6.6 3.2 –0.2 0.2 –0.9 0.9 –1.9
Spain 5.1 4.3 1.2 0.3 –0.8 –0.5 –2.1
Japan 1.7 1.7 1.6 0.0 –0.1 –0.7 –0.7
United Kingdom2 7.4 3.6 0.3 0.4 –0.2 –0.1 –0.9
Canada 4.5 3.3 1.5 –0.1 –0.3 –0.6 –1.3
Other Advanced Economies3 5.3 2.8 2.3 –0.1 –0.4 –0.3 –0.7
Emerging Market and Developing Economies 6.6 3.7 3.7 0.1 –0.2 –0.1 –0.7
Emerging and Developing Asia 7.2 4.4 4.9 –0.2 –0.1 –1.0 –0.7
China 8.1 3.2 4.4 –0.1 –0.2 –1.2 –0.7
India4 8.7 6.8 6.1 –0.6 0.0 –1.4 –0.8
ASEAN-55 3.4 5.3 4.9 0.0 –0.2 0.0 –1.0
Emerging and Developing Europe 6.8 0.0 0.6 1.4 –0.3 2.9 –0.7
Russia 4.7 –3.4 –2.3 2.6 1.2 5.1 0.0
Latin America and the Caribbean 6.9 3.5 1.7 0.5 –0.3 1.0 –0.8
Brazil 4.6 2.8 1.0 1.1 –0.1 2.0 –0.4
Mexico 4.8 2.1 1.2 –0.3 0.0 0.1 –1.3
Middle East and Central Asia 4.5 5.0 3.6 0.2 0.1 0.4 –0.1
Saudi Arabia 3.2 7.6 3.7 0.0 0.0 0.0 0.1
Sub-Saharan Africa 4.7 3.6 3.7 –0.2 –0.3 –0.2 –0.3
Nigeria 3.6 3.2 3.0 –0.2 –0.2 –0.2 –0.1
South Africa 4.9 2.1 1.1 –0.2 –0.3 0.2 –0.3
Memorandum
World Growth Based on Market Exchange Rates 5.8 2.9 2.1 0.0 –0.3 –0.6 –1.0
European Union 5.4 3.2 0.7 0.4 –0.9 0.3 –1.8
Middle East and North Africa 4.1 5.0 3.6 0.1 0.2 0.0 0.0
Emerging Market and Middle-Income Economies 6.8 3.6 3.6 0.1 –0.2 –0.2 –0.7
Low-Income Developing Countries 4.1 4.8 4.9 –0.2 –0.3 0.2 –0.5
World Trade Volume (goods and services) 10.1 4.3 2.5 0.2 –0.7 –0.7 –1.9
Imports
Advanced Economies 9.5 6.0 2.0 –0.2 –0.8 –0.1 –2.5
Emerging Market and Developing Economies 11.8 2.4 3.0 1.3 –0.3 –1.5 –1.8
Exports
Advanced Economies 8.7 4.2 2.5 –0.3 –1.0 –0.8 –2.2
Emerging Market and Developing Economies 11.8 3.3 2.9 0.1 –0.4 –0.8 –0.7
Commodity Prices (US dollars)
Oil6 65.9 41.4 –12.9 –9.0 –0.6 –13.3 0.4
Nonfuel (average based on world commodity import
weights) 26.3 7.3 –6.2 –2.8 –2.7 –4.1 –3.7
World Consumer Prices7 4.7 8.8 6.5 0.5 0.8 1.4 1.7
Advanced Economies8 3.1 7.2 4.4 0.6 1.1 1.5 1.9
Emerging Market and Developing Economies7 5.9 9.9 8.1 0.4 0.8 1.2 1.6
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 22, 2022–August 19, 2022. Economies are listed on
the basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1Difference based on rounded figures for the current, July 2022 WEO Update, and April 2022 WEO forecasts.
2See the country-specific note for the United Kingdom in the “Country Notes” section of the Statistical Appendix.
3Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
4For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as
a base year.
9 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2024) Divergent losses and recovery paths
IMFs projection from April 2021 Outlook on average annual loss in per
capita GDP over 2020-2024 (relative to pre-pandemic forecasts):
advanced economies: 2.3%
emerging markets: 4.7%
low-income countries: 5.7%
Main reasons for the divergent losses and recovery paths:
1 Lower-income countries have less access to COVID-19 vacines.
2 Higher-income countries have more scal capacity to launch above-the-line
scal measures.
Chinas economy returned to its pre-pandemic level in 2020.Q4;
US economy suprassed its pre-pandemic output forecast (in the absence of the
pandemic) in 2021.Q3, while other, lower-income countries are not expected to
so until 2023 or later.
10 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Source: IMF
11 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Source: IMF
12 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Impact of policy responses?
Without above-the-line monetary and scal policy responses, the global
GDP loss could have been three times worse (based on IMF projection):
monetary policy responses: unprecedented decrease in policy interest rates
globally (e¤ectively 0% rates for some countries, including Australia),
quantitative easings;
scal policy responses: US$ 16 trillion in various scal support (up to Q2
2021).
13 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
COVID-19s impact on the Australian economy
GDP growth
14 / 40
COVID-19s impact on the Australian economy
GDP growth cost and projection Source: RBAs Statement on Monetary Policy, MAY 2021
Table 5.1: Output Growth and Inflation Forecasts(a)
Per cent
Year-ended
Dec
2020
June
2021
Dec
2021
June
2022
Dec
2022
June
2023
GDP growth −1.1 9¼ 4¾ 4 3½ 3
(previous) (−2) (7¾) (3½) (3¼) (3½) (3)
Unemployment rate(b) 6.8 5¼ 5 4¾ 4½ 4½
(previous) (6.8) (6½) (6) (5½) (5½) (5¼)
CPI inflation 0.9 3¼ 1¾ 1¼ 1½ 2
(previous) (0.9) (3) (1½) (1½) (1½) (1¾)
Trimmed mean inflation 1.2 1½ 1½ 1½ 1¾ 2
(previous) (1.2) (1¼) (1¼) (1½) (1½) (1¾)
Year-average
2020 2020/21 2021 2021/22 2022 2022/23
GDP growth −2.4 1 5¼ 5 4 3¼
(previous) (−2¾) (¼) (4) (3¾) (3¼) (3¼)
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COVID-19s impact on the Australian economy
GDP growth cost and projection Source: RBAs Statement on Monetary Policy, AUGUST 2022
Table 5.1: Output Growth and Inflation Forecasts(a)
Per cent
Year-ended
Jun
2022
Dec
2022
Jun
2023
Dec
2023
Jun
2024
Dec
2024
GDP growth 3½ 3¼ 2¼ 1¾ 1¾ 1¾
(previous) (3½) (4¼) (3) (2) (2) (n/a)
Unemployment rate(b) 3.8 3¼ 3½ 3½ 3¾ 4
(previous)
(3¾) (3½) (3½) (3½) (n/a)
CPI inflation 6.1 7¾ 6¼ 4¼ 3½ 3
(previous)
(6) (4¼) (3¼) (3) (n/a)
Trimmed mean
inflation
4.9 6 5 3¾ 3¼ 3
(previous)
(4¾) (3½) (3¼) (3) (n/a)
Year-average
2021/22 2022 2022/23 2023 2023/24 2024
GDP growth 3¾ 4 3½ 2¼ 1¾ 1¾
(previous) (3¾) (4½) (4½) (2¾) (2) (n/a)
16 / 40
COVID-19s impact on the Australian economy
Unemployment rate
17 / 40
COVID-19s impact on the Australian economy
Income and consumption
18 / 40
COVID-19s impact on the Australian economy
Ination rate
19 / 40
COVID-19s impact on the Australian economy
Cash rate
20 / 40
COVID-19s impact on the Australian economy
Monetary aggregates
21 / 40
COVID-19s impact on the Australian economy
RBAs government bond holding
22 / 40
COVID-19s impact on the Australian economy
Commonwealth governments budget balance
23 / 40
COVID-19s impact on the Australian economy
Commonwealth governments scal support Source: Department of the Treasury (from
2021-2022 budget)
Overall scal support since the onset of the pandemic (up to Q2 2021): $311
billion (around 16% of GDP), e.g.
$90 billion JobKeeper payment;
$66 billion JobSeeker supplementary payment;
$35 billion cash ow bloost for small amd medium sized business.
24 / 40
COVID-19s impact on the Australian economy
Exchange rates
25 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Macroeconomic modelling of COVID-19 pandemic
In general there are two approaches of modelling the pandemic:
1 Endogenous modelling of the pandemic using SIR
(Susceptible-Infected-Removed) epidemiological model + an existing
macroeconomic model, e.g. as in:
Alvarez, Argente and Lippi (2020), Atkeson (2020), Boissay et al. (2020),
Eichenbaum, Rebelo and Trabandt (2020), Jones, Philippon and Venkateswaran
(2020).
2 Exogenous modelling, i.e. the pandemic is modelled as an exogenous shock
(or set of shocks) to the economy within a macroeconomic model, e.g. as in:
Faria-e Castro (2020), Fornaro and Wolf (2020), Lie (2021), McKibbin and
Fernando (2020a,b), Juhro, Lie, and Sasongko (2022).
Pros and cons of each approach?
26 / 40
Macroeconomic modelling of COVID-19 pandemic
Modelling the pandemic as exogenous shocks within a macroeconomic model, i.e. the "pandemic
shocks"
Faria-e Castro (2020): negative shocks to the utility of consumption in the
contact-intensive service sector.
Fornaro and Wolf (2020): negative shocks to the productivity growth rate.
McKibbin and Fernando (2020a,b):
supply-side shocks: labor supply, total factor productivity (TFP);
demand-side shocks: preference (consumer spending), risk premium,
government expenditure.
Lie (2021):
supply-side shocks: labor supply;
demand-side shocks: preference (consumer spending).
27 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
AA-DD model with exogenous "pandemic shocks"
Assumptions
Qualitative, instead of quantitative model (as in the standard AA-DD model).
The pandemic is modelled as exogenous shocks:
shocks to the goods market: consumer spending shock (a demand-side
shock) and labor supply shock (a supply-side shock);
shocks to the asset markets : relative risk-premium shock in the UIP
condition (a demand-side shock).
There is no e¤ect of foreign output on current account hence, scal
support in the foreign countries are immaterial to the domestic economy.
The rest of the model is the same as in the standard AA-DD model.
28 / 40
AA-DD model with exogenous "pandemic shocks" I
The model equations (goods market and asset markets equilibria)
Y = C + I + G + CA+ h"y
C = (1 s)Y ; or C = (1 s)Y bR
CA = aE mY
M s
P
= L(R;Y )
R = R +
E e E
E
+ "R
Notes:
the parameters s , a, m, h, b are all > 0;
we could either assume C = (1 s)Y (standard DD-AA model) or
C = (1 s)Y bR (non-standard DD-model with direct e¤ect of monetary
policy on consumption) note: the 2nd form means that a monetary policy
expansion (increase in M s or decrease in R) will also shift the DD curve to the
right);
AA-DD model with exogenous "pandemic shocks" II
The model equations (goods market and asset markets equilibria)
"y is the reduced-form output shock, encompassing the consumer-spending
shock (demand-side shock) and labor supply shock (supply-side shock);
"R is the relative risk-premium shock, i.e. "R > 0 means the riskiness of
domestic-currency assets has increased relative to foreign-currency assets.
AA-DD model with exogenous "pandemic shocks"
Pandemic shock 1: A negative output (consumer spending/demand) shock
31 / 40
AA-DD model with exogenous "pandemic shocks"
Pandemic shock 2: A negative or positive risk premium shock
32 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 1: Negative output shock and positive risk-premium shock, WITHOUT domestic
scal-monetary support
33 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 2: Negative output shock and positive risk-premium shock, WITH domestic
scal-monetary support
34 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 3: Negative output shock and negative risk-premium shock, WITHOUT domestic
scal-monetary support
35 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 4: Negative output shock and negative risk-premium shock, WITH domestic
scal-monetary support
36 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 5: Negative output shock and positive risk-premium shock, WITH domestic
scal-monetary support AND foreign monetary expansion
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AA-DD model with exogenous "pandemic shocks"
Case scenario 6: Domestic e¤ect of an expectation of a faster and imminent economic recovery
("end of pandemic") in the foreign countries, i.e. higher expected foreign interest rate (GFC-like
"taper tantrum")
38 / 40
References cited I
IMF World Economic Outlook (April 2021):
https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-
outlook-april-2021
RBA Statement on Monetary Policy (May 2021):
https://www.rba.gov.au/publications/smp/2021/may/
Alvarez, Fernando E, David Argente, and Francesco Lippi. 2020. A simple
planning problem for Covid-19 lockdown.National Bureau of Economic Research
Atkeson, Andrew. 2020. What will be the economic impact of covid-19 in the US?
Rough estimates of disease scenarios.National Bureau of Economic Research.
Boissay, Frederic, Daniel Rees, Phurichai Rungcharoenkitkul, et al. 2020. Dealing
with Covid-19: understanding the policy choices. Bank for International
Settlements.
Eichenbaum, Martin S, Sergio Rebelo, and Mathias Trabandt. 2020. The
macroeconomics of epidemics.National Bureau of Economic Research.
Faria-e Castro, Miguel. 2020. Fiscal policy during a pandemic. FRB St. Louis
Working Paper, (2020-006).
References cited II
Fornaro, Luca, and Martin Wolf. 2020. Covid-19 coronavirus and macroeconomic
policy.
Jones, Callum J, Thomas Philippon, and Venky Venkateswaran. 2020. Optimal
mitigation policies in a pandemic: Social distancing and working from home.
National Bureau of Economic Research.
Juhro, Solikin A, Denny Lie, and Aryo Sasongko. 2022. "An estimated
open-economy DSGE model for the evaluation of central bank policy mix." Bulletin
of Monetary Economics and Banking (forthcoming).
Lie, Denny. 2021. "Implications of state-dependent pricing for DSGE model-based
policy analysis in Indonesia." University of Sydney WP, Economic Analysis and
Policy 71(c).
COVID-19 pandemic
ECOS3007 International Macroeconomics
Semester 1 2023
Lecture Slides, Topic 8
Week 10
Relevant Readings
See slides.
2 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) Source: IMF (April 2021)
4 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) Source: IMF (October 2022)
5 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) I Source: IMF (April 2021)
6 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) II Source: IMF (April 2021)
7 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) I Source: IMF (October 2022)
C H A P T E R 1 G LO B A L P R O S P E C TS A N D P O L I C I E S
9International Monetary Fund | October 2022
Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2022 WEO Update1
Difference from April
2022 WEO1
2021 2022 2023 2022 2023 2022 2023
World Output 6.0 3.2 2.7 0.0 –0.2 –0.4 –0.9
Advanced Economies 5.2 2.4 1.1 –0.1 –0.3 –0.9 –1.3
United States 5.7 1.6 1.0 –0.7 0.0 –2.1 –1.3
Euro Area 5.2 3.1 0.5 0.5 –0.7 0.3 –1.8
Germany 2.6 1.5 –0.3 0.3 –1.1 –0.6 –3.0
France 6.8 2.5 0.7 0.2 –0.3 –0.4 –0.7
Italy 6.6 3.2 –0.2 0.2 –0.9 0.9 –1.9
Spain 5.1 4.3 1.2 0.3 –0.8 –0.5 –2.1
Japan 1.7 1.7 1.6 0.0 –0.1 –0.7 –0.7
United Kingdom2 7.4 3.6 0.3 0.4 –0.2 –0.1 –0.9
Canada 4.5 3.3 1.5 –0.1 –0.3 –0.6 –1.3
Other Advanced Economies3 5.3 2.8 2.3 –0.1 –0.4 –0.3 –0.7
Emerging Market and Developing Economies 6.6 3.7 3.7 0.1 –0.2 –0.1 –0.7
Emerging and Developing Asia 7.2 4.4 4.9 –0.2 –0.1 –1.0 –0.7
China 8.1 3.2 4.4 –0.1 –0.2 –1.2 –0.7
India4 8.7 6.8 6.1 –0.6 0.0 –1.4 –0.8
ASEAN-55 3.4 5.3 4.9 0.0 –0.2 0.0 –1.0
Emerging and Developing Europe 6.8 0.0 0.6 1.4 –0.3 2.9 –0.7
Russia 4.7 –3.4 –2.3 2.6 1.2 5.1 0.0
Latin America and the Caribbean 6.9 3.5 1.7 0.5 –0.3 1.0 –0.8
Brazil 4.6 2.8 1.0 1.1 –0.1 2.0 –0.4
Mexico 4.8 2.1 1.2 –0.3 0.0 0.1 –1.3
Middle East and Central Asia 4.5 5.0 3.6 0.2 0.1 0.4 –0.1
Saudi Arabia 3.2 7.6 3.7 0.0 0.0 0.0 0.1
Sub-Saharan Africa 4.7 3.6 3.7 –0.2 –0.3 –0.2 –0.3
Nigeria 3.6 3.2 3.0 –0.2 –0.2 –0.2 –0.1
South Africa 4.9 2.1 1.1 –0.2 –0.3 0.2 –0.3
Memorandum
World Growth Based on Market Exchange Rates 5.8 2.9 2.1 0.0 –0.3 –0.6 –1.0
European Union 5.4 3.2 0.7 0.4 –0.9 0.3 –1.8
Middle East and North Africa 4.1 5.0 3.6 0.1 0.2 0.0 0.0
Emerging Market and Middle-Income Economies 6.8 3.6 3.6 0.1 –0.2 –0.2 –0.7
Low-Income Developing Countries 4.1 4.8 4.9 –0.2 –0.3 0.2 –0.5
World Trade Volume (goods and services) 10.1 4.3 2.5 0.2 –0.7 –0.7 –1.9
Imports
Advanced Economies 9.5 6.0 2.0 –0.2 –0.8 –0.1 –2.5
Emerging Market and Developing Economies 11.8 2.4 3.0 1.3 –0.3 –1.5 –1.8
Exports
Advanced Economies 8.7 4.2 2.5 –0.3 –1.0 –0.8 –2.2
Emerging Market and Developing Economies 11.8 3.3 2.9 0.1 –0.4 –0.8 –0.7
Commodity Prices (US dollars)
Oil6 65.9 41.4 –12.9 –9.0 –0.6 –13.3 0.4
Nonfuel (average based on world commodity import
weights) 26.3 7.3 –6.2 –2.8 –2.7 –4.1 –3.7
World Consumer Prices7 4.7 8.8 6.5 0.5 0.8 1.4 1.7
Advanced Economies8 3.1 7.2 4.4 0.6 1.1 1.5 1.9
Emerging Market and Developing Economies7 5.9 9.9 8.1 0.4 0.8 1.2 1.6
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 22, 2022–August 19, 2022. Economies are listed on
the basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1Difference based on rounded figures for the current, July 2022 WEO Update, and April 2022 WEO forecasts.
2See the country-specific note for the United Kingdom in the “Country Notes” section of the Statistical Appendix.
3Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
4For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as
a base year.
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COVID-19 global economic impact
GDP growth cost and projections (2021-2023) II Source: IMF (October 2022)
C H A P T E R 1 G LO B A L P R O S P E C TS A N D P O L I C I E S
9International Monetary Fund | October 2022
Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2022 WEO Update1
Difference from April
2022 WEO1
2021 2022 2023 2022 2023 2022 2023
World Output 6.0 3.2 2.7 0.0 –0.2 –0.4 –0.9
Advanced Economies 5.2 2.4 1.1 –0.1 –0.3 –0.9 –1.3
United States 5.7 1.6 1.0 –0.7 0.0 –2.1 –1.3
Euro Area 5.2 3.1 0.5 0.5 –0.7 0.3 –1.8
Germany 2.6 1.5 –0.3 0.3 –1.1 –0.6 –3.0
France 6.8 2.5 0.7 0.2 –0.3 –0.4 –0.7
Italy 6.6 3.2 –0.2 0.2 –0.9 0.9 –1.9
Spain 5.1 4.3 1.2 0.3 –0.8 –0.5 –2.1
Japan 1.7 1.7 1.6 0.0 –0.1 –0.7 –0.7
United Kingdom2 7.4 3.6 0.3 0.4 –0.2 –0.1 –0.9
Canada 4.5 3.3 1.5 –0.1 –0.3 –0.6 –1.3
Other Advanced Economies3 5.3 2.8 2.3 –0.1 –0.4 –0.3 –0.7
Emerging Market and Developing Economies 6.6 3.7 3.7 0.1 –0.2 –0.1 –0.7
Emerging and Developing Asia 7.2 4.4 4.9 –0.2 –0.1 –1.0 –0.7
China 8.1 3.2 4.4 –0.1 –0.2 –1.2 –0.7
India4 8.7 6.8 6.1 –0.6 0.0 –1.4 –0.8
ASEAN-55 3.4 5.3 4.9 0.0 –0.2 0.0 –1.0
Emerging and Developing Europe 6.8 0.0 0.6 1.4 –0.3 2.9 –0.7
Russia 4.7 –3.4 –2.3 2.6 1.2 5.1 0.0
Latin America and the Caribbean 6.9 3.5 1.7 0.5 –0.3 1.0 –0.8
Brazil 4.6 2.8 1.0 1.1 –0.1 2.0 –0.4
Mexico 4.8 2.1 1.2 –0.3 0.0 0.1 –1.3
Middle East and Central Asia 4.5 5.0 3.6 0.2 0.1 0.4 –0.1
Saudi Arabia 3.2 7.6 3.7 0.0 0.0 0.0 0.1
Sub-Saharan Africa 4.7 3.6 3.7 –0.2 –0.3 –0.2 –0.3
Nigeria 3.6 3.2 3.0 –0.2 –0.2 –0.2 –0.1
South Africa 4.9 2.1 1.1 –0.2 –0.3 0.2 –0.3
Memorandum
World Growth Based on Market Exchange Rates 5.8 2.9 2.1 0.0 –0.3 –0.6 –1.0
European Union 5.4 3.2 0.7 0.4 –0.9 0.3 –1.8
Middle East and North Africa 4.1 5.0 3.6 0.1 0.2 0.0 0.0
Emerging Market and Middle-Income Economies 6.8 3.6 3.6 0.1 –0.2 –0.2 –0.7
Low-Income Developing Countries 4.1 4.8 4.9 –0.2 –0.3 0.2 –0.5
World Trade Volume (goods and services) 10.1 4.3 2.5 0.2 –0.7 –0.7 –1.9
Imports
Advanced Economies 9.5 6.0 2.0 –0.2 –0.8 –0.1 –2.5
Emerging Market and Developing Economies 11.8 2.4 3.0 1.3 –0.3 –1.5 –1.8
Exports
Advanced Economies 8.7 4.2 2.5 –0.3 –1.0 –0.8 –2.2
Emerging Market and Developing Economies 11.8 3.3 2.9 0.1 –0.4 –0.8 –0.7
Commodity Prices (US dollars)
Oil6 65.9 41.4 –12.9 –9.0 –0.6 –13.3 0.4
Nonfuel (average based on world commodity import
weights) 26.3 7.3 –6.2 –2.8 –2.7 –4.1 –3.7
World Consumer Prices7 4.7 8.8 6.5 0.5 0.8 1.4 1.7
Advanced Economies8 3.1 7.2 4.4 0.6 1.1 1.5 1.9
Emerging Market and Developing Economies7 5.9 9.9 8.1 0.4 0.8 1.2 1.6
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 22, 2022–August 19, 2022. Economies are listed on
the basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1Difference based on rounded figures for the current, July 2022 WEO Update, and April 2022 WEO forecasts.
2See the country-specific note for the United Kingdom in the “Country Notes” section of the Statistical Appendix.
3Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
4For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as
a base year.
9 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2024) Divergent losses and recovery paths
IMFs projection from April 2021 Outlook on average annual loss in per
capita GDP over 2020-2024 (relative to pre-pandemic forecasts):
advanced economies: 2.3%
emerging markets: 4.7%
low-income countries: 5.7%
Main reasons for the divergent losses and recovery paths:
1 Lower-income countries have less access to COVID-19 vacines.
2 Higher-income countries have more scal capacity to launch above-the-line
scal measures.
Chinas economy returned to its pre-pandemic level in 2020.Q4;
US economy suprassed its pre-pandemic output forecast (in the absence of the
pandemic) in 2021.Q3, while other, lower-income countries are not expected to
so until 2023 or later.
10 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Source: IMF
11 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Source: IMF
12 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Impact of policy responses?
Without above-the-line monetary and scal policy responses, the global
GDP loss could have been three times worse (based on IMF projection):
monetary policy responses: unprecedented decrease in policy interest rates
globally (e¤ectively 0% rates for some countries, including Australia),
quantitative easings;
scal policy responses: US$ 16 trillion in various scal support (up to Q2
2021).
13 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
COVID-19s impact on the Australian economy
GDP growth
14 / 40
COVID-19s impact on the Australian economy
GDP growth cost and projection Source: RBAs Statement on Monetary Policy, MAY 2021
Table 5.1: Output Growth and Inflation Forecasts(a)
Per cent
Year-ended
Dec
2020
June
2021
Dec
2021
June
2022
Dec
2022
June
2023
GDP growth −1.1 9¼ 4¾ 4 3½ 3
(previous) (−2) (7¾) (3½) (3¼) (3½) (3)
Unemployment rate(b) 6.8 5¼ 5 4¾ 4½ 4½
(previous) (6.8) (6½) (6) (5½) (5½) (5¼)
CPI inflation 0.9 3¼ 1¾ 1¼ 1½ 2
(previous) (0.9) (3) (1½) (1½) (1½) (1¾)
Trimmed mean inflation 1.2 1½ 1½ 1½ 1¾ 2
(previous) (1.2) (1¼) (1¼) (1½) (1½) (1¾)
Year-average
2020 2020/21 2021 2021/22 2022 2022/23
GDP growth −2.4 1 5¼ 5 4 3¼
(previous) (−2¾) (¼) (4) (3¾) (3¼) (3¼)
15 / 40
COVID-19s impact on the Australian economy
GDP growth cost and projection Source: RBAs Statement on Monetary Policy, AUGUST 2022
Table 5.1: Output Growth and Inflation Forecasts(a)
Per cent
Year-ended
Jun
2022
Dec
2022
Jun
2023
Dec
2023
Jun
2024
Dec
2024
GDP growth 3½ 3¼ 2¼ 1¾ 1¾ 1¾
(previous) (3½) (4¼) (3) (2) (2) (n/a)
Unemployment rate(b) 3.8 3¼ 3½ 3½ 3¾ 4
(previous)
(3¾) (3½) (3½) (3½) (n/a)
CPI inflation 6.1 7¾ 6¼ 4¼ 3½ 3
(previous)
(6) (4¼) (3¼) (3) (n/a)
Trimmed mean
inflation
4.9 6 5 3¾ 3¼ 3
(previous)
(4¾) (3½) (3¼) (3) (n/a)
Year-average
2021/22 2022 2022/23 2023 2023/24 2024
GDP growth 3¾ 4 3½ 2¼ 1¾ 1¾
(previous) (3¾) (4½) (4½) (2¾) (2) (n/a)
16 / 40
COVID-19s impact on the Australian economy
Unemployment rate
17 / 40
COVID-19s impact on the Australian economy
Income and consumption
18 / 40
COVID-19s impact on the Australian economy
Ination rate
19 / 40
COVID-19s impact on the Australian economy
Cash rate
20 / 40
COVID-19s impact on the Australian economy
Monetary aggregates
21 / 40
COVID-19s impact on the Australian economy
RBAs government bond holding
22 / 40
COVID-19s impact on the Australian economy
Commonwealth governments budget balance
23 / 40
COVID-19s impact on the Australian economy
Commonwealth governments scal support Source: Department of the Treasury (from
2021-2022 budget)
Overall scal support since the onset of the pandemic (up to Q2 2021): $311
billion (around 16% of GDP), e.g.
$90 billion JobKeeper payment;
$66 billion JobSeeker supplementary payment;
$35 billion cash ow bloost for small amd medium sized business.
24 / 40
COVID-19s impact on the Australian economy
Exchange rates
25 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Macroeconomic modelling of COVID-19 pandemic
In general there are two approaches of modelling the pandemic:
1 Endogenous modelling of the pandemic using SIR
(Susceptible-Infected-Removed) epidemiological model + an existing
macroeconomic model, e.g. as in:
Alvarez, Argente and Lippi (2020), Atkeson (2020), Boissay et al. (2020),
Eichenbaum, Rebelo and Trabandt (2020), Jones, Philippon and Venkateswaran
(2020).
2 Exogenous modelling, i.e. the pandemic is modelled as an exogenous shock
(or set of shocks) to the economy within a macroeconomic model, e.g. as in:
Faria-e Castro (2020), Fornaro and Wolf (2020), Lie (2021), McKibbin and
Fernando (2020a,b), Juhro, Lie, and Sasongko (2022).
Pros and cons of each approach?
26 / 40
Macroeconomic modelling of COVID-19 pandemic
Modelling the pandemic as exogenous shocks within a macroeconomic model, i.e. the "pandemic
shocks"
Faria-e Castro (2020): negative shocks to the utility of consumption in the
contact-intensive service sector.
Fornaro and Wolf (2020): negative shocks to the productivity growth rate.
McKibbin and Fernando (2020a,b):
supply-side shocks: labor supply, total factor productivity (TFP);
demand-side shocks: preference (consumer spending), risk premium,
government expenditure.
Lie (2021):
supply-side shocks: labor supply;
demand-side shocks: preference (consumer spending).
27 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
AA-DD model with exogenous "pandemic shocks"
Assumptions
Qualitative, instead of quantitative model (as in the standard AA-DD model).
The pandemic is modelled as exogenous shocks:
shocks to the goods market: consumer spending shock (a demand-side
shock) and labor supply shock (a supply-side shock);
shocks to the asset markets : relative risk-premium shock in the UIP
condition (a demand-side shock).
There is no e¤ect of foreign output on current account hence, scal
support in the foreign countries are immaterial to the domestic economy.
The rest of the model is the same as in the standard AA-DD model.
28 / 40
AA-DD model with exogenous "pandemic shocks" I
The model equations (goods market and asset markets equilibria)
Y = C + I + G + CA+ h"y
C = (1 s)Y ; or C = (1 s)Y bR
CA = aE mY
M s
P
= L(R;Y )
R = R +
E e E
E
+ "R
Notes:
the parameters s , a, m, h, b are all > 0;
we could either assume C = (1 s)Y (standard DD-AA model) or
C = (1 s)Y bR (non-standard DD-model with direct e¤ect of monetary
policy on consumption) note: the 2nd form means that a monetary policy
expansion (increase in M s or decrease in R) will also shift the DD curve to the
right);
AA-DD model with exogenous "pandemic shocks" II
The model equations (goods market and asset markets equilibria)
"y is the reduced-form output shock, encompassing the consumer-spending
shock (demand-side shock) and labor supply shock (supply-side shock);
"R is the relative risk-premium shock, i.e. "R > 0 means the riskiness of
domestic-currency assets has increased relative to foreign-currency assets.
AA-DD model with exogenous "pandemic shocks"
Pandemic shock 1: A negative output (consumer spending/demand) shock
31 / 40
AA-DD model with exogenous "pandemic shocks"
Pandemic shock 2: A negative or positive risk premium shock
32 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 1: Negative output shock and positive risk-premium shock, WITHOUT domestic
scal-monetary support
33 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 2: Negative output shock and positive risk-premium shock, WITH domestic
scal-monetary support
34 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 3: Negative output shock and negative risk-premium shock, WITHOUT domestic
scal-monetary support
35 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 4: Negative output shock and negative risk-premium shock, WITH domestic
scal-monetary support
36 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 5: Negative output shock and positive risk-premium shock, WITH domestic
scal-monetary support AND foreign monetary expansion
37 / 40
AA-DD model with exogenous "pandemic shocks"
Case scenario 6: Domestic e¤ect of an expectation of a faster and imminent economic recovery
("end of pandemic") in the foreign countries, i.e. higher expected foreign interest rate (GFC-like
"taper tantrum")
38 / 40
References cited I
IMF World Economic Outlook (April 2021):
https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-
outlook-april-2021
RBA Statement on Monetary Policy (May 2021):
https://www.rba.gov.au/publications/smp/2021/may/
Alvarez, Fernando E, David Argente, and Francesco Lippi. 2020. A simple
planning problem for Covid-19 lockdown.National Bureau of Economic Research
Atkeson, Andrew. 2020. What will be the economic impact of covid-19 in the US?
Rough estimates of disease scenarios.National Bureau of Economic Research.
Boissay, Frederic, Daniel Rees, Phurichai Rungcharoenkitkul, et al. 2020. Dealing
with Covid-19: understanding the policy choices. Bank for International
Settlements.
Eichenbaum, Martin S, Sergio Rebelo, and Mathias Trabandt. 2020. The
macroeconomics of epidemics.National Bureau of Economic Research.
Faria-e Castro, Miguel. 2020. Fiscal policy during a pandemic. FRB St. Louis
Working Paper, (2020-006).
References cited II
Fornaro, Luca, and Martin Wolf. 2020. Covid-19 coronavirus and macroeconomic
policy.
Jones, Callum J, Thomas Philippon, and Venky Venkateswaran. 2020. Optimal
mitigation policies in a pandemic: Social distancing and working from home.
National Bureau of Economic Research.
Juhro, Solikin A, Denny Lie, and Aryo Sasongko. 2022. "An estimated
open-economy DSGE model for the evaluation of central bank policy mix." Bulletin
of Monetary Economics and Banking (forthcoming).
Lie, Denny. 2021. "Implications of state-dependent pricing for DSGE model-based
policy analysis in Indonesia." University of Sydney WP, Economic Analysis and
Policy 71(c).
