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DTSTART;TZID=Europe/London:20200422T130000
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SUMMARY:Alex Mihailov (Virtual Seminar)
DESCRIPTION:Title: Quantifying the macroeconomic effects of the COVID-19 lockdown: Comparative simulations of the estimated Galí-Smets-Wouters model \nAbstract: This paper considers 3 scenarios regarding the duration of the COVID-19 pandemic lockdown\, staying for 1\, 2 or 3 quarters\, and 2 types of exceptionally rare and devastating disruptions in employment modeled as adverse labour supply shocks\, a temporary one without loss in the labour force due to deaths or a permanent one\, with deaths. The temporary labour supply shock simulations delimit a lower bound\, designed to match about 1/4 of the labour force unable to work\, and an upper bound\, matching about 3/4 of the labour force made economically inactive\, broadly consistent with estimates. The permanent labour supply shock is designed to match\, in 3 scenarios again\, up to 1% loss of the labour force due to mortality\, twice milder than the Spanish fl‡u 2% death rate. Estimated calibrations of the Galí-Smets-Wouters (2012) model for 5 major and most affected by the COVID-19 pandemic economies are simulated: the US\, Germany\, France\, Italy and Spain. The simulations suggest that even in the most optimistic scenario of a brief (lasting for 1 quarter) and mild (with 1/4 of the labour force unable to work) lockdown\, the loss of per-capita consumption (6-7% in annualised terms down from the long-run trend in the impact quarter) and per-capita output (3-4% down) will be quite damaging\, but recoverable relatively quickly\, in 1-2 years. In the most pessimistic simulated scenario of temporary loss the effects will be 10-15 times more devastating\, and the loss of output and consumption will persist beyond 10-15 years. Permanent loss of up to 1.5 percentage points of per-capita consumption and output characterises the simulated permanent labour supply shock. \nDiscussion Paper \nWatch the recording
URL:https://research.reading.ac.uk/economics/event/alex-mihailov-virtual-seminar/
CATEGORIES:Internal Seminars
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