Fiscal policy during a pandemic
By Miguel Faria-e-Castro. Journal of Economic Dynamics and Control, 2020
315 citations recorded by the source corpus.
I study the effects of the 2020 coronavirus outbreak in the United States and subsequent fiscal policy response in a nonlinear DSGE model. The pandemic is a shock to the utility of contact-intensive services that propagates to other sectors via general equilibrium, triggering a deep recession. I use a calibrated version of the model that matches the path of the US unemployment rate in 2020 to analyze different types of fiscal policies. I find that the pandemic shock changes the ranking of policy multipliers. Unemployment benefits are the most effective tool to stabilize income for borrowers, who are the hardest hit during a pandemic, while liquidity assistance programs are the most effective if the policy objective is to stabilize employment in the affected sector. I also study the effects of the $2.2 trillion CARES Act of 2020.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/48a063162fd61361070be1cb0f2a5779e1ad4534
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Citations in the corpus
- Firm-Level Exposure to Epidemic Diseases: Covid-19, SARS, and H1N1 (2020, unknown): “5 negative shock to the growth rate in productivity) and Faria-e Castro (2020) (modeling the pandemic as a large negative shock to the utility of consumption).4 In finance, several studies highlight the credit market access and liquidity consequences of the Covid-19 pandemic (Au et al. (2020);…”
- Sectoral Effects of Social Distancing (2020, background): “Faria-e Castro, M. (2020). Fiscal policy during a pandemic.”
- Covid-19 Infection Externalities: Trading Off Lives vs. Livelihoods (2020, unknown): “Literature In the economics literature, our work is most closely related to Goldman and Lightwood (2002), Gersovitz and Hammer (2003, 2004) and Gersovitz (2011) who study externalities of health interventions for infectious diseases in SIS and SIR models.”
- Effects of social distancing policy on labor market outcomes (2020, unknown): “…insurance claims showed steep increases from mid-March 2020 onward, questions remain regarding how much of the employment changes were due to state policy as opposed to federal policy (such as the CARES Act—Faria-e Castro, 2020; Humphries et al., 2020) or personal responses to the perceived risks.”