COVID-19 PANDEMIA: ECONOMIC IMPACT AND ANTICYCLICAL POLICIES. SIMULATIONS BASED ON A COMPUTABLE GENERAL EQUILIBRIUM MODEL OF ARGENTINA

A computable general equilibrium model of Argentina was adapted to analyze the impact of the Covid-19 pandemia on the economy and to assess the mitigating effects of anticyclical policies. The simulations are consistent with the observed performance of GDP, unemployment and social welfare. The anticyclical program is effective in reducing the short term adverse impact on several economic and social indicators, particularly, on social welfare. But over the medium and long term, smaller capital accumulation and sovereign indebtment imply lower growth and welfare. A sustainable fiscal policy –that stabilizes the debt-GDP ratio– allows the economy to, through higher investment and employment creation recover the base scenario levels (only) after 10 years. © 2023, Revista de Analisis Economico. All Rights Reserved.

Scenario Analysis on the Macroeconomic Impact of COVID-19: A Computable General Equilibrium Approach

This article uses the Computable General Equilibrium Model (CGE) of an open economy to analyze the impact of the COVID-19 pandemic on an open economy and industry sub-sectors, using the 2017 China Social Accounting Matrix (SAM) table data. The results have shown that, overall, the COVID-19 pandemic has harmed the economy extensively. The residential sector has been the most severely affected sector, particularly the hotels and catering services industries. Resident consumption demand is the most deeply affected part of all industries in all scenarios. Stabilizing employment and expanding demand is therefore an important mission for the government.

Investigating COVID-19 spillovers in the US economy with a dynamic CGE model

PurposeThe recent COVID-19 is forcing governments to implement policies on a large scale to counter its spread. A central issue in the economic debate is the effective quantification of the impact that the policies may implicitly have on the economy. This study quantifies the effects of lockdown in the United States.Design/methodology/approach The study uses a dynamic computable general equilibrium (DCGE) model calibrated on a social accounting matrix (SAM). The lockdown policy is applied on the supply side, by using a reduction in the production according to the closing time of each industry. The reduction in the demand is also applied, throughout the contraction of the household consumption that is diversified by the commodities. In order to analyse the pure effect of the lockdown policy, the interventions by the policy makers are not considered in this study.FindingsThe results show an important contraction of productivity in the food industry, the real estate activities, the constructions and the general services.Originality/valueThe contraction produces a fall of the GDP for the whole period analysed, traced by the investments, which includes repercussions on the whole productive system, employment and income of the institutional sectors.

Modeling economic impacts of mobility restriction policy during the COVID-19 pandemic.

The economic impacts of pandemics can be enormous. However, lockdown and human mobility restrictions are effective policies for containing the spread of the disease. This study proposes a framework for assessing the economic impact of varying degrees of movement restrictions and examines the effectiveness of this framework in a case study examining COVID-19 control measures in Japan. First, mobile network operators data and total employment statistics on a 500-meter grid scale are used to determine the status of mobility restrictions and impacts on consumption in 30 industrial sectors. Next, the economic impacts are assessed using a spatial computable general equilibrium (CGE) model, proven to yield valuable insights into the total economic impacts of natural disasters. In sectors that implement telework and e-commerce-wholesale/retail, finance/insurance, and communication sectors-estimates of production and GDP are obtained that are close to the actual figures. The current case study is limited to Japan, but similar analysis can be conducted by using the CGE model for each country and open mobility data. Thus, the framework has potential to serve as an effective tool for assessing trade-offs between infection risks and economic impacts to inform policy-making by combining with findings from epidemiology.

Future assessment of the impact of the COVID-19 pandemic on the electricity market based on a stochastic socioeconomic model.

This paper proposes a time-series stochastic socioeconomic model for analyzing the impact of the pandemic on the regulated distribution electricity market. The proposed methodology combines the optimized tariff model (socioeconomic market model) and the random walk concept (risk assessment technique) to ensure robustness/accuracy. The model enables both a past and future analysis of the impact of the pandemic, which is essential to prepare regulatory agencies beforehand and allow enough time for the development of efficient public policies. By applying it to six Brazilian concession areas, results demonstrate that consumers have been/will be heavily affected in general, mainly due to the high electricity tariffs that took place with the pandemic, overcoming the natural trend of the market. In contrast, the model demonstrates that the pandemic did not/will not significantly harm power distribution companies in general, mainly due to the loan granted by the regulator agency, named COVID-account. Socioeconomic welfare losses averaging 500 (MR$/month) are estimated for the equivalent concession area, i.e., the sum of the six analyzed concession areas. Furthermore, this paper proposes a stochastic optimization problem to mitigate the impact of the pandemic on the electricity market over time, considering the interests of consumers, power distribution companies, and the government. Results demonstrate that it is successful as the tariffs provided by the algorithm compensate for the reduction in demand while increasing the socioeconomic welfare of the market.

The macroeconomic implications of disease pandemics in developing countries: An application of Covid-19 in Uganda.

This study examines the economy-wide implications of infectious diseases, taking the case of the Covid-19 pandemic in Uganda. Covid-19 containment measures generated social and economic consequences. We employ a recursive dynamic computable general equilibrium model to evaluate the implications on the economy. We design scenarios to mimic the containment policies via labour supply, labour productivity, government healthcare spending and remittance inflows. Results indicate that growth in sector output declines when compared to the no-Covid-19 baseline. However, export growth rates are predicted to be higher. Increased government healthcare spending induces expansion in the healthcare output, but the sectors that produce the intermediate inputs for healthcare production do not grow in tandem. Household welfare declines, and the loss is largest among the top quintile households in both rural and urban areas. Policymakers should revisit Uganda's industrial policy towards domestic production of intermediate inputs to critical domestic sectors such as healthcare. Also, accelerate rural infrastructure development particularly the road network, to facilitate an integrated rural economy induced by the shift in labour and enterprise towards rural areas.

How to cushion economic recession caused by the COVID-19 pandemic: Fiscal or monetary policies?

The outbreak of the COVID-19 pandemic has brought the global economy to a crisis: how to choose the optimal policy tools to cope with the external impacts has attracted worldwide attention. The research evaluates the effects of China's fiscal and monetary policies in promoting economic recovery by establishing a CGE model. Five representative countermeasures such as exempting value-added tax (VAT) and cutting loan rates are studied. The results indicate that: from the aspect of fiscal policies, increasing investment shows a better effect in boosting economy compared with exempting VAT and increasing medical care expenditures; however, the policy also causes price inflation (+0.45%) and crowding-out of enterprise investment (-0.03%). From the aspect of monetary policies, providing targeted loans to enterprises has a better boosting effect on economy compared with cutting loan rates. In the choice between fiscal or monetary policies, fiscal policies exert better effects (household income, +0.95%) when taking the improvement of residents' welfare as the objective. If taking promoting recovery of enterprises and boosting the economy as objectives, monetary policies are found to be better (GDP, +1.99%). Therefore, fiscal and monetary policies should be guided by different objectives and allowed to work in a synergistic manner.

Understanding the Effects of Coronavirus on Australian Households: A Macro–Micro Analysis

The coronavirus (COVID-19) pandemic brought economic recession that affected nations, businesses, and households globally. The severity of this global economic crisis is large and the impact has been asymmetric across socioeconomic groups. We examine the distributional effects of the COVID-19 pandemic across household types using a specially-designed model that combines macro (computable general equilibrium) and micro (heterogenous households) approaches. Computable general equilibrium models are able to capture behavioural changes in macroeconomic and sectoral variables but they often lack the rich distributional detail found in microsimulation models. In this paper, we address this limitation by incorporating 10,046 actual households into a computable general equilibrium model to capture the heterogeneity through which the pandemic may influence household behaviour. We find that the income effects are asymmetric across income groups leading to a slight increase in income inequality. The distributional effects are more progressive for non-wage income sources and uniform for wage income. For younger cohorts, income changes are dominated by employment effects whereas income changes for older cohorts are dominated by changes in capital rentals and government transfers. Spatially, the income effects follow a similar pattern for city and non-city dwellers.

The Impact of COVID-19 on the World Economy

Purpose – The coronavirus, which appeared in Wuhan, China in late 2019, has had immense ramifications on the global community. This paper undertakes to identify the economic impact of COVID-19, which has spread as a global pandemic, on the global economy and international trade. Design/Methodology/Approach – Using a global, multisector, computable-general-equilibrium model, this paper attempts to assess the potential economic impacts of COVID-19. The baseline scenario was set up using the World Bank’s macroeconomic data, such as real GDP, population, labor, and capital from 2015 to 2019, to calculate future estimates. Policy scenarios were established by (1) drops in employment rate (0.4~8.8%) of the analyzed countries, (2) a 5% increase in trade costs, (3) an 8.3% decrease in income reduction, and (4) lastly, a 50% fall of income in affected services industries. Findings – Results show that the GDP of all countries, including the United States and China, contracted, demonstrating that COVID-19 is not only limited to a specific country but also negatively affects the economic growth of all countries. Regarding international trade, exports and imports of all countries have declined due to the increase in trade costs resulting from COVID-19. However, in terms of the trade balance, each country exhibits slightly different patterns. Some countries, such as the United States, ran a trade surplus and others recorded a trade deficit. Although aggregate exports and imports around the world declined, the reason some countries recorded a trade surplus was that imports declined more than exports did, so it would be rea-sonable to view it as a ‘trade surplus in an economic recession’. Research Implications – Analytical results imply that the COVID-19 pandemic is not limited to a specific region and has a negative impact on countries around the world, signifying that the only way to lessen economic damage is to surmount COVID-19 as soon as possible. © 2022 International Academy of Global Business and Trade. All rights reserved.

Toward green transition in the post Paris Agreement era: The case of Taiwan

The Paris Agreement opens a new era to combat the global climate change. Apart from this, the COVID-19 provides an opportunity of restructuring industries of an economy. The current literature and policy practices have addressed the need for including green transition measures in the adaptation and recovery plans to avoid a significant rebound effect on the environment. Given the fact that emission mitigation and the pandemic might have asymmetric impacts on the industrial structure, this study makes a quantitative contribution in analyzing the economy-wide impacts of main green transition policies to elucidate the significance of renewable energy development and market-based instruments for Taiwan. Our results show that offshore wind alone would not be sufficient to re-direct the energy-intensive pathway for Taiwan. In this regard, a sound green policy transition package ought to complement with a market-based instruments (such as carbon tax) and suitable tax revenue recycling scheme in order to reach a ‘win-win situation’ of a reduction of GHG emissions and a better economic performance.

Environmental Benefits From Carbon Tax in the Chinese Carbon Market: A Roadmap to Energy Efficiency in the Post-COVID-19 Era

Because of China’s global responsibilities to address climate change, the country has made a commitment to limiting the growth of future emissions using policy measures, such as funding mitigation research and regulating energy efficiency requirements directly. Extensions of these policies, such as the measures to improve energy efficiency, use of carbon taxes, and changes to the mix of electricity generation in the country, are also of interest to China. This article applied a computable general equilibrium (CGE) model to examine the effects of such energy efficiency and climate change policy options in the post-COVID-19 era in the China economy. The study findings show that even modest measures can have significant effects on emissions with marginal economic impacts, given the current level of development in the China electricity generation and transportation sectors. It is estimated that a 5 RMB per ton carbon tax will reduce emissions by 4.1% and GDP by 0.27%. Emissions drop by 8.2% and GDP drops by 0.54% when energy efficiency increases by 2% across the China economy, respectively. As a final result, a 5% shift away from burning coal would reduce emissions by 9.0%, while GDP would increase by 1.3%. It has been shown that even low carbon taxes can encourage a notable cleaner energy system. Copyright © 2022 Wei, Ayub and Dagar.

Who will pay for workplace reforms in U.S. meat‐processing plants? Simulation results from the USAGE model

It is possible that COVID will trigger permanent changes in work practices that increase costs in U.S. meat‐processing plants. These changes will be beneficial for the safety and economic welfare of meat‐processing workers. However, they will have economic costs. In assessing reform options, policymakers seek guidance from analyses based on models embracing micro detail and an economy‐wide perspective. In this paper, we use USAGE‐Food, a highly disaggregated computable general equilibrium (CGE) model of the United States, to work out how additional processing costs would be distributed between consumers of meat products and farmers. We also calculate industry and macroeconomic effects. Despite modelling farmers as owning fixed factors, principally their own labour, we find that the farmer share in extra processing costs is likely to be quite moderate. Throughout the paper, we support simulation results with back‐of‐the‐envelope calculations, diagrams and sensitivity analyses. These devices identify the mechanisms in the model and key data points that are responsible for the main results. In this way, we avoid the black‐box criticism that is sometimes levelled at CGE modelling.

Prioritizing public investment in agriculture for post-COVID-19 recovery: A sectoral ranking for Mexico

Mexico's economy contracted unprecedentedly in 2020. Agriculture remains important for the economy and job creation, but it lacks strong productive dynamism and exhibits high informality. We show that investing in agriculture’s infrastructure can contribute to economic recovery and welfare post-COVID-19. On the basis of a dynamic computable general equilibrium model, we allocate to agriculture sectors public investment in productive infrastructure equivalent to 0.25% of GDP during three immediate years and analyze effects up to 2030. We see improvement in GDP, agri-food output and private consumption with rural poverty reduction. Based on the impact on these variables, a ranking suggests that new investments should prioritize the sugar cane sector. Highly ranked are also cereals, mainly maize, and other export-oriented crops such as flowers and coffee. Not only should investments prioritize these sectors, but the government should also finance them with foreign borrowing to speed up recovery and avert the short-term macroeconomic trade-offs of domestic financing.

Economic impacts of COVID-19 on the tourism sector in Tanzania

The worldwide COVID-19 pandemic has affected the tourism sector by closing borders, reducing both the transportation of tourists and tourist demand. Developing countries, such as Tanzania, where the tourism sector contributes a high share to gross domestic product, are facing considerable economic consequences. Tourism interlinks domestic sectors such as transport, accommodation, beverages and food, and retail trade and thus plays an important role in household income. Our study assesses the macroeconomic impacts of COVID-19 on the tourism sector and the Tanzanian economy as a case study of an impacted developing economy. We use a computable general equilibrium model framework to simulate the economic impacts resulting from the COVID-19 pandemic and quantitatively analysed the economic impacts.

Economic growth, employment, and income distribution in times of pandemic: A general equilibrium analysis for Colombia

This paper quantifies the effects of the COVID-19 pandemic on the productive activity in Colombia and the measures adopted to contain, mitigate, and recover from it. Additionally, distributional effects are studied, taking into consideration different types of households in order to analyse their impact on the most vulnerable sectors of the economy. For this purpose, a CGE model that summarises the behaviour of the Colombian economy and allows for simulation of the COVID-19 shocks is constructed. It found a growth of 4.6% in 2021, which would be insufficient for reaching pre-pandemic GDP levels. The social effects would be devastating in terms of poverty, which after rising by about eight percentage points during 2020, could continue increasing in 2021 due to the partial recovery of labour markets.

Spatial transmission of the economic impacts of COVID-19 through international trade.

While most of the attention to COVID-19 is being focused on the physical transmission of the virus across country borders, there is also an analogous spatial transmission of economic impacts through international trade and global supply chains. This paper presents an analysis of the extent to which the economic shocks of mandatory closures to mitigate the pandemic ripple through the world economy. We utilize a state-of-the-art computable general equilibrium (CGE) model to analyze these interconnections through international trade. We compare estimates of the impacts on US GDP in isolation and then examine the impacts taking into account US trade with China and the rest of the world (ROW). Our analysis indicates that these international trade linkage impacts are generally negative and range from near zero to very large overall, depending on the region, and that own- and cross-country impacts differ by region as well. At the same time, we find that China is able to capitalize on the situation by actually being able to increase its exports through international trade following mandatory closures in other regions. We also confirm that the US economy was relatively insulated from trade linkages with the rest of the world. Sectoral impacts provide further insight into the results.

Crecimiento económico, empleo y distribución del ingreso en tiempos de pandemia: un análisis de equilibrio general para Colombia

Este artículo cuantifica los efectos sobre la actividad productiva en Colombia que tiene la pandemia por COVID-19 y las medidas de contención, mitigación y recu­peración adoptadas para enfrentarla. Además, se estudian los efectos distributivos, considerando distintos tipos de hogares, para analizar su impacto en los secto­res más vulnerables de la economía. Para ello, se construyó un modelo CGE que resume el comportamiento de la economía colombiana y permite simular los cho­ques por COVID-19. Se encontró un crecimiento económico de 4,6 % en 2021 que sería insuficiente para que el PIB alcance niveles prepandemia. Los efectos socia­les serían devastadores en términos de pobreza, que luego de elevarse en cerca de ocho puntos porcentuales durante 2020, podría seguir aumentando hacia 2021 por efecto de la parcial recuperación de los mercados laborales. Alternate : This paper quantifies the effects of the COVID-19 pandemic on the productive activity in Colombia and the measures adopted to contain, mitigate, and recover from it. Additionally, distributional effects are studied, taking into consideration different types of households in order to analyse their impact on the most vulner­able sectors of the economy. For this purpose, a CGE model that summarises the behaviour of the Colombian economy and allows for simulation of the COVID-19 shocks is constructed. It found a growth of 4.6% in 2021, which would be insuf­ficient for reaching pre-pandemic GDP levels. The social effects would be dev­astating in terms of poverty, which after rising by about eight percentage points during 2020, could continue increasing in 2021 due to the partial recovery of labour markets.

An Assessment of the Short-Term Impact of COVID-19 on Economics and the Environment: A Case Study of Indonesia

The COVID-19 pandemic has already made a significant impact on various sectors. No country was fully prepared to face this global pandemic, and Indonesia is no exception. For Indonesia, this pandemic shook not only the public health service system but also the economy. This study makes projections related to the impact of this pandemic on the Indonesian economy by utilising a computable general equilibrium (CGE) model. Additionally, we calculate the land needed to cover the demand for agricultural products, as well as the level to which emissions can be reduced. Our simulation shows that, along with every shock caused by COVID-19 to national supply and demand, Indonesia will be experiencing economic stagnation by 2021, with the gross domestic product (GDP) level 4%–8% lower than the business as usual (BAU) level during the pandemic (2020–2021). The two sectors that will be hit hardest are the transportation and tourism sectors, making up a GDP loss ranging from 30%–50%. During this stagnation, the agricultural sector is a potential sector for accommodating workers who have been laid off. The model also predicts that there will be a temporary land-use change that the farmers will prefer to use their land for food and horticultural commodities. As for emissions, our calculations show that the potential for emission reductions will be up to 8% by 2021, compared to the BAU level. However, the source of this emission reduction is not positive as it comes from the restriction of economic activity, and the growth in emissions from the industrial and waste sectors are still increasing rapidly, even during the pandemic. Thus, it is feared that there will be a very high spike in emissions when the pandemic ends, making the situation more challenging for Indonesia to achieve its emission mitigation targets. Furthermore, once the government introduces fiscal incentives to support the economy during the pandemic, the economic condition will be improved, although still not fully recovered. The model predicts that the government fiscal incentives may help to improve the GDP by around 1%–3%, compared to when no incentive is introduced.

The impacts of COVID-19 containment on the Australian economy and its agricultural and mining industries.

We simulate the economic impacts of the COVID-19 pandemic on the Australian economy using VURM, a detailed computable general equilibrium model for Australia. We identify five sources of economic perturbations: changes to productivity due to changing work practices, changes in household demand imposed by voluntary and mandated social distancing behaviour, changes in international trade due to a weakened world economy and severe curtailment of international travel, reduced population growth due to lower net migration and large debt-financed fiscal stimulus. Variants of these shocks and associated recovery paths are simulated in VURM, with three scenarios describing potential recovery arcs. The macroeconomic and industry impacts are reported for each scenario. Ultimately, our focus is on the impact on output and employment in the agriculture and mining sectors, and on their likely recovery prospects. At the peak of economic impacts, output in these sectors declines by about 6 per cent relative to a no-COVID baseline. Compared to the economy-wide average, the decline in agriculture and mining output is small. This can be explained by relatively minor impacts on work practices, relatively low negative impacts on demand for intensive agriculture (helped by fiscal supports for households) and relatively low disruption to export demand.

How COVID-19 Pandemic Worsens the Economic Situation of Women in South Africa.

Little is known about the general equilibrium impact COVID-19 induces on different gender groups. This paper addresses the problem of relatively few general equilibrium studies focusing on gender impacts of COVID-19. The analysis uses a gendered Computable General Equilibrium model linked to a microsimulation model that analyses a mild and severe scenario of the pandemic on economic and distributional outcomes for females. Irrespective of scenario, findings show that because women employment tend to have unskilled labour which is more concentrated in sectors that are hurt the most by COVID-19 response measures, they suffer disproportionately more from higher unemployment than their male counterparts. The poverty outcomes show worsened vulnerability for female-headed households given that, even prior to the pandemic, poverty was already higher amongst women. These simulated results are consistent with recently observed impacts and address research gaps important for well-designed public policies to reverse these trends.

On connait peu les impacts d'équilibre général induits par la Covid-19 sur les groupes de genre différents. Cette étude adresse le problème de la pénurie d'études en équilibre général s'intéressant aux impacts de la COVID-19 sur le genre. L'analyse te combine un modèle d'équilibre général calculable sexo-spécifique avec un modèle de micro-simulation et évalue deux scenarios de la pandémie, l'un modéré et l'autre sévère, et leurs effets sur les résultats économiques et distributionnels des femmes. Quel que soit le scenario, les résultats démontrent que les femmes souffrent du chômage d'une manière disproportionée comparé aux hommes, puisque le travail des femmes tend à être du travail non qualifié, concentré dans les secteurs qui sont les plus frappés par les mesures de réponse à la COVID-19. En termes de pauvreté, les foyers dirigés par des femmes sont plus vulnérables, étant donné que même avant la pandémie, la pauvreté était déjà plus élevée chez les femmes. Les résultats simulés par cette étude concordent avec les impacts récemment observés, et abordent les lacunes de recherche nécessaires pour modéliser des politiques publiques bien conçues afin de renverser ces tendances.