Economic Recession from Household Responses to an Epidemic and Consumption Stimulus Measures in Thailand

ABSTRACT

This paper aimed to study the economic recession from household responses to the epidemic and consumption stimulus policies in Thailand using the macroeconomic general equilibrium model simulation method. Simulation results show the household responses. The epidemic situation caused the households to decrease consumption, working hours, and investment in order to prevent infection. These steps led to a contraction of the economy. Furthermore, the households responded to the measures by sharply reducing investment so as to increase consumption during the implementation period, especially in the first week. Changes in the opposite direction between consumption and investment imply the crucial role of government spending to drive the households' consumption. At first glance, it may seem that the government's consumption stimulus policies made the economy and the epidemic situation even worse because of the sharp decline in GDP per capita, investment, and working hours. Moreover, they have accelerated the COVID-19 epidemic to a peak more rapidly and intensely. An approach that will allow us to assess the effectiveness of policies would be to take the change in GDP per capita over the periods that cover the policy action. The calculation of the net change in GDP per capita shows that the policies introduced by the government to boost consumption helped mitigate a total annual economic loss of $36.88 and $26.26 per capita in the perfect and imperfect competition models respectively, compared with the case of no policies. © 2023, Economic Laboratory for Transition Research. All rights reserved.