COVID-19 and Emerging Markets: An Epidemiological Model with International Production Networks and Capital Flows

We quantify the macroeconomic effects of COVID-19 for a small open economy by calibrating a SIR-multi-sector-macro model. We measure sectoral supply shocks utilizing teleworking and physical job proximity, and demand shocks with credit card purchases. Both shocks are also affected from changing infection rates under different lockdown scenarios. Being an open economy amplifies the economic costs through two main channels. First, the demand shock has domestic and external components. Second, the initial shock is magnified due to domestic and international input-output linkages.

Keywords: Economic conditions, Economic models, Financial crises, Supply and demand, Economic policy, COVID-19, Debt Monetisation, External Finance, SIR, Input-Output Tables, Emerging Markets, WP, lockdown, I-O, economic cost, supply shock, infection rate

JEL Classification: E61, F00, C51, E01, G21, E52, F16, H63

Suggested Citation: Suggested Citation

Cakmakli, Cem and Demiralp, Selva and Kalemli Ozcan, Sebnem and Yesiltas, Sevcan and Yildirim, Muhammed A., COVID-19 and Emerging Markets: An Epidemiological Model with International Production Networks and Capital Flows (July 1, 2020). IMF Working Paper No. 20/133, Available at SSRN: https://ssrn.com/abstract=3670613