The Global Macroeconomic Impacts of COVID-19: Seven Scenarios

45 Pages Posted: 4 Mar 2020

See all articles by Warwick J. McKibbin

Warwick J. McKibbin

Australian National University

Roshen Fernando

The Australian National University; Centre of Excellence in Population Ageing Research (CEPAR); Centre for Applied Macroeconomic Analysis (CAMA), Crawford School of Public Policy

Date Written: March 2, 2020

Abstract

The outbreak of coronavirus named COVID-19 has disrupted the Chinese economy and is spreading globally. The evolution of the disease and its economic impact is highly uncertain which makes it difficult for policymakers to formulate an appropriate macroeconomic policy response. In order to better understand possible economic outcomes, this paper explores seven different scenarios of how COVID-19 might evolve in the coming year using a modelling technique developed by Lee and McKibbin (2003) and extended by McKibbin and Sidorenko (2006). It examines the impacts of different scenarios on macroeconomic outcomes and financial markets in a global hybrid DSGE/CGE general equilibrium model. The scenarios in this paper demonstrate that even a contained outbreak could significantly impact the global economy in the short run. These scenarios demonstrate the scale of costs that might be avoided by greater investment in public health systems in all economies but particularly in less developed economies where health care systems are less developed and popultion density is high.

Keywords: pandemics, infectious diseases, risk, macroeconomics, DSGE, CGE, G-Cubed

Suggested Citation

McKibbin, Warwick J. and Fernando, Roshen, The Global Macroeconomic Impacts of COVID-19: Seven Scenarios (March 2, 2020). CAMA Working Paper No. 19/2020, Available at SSRN: https://ssrn.com/abstract=3547729 or http://dx.doi.org/10.2139/ssrn.3547729

Warwick J. McKibbin (Contact Author)

Australian National University ( email )

Crawfrod School of Public Policy
Canberra, ACT 2600
Australia
02-61250301 (Phone)
02-62735575 (Fax)

HOME PAGE: http://www.sensiblepolicy.com

Roshen Fernando

The Australian National University; Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Canberra, Australian Capital Territory 2601
Australia

Centre for Applied Macroeconomic Analysis (CAMA), Crawford School of Public Policy ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

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