Macroeconomic Impacts of COVID-19 and Universal Transfer Programs: The Case of Korea

Global Economic Review, Vol.51, No.4, 2022

37 Pages Posted: 19 Sep 2022 Last revised: 3 Mar 2023

See all articles by Kwangyong Park

Kwangyong Park

Economist, Economic Research Institute, The Bank of Korea

Date Written: September 15, 2022

Abstract

In this paper, we analyze the impacts of COVID-19 and the policy response to it in Korea based on a version of a Macro-SIR model with labor friction, and with multiple types of jobs and households. Due to substantial uncertainty in the model and parameters that govern the interaction between epidemiological and macroeconomic developments, we rely on a prior predictive analysis when simulating the model. We nd that the model successfully predicts an endogenous rise in the number of con rmed cases in the second half of 2020, and a sharp decline in economic activity followed by a temporary recovery caused by the government transfer program. It also turns out that low-wealth households are more damaged from the pandemic due to larger losses in terms of labor income. In addition, it is shown that the consumption multiplier of the universal transfer program is around 0.09.

Keywords: COVID-19, Fiscal Policy, Labor Friction, Universal Transfers, SIR model

JEL Classification: E24, E37, E62, H3, I18, J64

Suggested Citation

Park, Kwangyong, Macroeconomic Impacts of COVID-19 and Universal Transfer Programs: The Case of Korea (September 15, 2022). Global Economic Review, Vol.51, No.4, 2022, Available at SSRN: https://ssrn.com/abstract=4219942 or http://dx.doi.org/10.2139/ssrn.4219942

Kwangyong Park (Contact Author)

Economist, Economic Research Institute, The Bank of Korea ( email )

110, 3-Ga, Namdaemunno, Jung-Gu
Seoul 100-794
Korea, Republic of (South Korea)

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