AI summary · arXiv: 2103.02732v4 · econ.EM
Modeling Macroeconomic Variations After COVID-19
The essentials
- The coronavirus pandemic has had an unprecedented impact on global economic forecasting models
- Time series properties have changed in ways that render many pre-COVID models inadequate
- COVID indicators can be used as controls to "de-COVID" data before estimation
- Economic uncertainty remains high despite real economic activity's recovery and receding COVID uncertainty by the end of 2020
- Dynamic responses of variables to shocks in a vector autoregression (VAR) similar in magnitude and shape to those identified before 2020 can be recovered by directly or indirectly modeling COVID and treating it as exogenous
- Responses to economic shocks are distinctly different from those to a COVID shock, which are much larger but shorter-lived
- Disentangling the two types of shocks is crucial in macroeconomic modeling post-COVID
- Updated models that account for the unique impact of pandemics on economies worldwide are needed.
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