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GTAP Resource #6228

"Modelling the Economic Impact of the Covid-19 Pandemic and Lockdown Policies: A Structural Simulation Model Applied to Four Countries "
by Robinson, Sherman, Stephanie Levy, Victor Hernandez, Rob Davies, Raul Hinojosa, Sherwin Gabriel, Channing Arndt, Dirk van Seventer and Marcelo Pleitez

This paper considers different approaches to modelling the economic impact of the Covid-19 pandemic/lockdown shocks. We review different modelling strategies and argue that, given the nature of the bottom-up recession caused by the pandemic/lockdowns, simulation models of the shocks should be based on a social accounting matrix (SAM) that includes both disaggregated sectoral data and the national accounts in a unified framework. SAM-based models have been widely used to analyze the impact of natural disasters, which are comparable to pandemic/lockdown shocks.
The pandemic/lockdown shocks occurred rapidly, in weeks or months, not gradually over a year or more. In such a short period, adjustments through smooth changes in wages, prices and production methods are not plausible. Rather, initial adjustments occur through changes in quantities, altering demand and supply of commodities and employment in affected sectors. In this environment, we use a linear SAM-multiplier model that specifies a fixed-coefficient production technology, linear demand system, fixed savings rates, and fixed prices.
There are three different kinds of sectoral shocks that are included in the model: (1) changes in demand due to household lockdown, (2) changes in supply due to industry lockdown, and (3) changes in demand due to induced macro shocks. At the detailed industry level, data are provided for all three shocks and the model imposes the largest of the three.
We applied the model on a monthly time step for the period March to June 2020 for four countries: US, UK, Mexico, and South Africa. The models closely replicate observed macro results (GDP and employment) for the period. The results provide detailed structural information on the evolution of the different economies month-by-month and provide a framework for forward-looking scenario analysis.

Resource Details (Export Citation) GTAP Keywords
Category: 2021 Conference Paper
Status: Not published
By/In: Presented during the 24th Annual Conference on Global Economic Analysis (Virtual Conference)
Date: 2020
Version: April 2021
Created: Robinson, S. (4/11/2021)
Updated: Robinson, S. (6/22/2021)
Visits: 1,345
- Economic crisis
- Labor market issues
- Other data bases and data issues
- Africa (East)
- Europe (Western)
- North America
- South America

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