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The Economic Impact of COVID-19 around the World

Author

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  • Fernando M. Martin
  • Juan M. Sanchez
  • Olivia Wilkinson

Abstract

For over two years, the world has been battling the health and economic consequences of the COVID-19 pandemic. This paper provides an account of the worldwide economic impact of the COVID-19 shock, measured by GDP growth, employment, government spending, monetary policy, and trade. We find that the COVID-19 shock severely impacted output growth and employment in 2020, particularly in middle-income countries. The government response, mainly consisting of increased expenditure, implied a rise in debt levels. Advanced countries, having easier access to credit markets, experienced the highest increase in indebtedness. All regions also relied on monetary policy to support the fiscal expansion. The specific circumstances surrounding the COVID-19 shock implied that the expansionary fiscal and monetary policies did not put upward pressure on prices until 2021. We also find that the adverse effects of the COVID-19 shock on output and prices have been significant and persistent, especially in emerging and developing countries.

Suggested Citation

  • Fernando M. Martin & Juan M. Sanchez & Olivia Wilkinson, 2022. "The Economic Impact of COVID-19 around the World," Working Papers 2022-030, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:94816
    DOI: 10.20955/wp.2022.030
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    References listed on IDEAS

    as
    1. Kareem Ismail & Mr. Roberto Perrelli & Jessie Yang, 2020. "Optimism Bias in Growth Forecasts—The Role of Planned Policy Adjustments," IMF Working Papers 2020/229, International Monetary Fund.
    2. Allan Timmermann, 2007. "An Evaluation of the World Economic Outlook Forecasts," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 1-33, May.
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    More about this item

    Keywords

    COVID-19; government debt; fiscal policy; monetary policy; emerging markets; inflation; international trade; employment;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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