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Epidemics and Macroeconomic Dynamics

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  • Masashige Hamano
  • Munechika Katayama

Abstract

We propose a novel SIR-macro model in which virus transmission is uncertain. The model is solved with the perturbation method around a deterministic infectious steady state. Assuming a stationary infection process, a positive infection shock increases infection while reducing consumption and hours worked for susceptible individuals. Further, we estimate our model with the recent US data on the COVID-19 outbreak. Historical decomposition obtained with Bayesian techniques finds that the dis-containment rule that encourages people to work more, as well as infection shock and technology shock, play an important role in characterizing US infection and macroeconomic dynamics.

Suggested Citation

  • Masashige Hamano & Munechika Katayama, 2021. "Epidemics and Macroeconomic Dynamics," Working Papers e162, Tokyo Center for Economic Research.
    • Handle: RePEc:tcr:wpaper:e162
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    References listed on IDEAS

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    Cited by:

    1. Mitsuhiro Fukao & Etsuro Shioji, 2022. "Is There a Trade‐Off between COVID‐19 Control and Economic Activity? Implications from the Phillips Curve Debate," Asian Economic Policy Review, Japan Center for Economic Research, vol. 17(1), pages 66-85, January.

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