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COVID-19 pandemic, health risks, and economic consequences: Evidence from China

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  • Zhao, Bo

Abstract

This paper introduces the Susceptible-Infectious-Recovered model into the Bewley-type incomplete market model and uses it to study the impact of the coronavirus disease (COVID-19) pandemic on China's macroeconomics. The calibrated model predicts that the average propensity to consume household wealth will decline, while the demand for money will increase, and these predictions are consistent with the data. Monetary policy is effective because it provides enough liquidity for households to buffer health risks. Monetary stimulus is more effective in an economy with greater health risks and consumption uncertainty. Counterfactual experiments show that abandoning the containment policy too early would avoid a sharp drop in output and employment in the short term, but it would greatly increase mortality and ultimately lead to a decline in social welfare.

Suggested Citation

  • Zhao, Bo, 2020. "COVID-19 pandemic, health risks, and economic consequences: Evidence from China," China Economic Review, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:chieco:v:64:y:2020:i:c:s1043951x20301589
    DOI: 10.1016/j.chieco.2020.101561
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    Cited by:

    1. Xinping Zhang & Yimeng Zhang & Yunchan Zhu, 2021. "COVID-19 Pandemic, Sustainability of Macroeconomy, and Choice of Monetary Policy Targets: A NK-DSGE Analysis Based on China," Sustainability, MDPI, vol. 13(6), pages 1-20, March.
    2. repec:ris:msuecw:2023_002 is not listed on IDEAS
    3. Hugo S. Gonçalves & Sérgio Moro, 2023. "On the economic impacts of COVID‐19: A text mining literature analysis," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 375-394, February.
    4. Tianbao Zhou & Zhixin Liu & Yingying Xu, 2024. "How do financial variables impact public debt growth in China? An empirical study based on Markov regime-switching model," Papers 2407.02183, arXiv.org.
    5. Chi‐Chuan Lee & Chien‐Chiang Lee & Yizhong Wu, 2023. "The impact of COVID‐19 pandemic on hospitality stock returns in China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1787-1800, April.
    6. Edward Balistreri & Felix Baquedano & John C. Beghin, 2022. "The impact of COVID‐19 and associated policy responses on global food security," Agricultural Economics, International Association of Agricultural Economists, vol. 53(6), pages 855-869, November.
    7. Yugang He & Yinhui Wang, 2022. "Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea," Sustainability, MDPI, vol. 14(9), pages 1-14, April.
    8. Maria del Mar Alonso-Almeida, 2022. "To Use or Not Use Car Sharing Mobility in the Ongoing COVID-19 Pandemic? Identifying Sharing Mobility Behaviour in Times of Crisis," IJERPH, MDPI, vol. 19(5), pages 1-14, March.
    9. Liu, Qingfu & Shi, Chen & Tse, Yiuman & Zhang, Linlin, 2023. "The impact of public health emergencies on small and medium-sized enterprises: Evidence from China," Global Finance Journal, Elsevier, vol. 58(C).
    10. Wang, Xueli & Wang, Lei & Zhang, Xuerong & Fan, Fei, 2022. "The spatiotemporal evolution of COVID-19 in China and its impact on urban economic resilience," China Economic Review, Elsevier, vol. 74(C).
    11. Xin‐Xin Zhao & Jun Wen & Xing‐Yun Zou & Quan‐jing Wang & Chun‐Ping Chang, 2023. "Strategies for the sustainable development of China in the post‐epidemic era," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(1), pages 426-438, February.
    12. Ferry Syarifuddin & Maman Setiawan, 2021. "Capital Flow Amid The Covid-19 Pandemic: Cross-Country Contagion Effect Among Asean5 And Projection Of The Impacts For The Indonesian Economy," Working Papers WP/08/2021, Bank Indonesia.
    13. Congli Su & Mingxi Wang, 2022. "Quality incentive contract design in government procurement for innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3665-3684, December.
    14. Xi He & Edward J. Balistreri & Gyu Hyun Kim & Wendong Zhang, 2022. "A general equilibrium assessment of COVID-19's labor productivity impacts on china's regional economies," Journal of Productivity Analysis, Springer, vol. 58(2), pages 129-150, December.

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    More about this item

    Keywords

    Health risks; Bewley model; COVID-19; Containment policy;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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