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The macroeconomics of COVID-19: a two-sector interpretation

Author

Listed:
  • Halvor Mehlum

    (Department of Economics, University of Oslo, Norway)

  • Ragnar Torvik

    (Department of Economics, Norwegian University of Science and Technology, Trondheim, Norway)

Abstract

For a developed market economy, the COVID-19 crisis is a new type of crisis, but such a crisis has parallels with economies at other times, and with crises in many places. We discuss some mechanisms from the traditional macro literature and from the literature on macroeconomics for developing countries. Phenomena such as bottlenecks, rationing, forced savings, production constrained by access to inputs, liquidity constraints, sector heterogeneity, and costs running despite production being shut down, are all permanent phenomena in developing countries. During the COVID-19 crisis, however, they have also emerged as key mechanisms in developed market economies. We discuss some of these well-developed but partially forgotten mechanisms by extending simple textbook descriptions, and we provide some examples of how the effects of policy are changed in a time of crisis.

Suggested Citation

  • Halvor Mehlum & Ragnar Torvik, 2021. "The macroeconomics of COVID-19: a two-sector interpretation," Review of Keynesian Economics, Edward Elgar Publishing, vol. 9(2), pages 165-174, April.
    • Handle: RePEc:elg:rokejn:v:9:y:2021:i:2:p165-174
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    More about this item

    Keywords

    COVID-19 crisis; multi-sector macro model; demand and supply interactions;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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