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Dynamics of the impact of COVID-19 on the economic activity of Peru

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  • Luis Varona
  • Jorge R Gonzales

Abstract

Background: The COVID-19 virus impacts human health and the world economy, causing in Peru, more than 800 thousand infected and a strong recession expressed in a drop of -12% in its economic growth rate for 2020. In this context, the objective of the study is to analyze the dynamics of the short-term behavior of economic activity, as well as to explain the causal relationships in a Pandemic context based on the basic number of spread (Re) of COVID-19 per day. Methods: An Autoregressive Distributed Lags (ARDL) model was used. Results: A negative and statistically significant impact of the COVID-19 shock was found on the level of economic activity and a long-term Cointegration relationship with an error correction model (CEM), with the expected sign and statistically significant at 1%. Conclusion: The Pandemic has behaved as a systemic shock of supply and aggregate demand at the macroeconomic level, which together have an impact on the recession or level of economic activity. The authors propose changing public health policy from an indiscriminate suppression strategy to a targeted, effective and intelligent mitigation strategy that minimizes the risk of human life costs and socioeconomic costs, in a context of uncertainty about the end of the Pandemic and complemented by economic, fiscal and monetary policies that mitigate the economic recession, considering the underlying structural characteristics of the Peruvian economy.

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  • Luis Varona & Jorge R Gonzales, 2021. "Dynamics of the impact of COVID-19 on the economic activity of Peru," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-30, January.
    • Handle: RePEc:plo:pone00:0244920
    DOI: 10.1371/journal.pone.0244920
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    References listed on IDEAS

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    2. Eichenbaum, Martin S. & Rebelo, Sergio & Trabandt, Mathias, 2022. "Epidemics in the New Keynesian model," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
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    Cited by:

    1. Liu, Li-Jing & Yao, Yun-Fei & Liang, Qiao-Mei & Qian, Xiang-Yan & Xu, Chun-Lei & Wei, Si-Yi & Creutzig, Felix & Wei, Yi-Ming, 2021. "Combining economic recovery with climate change mitigation: A global evaluation of financial instruments," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 438-453.
    2. Cristi Spulbar & Ramona Birau & Jatin Trivedi, 2021. "Investigating Short and Long Run Volatility Movements in the Context of COVID-19 Pandemic: A Case Study for Norwegian Stock Market," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1166-1171, December.
    3. Fredy S. Monge-Rodríguez & He Jiang & Liwei Zhang & Andy Alvarado-Yepez & Anahí Cardona-Rivero & Enma Huaman-Chulluncuy & Analy Torres-Mejía, 2021. "Psychological Factors Affecting Risk Perception of COVID-19: Evidence from Peru and China," IJERPH, MDPI, vol. 18(12), pages 1-16, June.
    4. Muhammad Azmat Hayat & Huma Ghulam & Maryam Batool & Muhammad Zahid Naeem & Abdullah Ejaz & Cristi Spulbar & Ramona Birau, 2021. "Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach," JRFM, MDPI, vol. 14(6), pages 1-22, June.
    5. Orhan Cengiz & Müge Manga, 2022. "Impact of COVID-19 pandemic on exports: new evidence from selected European Union countries and Turkey," Asia-Pacific Journal of Regional Science, Springer, vol. 6(3), pages 1195-1219, October.
    6. Halima Begum & A. S. A. Ferdous Alam & Walter Leal Filho & Abd Hair Awang & Ahmad Bashawir Abdul Ghani, 2021. "The COVID-19 Pandemic: Are There Any Impacts on Sustainability?," Sustainability, MDPI, vol. 13(21), pages 1-16, October.

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