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The COVID19-Pandemic in the EU: Macroeconomic Transmission and Economic Policy Response

Author

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  • Philipp Pfeiffer
  • Werner Roeger
  • Jan in ’t Veld

Abstract

This paper uses a macroeconomic model to analyse the transmission of the COVID19-pandemic and its associated lockdown and quantify the stabilising effects of the economic policy response. Our simulations identify firm liquidity problems as crucial for shock propagation and amplification. We then quantify the effects of short-term work allowances and liquidity guarantees - central policy strategies in the European Union. The measures reduce the output loss of COVID19 and its associated lockdown by about one fourth. However, they cannot prevent a sharp but temporary decline in production.

Suggested Citation

  • Philipp Pfeiffer & Werner Roeger & Jan in ’t Veld, 2020. "The COVID19-Pandemic in the EU: Macroeconomic Transmission and Economic Policy Response," European Economy - Discussion Papers 127, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:127
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    References listed on IDEAS

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    Cited by:

    1. Robert Kollmann, 2021. "Effects of Covid-19 on Euro area GDP and inflation: demand vs. supply disturbances," International Economics and Economic Policy, Springer, vol. 18(3), pages 475-492, July.
    2. Paul J. J. Welfens, 2020. "Trump’s Trade Policy, BREXIT, Corona Dynamics, EU Crisis and Declining Multilateralism," International Economics and Economic Policy, Springer, vol. 17(3), pages 563-634, July.
    3. Cardani, Roberta & Croitorov, Olga & Giovannini, Massimo & Pfeiffer, Philipp & Ratto, Marco & Vogel, Lukas, 2021. "The Euro Area's pandemic recession: A DSGE interpretation," JRC Working Papers in Economics and Finance 2021-10, Joint Research Centre, European Commission.
    4. Cardani, Roberta & Croitorov, Olga & Giovannini, Massimo & Pfeiffer, Philipp & Ratto, Marco & Vogel, Lukas, 2022. "The euro area’s pandemic recession: A DSGE-based interpretation," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).
    5. Tsai, I-Chun & Chiang, Ying-Hui & Lin, Shih-Yuan, 2022. "Effect of COVID-19 lockdowns on city-center and suburban housing markets: Evidence from Hangzhou, China," Journal of Asian Economics, Elsevier, vol. 83(C).
    6. Hinterlang, Natascha & Moyen, Stephane & Röhe, Oke & Stähler, Nikolai, 2023. "Gauging the effects of the German COVID-19 fiscal stimulus package," European Economic Review, Elsevier, vol. 154(C).
    7. Lucas Bretschger & Elise Grieg & Paul J. J. Welfens & Tian Xiong, 2020. "COVID-19 infections and fatalities developments: empirical evidence for OECD countries and newly industrialized economies," International Economics and Economic Policy, Springer, vol. 17(4), pages 801-847, October.
    8. Clemens, Marius & Röger, Werner, 2024. "What is the difference between fossil fuel embargo and price shocks?," Energy Economics, Elsevier, vol. 132(C).
    9. Shiou‐Yen Chu, 2024. "The impact of the COVID‐19 pandemic on high‐skilled and low‐skilled labor markets in a DSGE model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(1), pages 41-74, February.
    10. Pierpaolo Benigno & Paolo Canofari & Giovanni Di Bartolomeo & Marcello Messori, 2021. "Financial Dominance in the Pandemic and Post-Pandemic European Economy," Working Papers in Public Economics 206, Department of Economics and Law, Sapienza University of Roma.
    11. Pompeo Della Posta & Enrico Marelli & Marcello Signorelli, 2022. "COVID-19, Economic Policies and Public Debt Sustainability in Italy," Sustainability, MDPI, vol. 14(8), pages 1-20, April.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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