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The Stabilizing Effects of Economic Policies in Spain in Times of COVID-19

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  • José E. Boscá
  • Rafael Doménech
  • Javier Ferri
  • José R. García
  • Camilo Ulloa

Abstract

In this article we analyse the stabilizing role of economic policies during the COVID-19 crisis in Spain. First, we estimate the contribution of the structural shocks that explain the behaviour of the main macroeconomic aggregates during 2020, using a DSGE model estimated for the Spanish economy. Our results highlight the importance of supply and demand shocks in explaining the COVID-19 crisis. Second, we have simulated a counterfactual scenario for GDP in absence of the COVID-19 economic policy measures. According to our results, the annual fall in GDP moderates at least by 7.6 points in the most intense period of the crisis, thanks to these stabilizing policies. Finally, we have estimated the potential effects of Next Generation EU in the Spanish economy. Assuming that Spain may receive from the EU between 1.5 and 2.25 percentage points of GDP in grants and loans from 2021 to 2024, to finance mainly public investment, GDP could increase between 2 and 3 pp in 2024. All these results show the usefulness of a DSGE model like EREMS, as a practical tool for the applied economic analysis and understanding of the Spanish economy.

Suggested Citation

  • José E. Boscá & Rafael Doménech & Javier Ferri & José R. García & Camilo Ulloa, 2020. "The Stabilizing Effects of Economic Policies in Spain in Times of COVID-19," Studies on the Spanish Economy eee2020-42, FEDEA.
    • Handle: RePEc:fda:fdaeee:eee2020-42
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    Cited by:

    1. Chanamart Intapan & Chukiat Chaiboonsri & Pairach Piboonrungroj, 2021. "Forecasting for the Optimal Numbers of COVID-19 Infection to Maintain Economic Circular Flows of Thailand," Economies, MDPI, vol. 9(4), pages 1-22, October.
    2. Yugang He & Yinhui Wang, 2022. "Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea," Sustainability, MDPI, vol. 14(9), pages 1-14, April.
    3. 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).
    4. Dejan Živkov & Boris Kuzman & Jonel Subić, 2023. "Multi-frequency downside risk interconnectedness between soft agricultural commodities," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(8), pages 332-342.
    5. Mohimont, Jolan & de Sola Perea, Maite & Zachary, Marie-Denise, 2024. "Softening the blow: Job retention schemes in the pandemic," Journal of Public Economics, Elsevier, vol. 238(C).

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