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An Epidemiological Model of Crisis Spread Across Sectors in The United States

Author

Listed:
  • Eva (E.F.) Janssens

    (Tinbergen Institute; Erasmus University of Rotterdam)

  • Robin (R.) Lumsdaine

    (American University, Erasmus University of Rotterdam)

  • Sebastiaan (S.H.L.C.G.) Vermeulen

    (Tinbergen Institute; Erasmus University of Rotterdam)

Abstract

This paper develops a discrete-time epidemiological model for the spread of crises across sectors in the United States for the period 1952-2015. It is the first to use an epidemiological approach with macroeconomic (Flow of Funds) data. An extension of the usual one-period Markov model to a two-period setting incorporates the concept of downturns that may either precede a crisis or from which the sector may recover and avert a crisis. The results indicate that the nonfinancial business and private depository institutions & money market mutual funds sectors are highly contagious while the monetary authority is the least contagious.

Suggested Citation

  • Eva (E.F.) Janssens & Robin (R.) Lumsdaine & Sebastiaan (S.H.L.C.G.) Vermeulen, 2018. "An Epidemiological Model of Crisis Spread Across Sectors in The United States," Tinbergen Institute Discussion Papers 18-008/III, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20180008
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    References listed on IDEAS

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    More about this item

    Keywords

    Flow of Funds; economic downturns; Susceptible-Infected-Removed(SIR); contagion; epidemiology;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • G01 - Financial Economics - - General - - - Financial Crises

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