Post Covid Era: Future of Economies and World Order
Macroeconomic Impacts of Covid-19Murat Çak, Türkmen Göksel, Şeref Bozoklu
This study analyzes the impacts of the demand and supply shocks that arose due to the COVID-19 pandemic on consumption, investment, capital stock, working time and GDP. For that purpose, a dynamic general equilibrium model employing a representative household, firm and fiscal authority was constructed, and it was examined how alternative fiscal policies mitigate the impacts of demand and supply shocks under the assumption of perfect competition. The steady state equation set obtained from the characterization of the dynamic general equilibrium model was calibrated by using the dataset from the pre-pandemic era. The calibration results indicate that the model successfully represents the pre-pandemic values of Consumption/GDP, Investment/GDP, Government Purchases/ GDP and Capital Stock/GDP. To do an effectiveness analysis, alternative fiscal policies were ranked in terms of compensating for GDP losses caused by negative shocks. When evaluated in the context of the GDP, it turns out that the most efficient tool to stabilize the welfare level compared to the pre-pandemic period is the governmentsubsidized consumption in the short run, especially for those who do not have wealth accumulation or cannot make enough consumption due to low income level. In the medium run on which the economy may meet demand and supply shocks simultaneously, the importance of the government-subsidized consumption decreases due to the crowding-out effect. As a result, it is important for the policy makers to consider the short or medium term in terms of policy selection.