Working Papers
COVID-19 Fiscal Support and Its Effectiveness
No.
1465
Publisher
ERF
Date
March, 2021
Topic
E4. Money and Interest Rates
C3. Multiple or Simultaneous Equation Models
E6. Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
This paper uses a threshold-augmented Global VAR model to quantify the macro-economic effects of countries’ discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility.
Authors
Alexander Chudik
Federal Reserve bank of Dallas, Research Department
Research Fellows
Kamiar Mohaddes
Macroeconomist, Judge Business School, University of Cambridge
Authors
Mehdi Raissi
Senior Economist, International Monetary Fund