ABC: An Agent Based Exploration of the Macroeconomic Effects of COVID-19

70 Pages Posted: 15 Dec 2020

See all articles by Domenico Delli Gatti

Domenico Delli Gatti

Università Cattolica del Sacro Cuore

Severin Reissl

Institute of Advanced Study (IUSS - Pavia)

Date Written: 2020

Abstract

We employ a new macro-epidemiological agent based model to evaluate the “lives vs livelihoods” trade-off brought to the fore by Covid-19. The disease spreads across the networks of agents’ social and economic contacts and feeds back on the economic dimension of the model through various channels such as employment and consumption demand. We show that under a lockdown scenario the model is able to closely reproduce the epidemiological dynamics of the first wave of the coronavirus epidemic in Lombardy. We then explore the efficacy of the fiscal response to Covid-19 which may take different routes: income support, liquidity provision, credit guarantees. In an agent based setting we gain additional insights on the way in which fiscal measures impact not only on GDP but also on the defaults of firms and the allocation of inputs. We find that liquidity support for firms, a short-time working scheme with compensation for workers, and direct transfer payments to households are effective policy tools to alleviate the economic impact of the epidemic and the lockdown.

JEL Classification: E210, E220, E240, E270, E620, E650

Suggested Citation

Delli Gatti, Domenico and Reissl, Severin, ABC: An Agent Based Exploration of the Macroeconomic Effects of COVID-19 (2020). CESifo Working Paper No. 8763, Available at SSRN: https://ssrn.com/abstract=3748964

Domenico Delli Gatti (Contact Author)

Università Cattolica del Sacro Cuore ( email )

LArgo Gemelli 1
Milan, 20123
Italy

Severin Reissl

Institute of Advanced Study (IUSS - Pavia) ( email )

Italy

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