CREATE researchers have completed a new study of the economic impacts of the coronavirus pandemic, “Macroeconomic Consequences of the COVID-19 Pandemic,” utilizing the CREATE economic consequence analysis (ECA) framework. “ECA is a bottom-up approach that identifies the relative influence of causal factors,” according to Adam Rose, principal investigator and CREATE senior research fellow. The methodology differs from most studies of the impacts of COVID-19, which employ “top down” macroeconomic or financial modeling.
The new study collected primary data on 10 types of avoidance behavior through survey research and then improved estimation of disease spread and healthcare parameters, as derived from interviews with health care experts. The analysis also applied a dynamic computable general equilibrium model, which enabled the research team to estimate how impacts in each time period affects others.
The team also traced the overall time-path of impacts on GDP and employment. The aggregate results build from the team’s previous work, which found that U.S. GDP losses could amount to several trillion dollars over the course of the pandemic.
Nearly all of the causal factors modeled involve some form of resilience (e.g., telework and pent-up demand) or behavioral responses (e.g., avoidance behavior and vaccination uptake) that are a hallmark of the ECA framework. ECA offers two major advantages. First, it improves insight into the workings and interrelationships of causal factors. Second, it enables policymakers to identify the most prominent factors, which is the first step toward offsetting negative influences and reinforcing positive ones. For example, the analysis found that mandatory closures have by far the largest negative influence, and even slow re-openings continue to harm the economy due to persistent supply-chain bottlenecks . Avoidance behavior and telework are also prominent influences, while pent-up demand and six rounds of federal government stimulus packages helped offset negative impacts to some extent.
The study was recently presented at two major professional meetings. Adam Rose presented the Fellows Lecture at the North American Regional Science Council Meetings in Denver, CO, in November, and then made a virtual presentation to the Society of Risk Analysis in December.
“Macroeconomic Consequences of the COVID-19 Pandemic” was supported by the Center for Accelerating Operational Efficiency (CAOE). The study’s authors are: Terrie Walmsley, Research Fellow, CREATE, and Adjunct Assistant Professor of the Practice, Department of Economics; Richard John, Senior Research Fellow, CREATE, and Professor, Department of Psychology; Dan Wei, Research Fellow, CREATE , and Research Associate Professor, Price School of Public Policy; Jakub Hlavka, Research Fellow, CREATE, Research Fellow, Schaeffer Center for Health Policy and Economics, and Research Assistant Professor, Price School; Juan Machado, Research Associate, CREATE; Adam Rose, Senior Research Fellow, CREATE, Senior Research Fellow, Schaeffer Center, and Research Professor, Price School; and Katie Byrd, PhD student, Department of Psychology.
The entire study is available here.
A condensed version being submitted for journal publication is available here.
In addition, note the following journal articles emanating from CREATE’s research on COVID-19 over the past year:
- Rose, A. 2021. “COVID-19 Economic Impacts in Perspective: A Comparison to Recent U.S. Disasters,” International Journal of Disaster Risk Reduction, electronic preprint. doi.org/10.1016/j.ijdrr.2021.102317
- Rose, A., T. Walmsley, and D. Wei. 2021. “Spatial Transmission of the Economic Impacts of COVID-19 through International Trade," Letters in Spatial and Resource Sciences 14: 169-96 doi.org/10.1007/s12076-021-00271-8
- Walmsley, T., A. Rose and D. Wei. 2021. “The Impacts of the Coronavirus on the Economy of the United States,” Economics of Disasters and Climate Change 5(1): 1-52. https://link.springer.com/article/10.1007/s41885-020-00080-1
- Walmsley, T., A. Rose and D. Wei. 2021. “Impact on the U.S. Macroeconomy of Mandatory Business Closures in Response to the COVID-19 Pandemic,” Applied Economics Letters 28(15): 1293-1300. https://www.tandfonline.com/doi/full/10.1080/13504851.2020.1809626
Posted December 15, 2021