nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2021‒04‒19
nineteen papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Role of the Euro in the Eastern Partnership Countries By Radostin Neykov; Caroline Robert
  2. Divisia Monetary Aggregates for Russia: Money Demand, GDP Nowcasting, and the Price Puzzle By Makram El-Shagi; Kiril Tochkov
  3. Assessing One for one and none for all – The Radical Right in the European Parliament By Matthias Diermeier; Hannah Frohwein; Aljoscha Nau
  4. Indecent Disclosures: Anti-Corruption Reforms and Political Selection By David Szakonyi
  5. The Ruble Collapse in an Online Marketplace: Some Lessons for Market Designers By John Horton
  6. Globalization and Female Economic Participation in MINT and BRICS countries By Osinubi, Tolulope; Asongu, Simplice
  7. Asymmetric Effects of Monetary Policy in Different Phases of Armenia's Business Cycle By Haykaz Igityan
  8. A medium-scale Bayesian DSGE model for Kazakhstan with incomplete exchange rate pass through By Nurdaulet Abilov
  9. Spatial concentration and firm-level productivity in Kazakhstan By Zarina Adilkhanova
  10. Trade credit and financial crises in Kazakhstan By Zarina Adilkhanova; Aruzhan Nurlankul; Aizat Token; Berk Yavuzoglu
  11. Housing Market Drivers and Dynamics in Armenia By Haykaz Igityan; Hasmik Kartashyan
  12. Exchange Rate Pass-through in Armenia By Stella Mnoyan
  13. Fitting Armenian Data to the Simple DSGE Model with Permanent Productivity Growth By Haykaz Igityan; Hovhannes Manukyan
  14. Alternative financing and the non-performing loans of the corporate sector in Estonia By Merike Kukk; Natalia Levenko
  15. Asymmetric Effects of Monetary Policy on the Armenian Economy By Haykaz Igityan
  16. Estimating Potential Output at the Central Bank of Armenia By Hayk Karapetyan
  17. Georgia Leads in Prosociality: Comparison to Cross-Cultural Economic Experiment By Mekvabishvili, Rati
  18. Carbon Border Adjustment Mechanism (CBAM): Motivation, Ausgestaltung und wirtschaftliche Implikationen eines CO2-Grenzausgleichs in der EU By Kolev, Galina V.; Kube, Roland; Schaefer, Thilo; Stolle, Leon
  19. Modelling the Effects of a Health Shock on the Armenian Economy By Ani Asoyan; Vahagn Davtyan; Haykaz Igityan; Hasmik Kartashyan; Hovhannes Manukyan

  1. By: Radostin Neykov; Caroline Robert
    Abstract: This paper explores the role of the euro in a number of Eastern neighbours to the EU that are part of the Eastern Partnership (EaP) initiative: Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine. Based on a survey conducted by the European Commission at the end of 2019 on the use of the euro and other currencies in these countries, as well as desk research, it looks into four dimensions: crossborder trade transactions, foreign exchange reserves, external public debt and the commercial bank sector. It finds that most of the EaP countries are skewed towards using the US dollar. This reflects both historical developments and the efficiency of the US dollar financial market. However, the growing political ties and economic exchanges between these countries and the EU provide a rational basis for a greater role of the euro. Since 2014, the euro is steadily increasing its share in trade invoicing and debt stock in a number of countries. Overall, Moldova stands out by a large margin as it uses the euro in more than half of its total international transactions. At the other end of the spectrum are Georgia and Armenia, where the euro plays a more moderate role in most areas. Based on these findings, the paper highlights some areas where the EU could encourage the use of the euro in the region through enhanced economic diplomacy and policy initiatives that would increase its attractiveness such as development of instruments that create sufficient supply of safe euro assets or target niche segments where the EU could play a leading role (for example social bonds, green bonds).
    JEL: E41 E42 E52 E58
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:euf:dispap:138&r=all
  2. By: Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Kiril Tochkov (Texas Christian University, Fort Worth, TX, US)
    Abstract: The lack of developed financial markets and well-functioning transmission channels assigns monetary aggregates in emerging economies the potential role of nominal anchor, intermediate target, or informational variable for monetary policy. The effectiveness of this approach relies crucially on the correct measurement of money, which is not fulfilled by the conventional index based on the simple sum of financial assets. This paper calculates alternative Divisia monetary aggregates for Russia over the period 1998-2019, which account for the level of liquidity of a given monetary asset by assigning weights according to the usefulness of that asset for transaction services. Divisia is found to follow a growth pattern markedly different from the simple sum, whereby deviations between the two series are even more pronounced when foreign-currency accounts are included. We conduct three empirical exercises to demonstrate the advantages of Divisia over the simple sum. Divisia confirms the stability of the money demand function and reflects portfolio shifts in response to changes in the opportunity cost of simple sum. Lastly, Divisia mitigates the price puzzle phenomenon relative to the conventional measure. We conclude that Divisia monetary aggregates would improve the effectiveness of monetary policy in Russia.
    Keywords: Monetary policy, monetary aggregates, Divisia, nowcasting, Russia
    JEL: C43 E41 E52 O52
    Date: 2021–01
    URL: http://d.repec.org/n?u=RePEc:fds:dpaper:202101&r=all
  3. By: Matthias Diermeier; Hannah Frohwein; Aljoscha Nau
    Abstract: The radical right in Europe seemed to be on an unprecedented rise. In the run-up to the European Parliament elections in 2019, a newly founded ‘super-faction’ profoundly scared established politicians. In contrast to the widespread fear of a consolidated right-wing, this contribution carves out that the radical right’ policy congruence in the European Parliament is limited due to internal division primarily caused by the parties’ nativist core ideology. Splitting the radical right into its Eastern and Western European offshoots, reveals a significant economic nativism that systemically prevents comprehensive interregional cooperation. What is more, despite common authoritarian grounds with foreign powers such as the Peoples Republic of China and Russia and their significant advance on influencing the European radical right, nativism divides the radical right also in their stance on foreign autocracies. Whereas economic nativism triggers an opposition against China within the Western European radical right, political nativism in the East obviates cooperation between European rightwingers regarding Russia.
    Keywords: radical right, authoritarianism, nativism, economic policy, European Parliament
    Date: 2021–03
    URL: http://d.repec.org/n?u=RePEc:eiq:eileqs:167&r=all
  4. By: David Szakonyi (George Washington University)
    Abstract: Cracking down on corruption has become a key tool for politicians to build popular support. But little is known about whether anti-corruption measures actually change political behavior. This paper evaluates the effects of a common reform -- financial disclosures -- using data on 25,724 elections in Putin-era Russia. I argue that financial disclosures function like a personal audit, generating information for journalists and prosecutors to investigate illicit gains earned inside and outside of government. Exploiting staggered elections, I find that the passage of a disclosures requirement led to roughly 25% fewer incumbents seeking re-election and 10% fewer candidates with suspicious financial histories. Greater media freedom and law enforcement capacity further increase the risk of corruption and tax evasion being exposed, resulting in even fewer candidacies from those criminally exposed. Increasing transparency changes the incentives for serving in elected office, even in settings where other political motives may be at play.
    Keywords: corruption; anti-corruption; Russia; reforms; elections
    JEL: D7 H40 D73
    Date: 2020
    URL: http://d.repec.org/n?u=RePEc:gwi:wpaper:2020-21&r=all
  5. By: John Horton
    Abstract: The sharp devaluation of the ruble in 2014 increased the real returns to Russians from working in a global online labor marketplace, as con- tracts in this market are dollar-denominated. Russians clearly noticed the opportunity, with Russian hours-worked increasing substantially, primarily on the extensive margin -- incumbent Russians already active were fairly inelastic. Contrary to the predictions of bargaining models, there was little to no pass-through of the ruble price changes in to wages. There was also no evidence of a demand-side response, with buyers not posting more "Russian friendly" jobs, suggesting limited cross-side externalities. The key findings -- a high extensive margin elasticity but low intensive margin elasticity; little pass-through into wages; and little evidence of a cross-side externality -- have implications for market designers with respect to pricing and supply acquisition.
    Date: 2021–04
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2104.06170&r=all
  6. By: Osinubi, Tolulope; Asongu, Simplice
    Abstract: This study examines the effect of globalization on female economic participation (FEP) in MINT (Mexico, Indonesia, Nigeria & Turkey) and BRICS (Brazil, Russia, India, China & South Africa) countries between 2004 and 2018. Four measures of globalization are employed and sourced from KOF globalization index, 2018, while the female labour force participation rate is a proxy for FEP. The empirical evidence is based on Pooled Mean Group (PMG) estimators. The findings of the PMG estimator from the Panel ARDL method reveal that political and overall globalization in MINT and BRICS countries have a positive impact on FEP, whereas social globalization exerts a negative impact on FEP in the long-run. It is observed that economic globalization has no long-run effect on FEP. Contrarily, all the measures of globalization posit no short-run effect on FEP in the short-run. This supports the argument that globalization has no immediate effect on FEP. Thus, it is recommended that both MINT and BRICS countries should find a way of improving the process of globalization generally to empower women to be involved in economic activities. This study complements the extant literature by focusing on how globalization dynamics influence FEP in the MINT and BRICS countries.
    Keywords: Globalization; female; gender; labour force participation; MINT and BRICS countries
    JEL: D60 E60 F40 F59
    Date: 2020–08
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:107138&r=all
  7. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper develops empirical models and shows the presence of asymmetric responses of inflation and output in Armenia to the same size of positive and negative monetary policy shocks. Tight monetary policy yields more reduction in output compared to the increase of output in a response to the same size of loose monetary policy. On the other hand, relatively more inflation is created by expansionary policy. The theoretical micro founded model with New Keynesian frictions is developed to explain asymmetries in transmission mechanism of policy. The model is estimated for the Armenian economy using fifteen macroeconomic time series and fifteen structural shocks. Impulse response functions of second order approximated theoretical model, based on estimated structural parameters, match asymmetries from empirical models. The methodology of mixed equations is applied to calculate the contribution of the particular friction in a creation of asymmetry in the transmission mechanism. The asymmetric response of inflation is mostly the result of highly convex Phillips curve of importers. Another part of asymmetry in inflation is created by internal economy’s price setting frictions and labor market rigidities. The significant part of asymmetric response in output is caused by nonlinearities in capital and labor markets. Adding curvatures of the small open economy into the second order approximated model, the size of asymmetry increases through the channel of higher asymmetry in real exchange rate. Third order theoretical moments of simulated models match directions and sizes of observed data. Variance decomposition of output shows that both demand and supply shocks are important drivers of output. The paper does policy experiments in demand and supply driven business cycle environments. In a demand driven growing economy, the aggressive contractionary monetary policy accelerates the decline of output with diminishing effect on inflation. Aggressive expansionary monetary policy increases the efficiency of creating inflation and decreases the stimulation of output in a demand driven recession. When the economy is in supply driven expansion, the increase in reaction of monetary policy accelerates the decline in output with no significant relative impact on inflation. In a supply driven recession, the aggressive response increases the reaction of output with diminishing effect on inflation.
    Keywords: Nonlinear VAR, Simulation, New Keynesian DSGE, Monetary Policy, Asymmetries, Business Cycle, Expansion, Recession, Asymmetric Effects of Monetary Policy
    JEL: C32 E12 E32 E52
    Date: 2019–09
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:011&r=all
  8. By: Nurdaulet Abilov (NAC Analytica, Nazarbayev University)
    Abstract: The paper analyzes the sources of business cycle fluctuations in Kazakhstan and the relevance of various frictions in the economy using a medium-scale DSGE model with imperfect exchange rate pass through. We estimate the model via Bayesian methods and present estimates of structural parameters of the model and highlight the role of various shocks in explaining the actual dynamics of observed variables. In the absence of quality and deseasonalized data we show that the DSGE model with time-varying markups possesses a reasonable level of accuracy as the one-sided Kalman filter predictions match the dynamics of the observable variables. Posterior estimates of the model show that the long-run growth rate of output is 4.5% per annum and the exchange rate pass through to domestic prices is between 33% and 40% within a quarter. We also find that risk premium shocks have played an important role in determining the inflation rate, the interest rate and the real exchange rate in the economy since 2015.
    Keywords: DSGE model; Incomplete exchange rate pass through; Bayesian estimation; Emerging economy; Kazakhstan.
    JEL: C11 E30 E32 E37
    Date: 2020–12
    URL: http://d.repec.org/n?u=RePEc:ajx:wpaper:7&r=all
  9. By: Zarina Adilkhanova (NAC Analytica, Nazarbayev University)
    Abstract: This paper studies the effect of spatial agglomeration on firms' total factor productivity in Kazakhstan using panel data from 2009 to 2017. We employ a two-stage estimation strategy and control for endogeneity biases by making use of the GMM approach. The results suggest that productivity increases with clustering: a 10% increase in the number of employees of the neighboring firms inside the same industry increases firm-level productivity by 1.36%, while a 10% increase in the employment in other industries enhance firm performance by 1.95%. The productivity gains are higher at the 2-digit regional level rather than at the 9-digit sub-regional level of geographical aggregation, implying that the denser geography increases firms' performance more than in the observed geography.
    Keywords: Agglomeration economies; Total Factor Productivity; Spatial Concentration; Clusters
    JEL: C23 R10 R11 R12 R15
    Date: 2020–12
    URL: http://d.repec.org/n?u=RePEc:ajx:wpaper:14&r=all
  10. By: Zarina Adilkhanova (NAC Analytica, Nazarbayev University); Aruzhan Nurlankul (Department of Economics and Finance, EIEF and LUISS); Aizat Token (Department of Economics, Nazarbayev University); Berk Yavuzoglu (Department of Economics, Nazarbayev University)
    Abstract: This paper studies the trade credit and delinquency behavior in Kazakhstan paying attention to the effects of two recent crises using a unique dataset of large firms and SMEs from the year 2009 to 2016. Our estimates suggest that the relationship between trade credit and bank loans is mainly substitutional except that it was complementary for large firms following the year 2014-5 crisis. This new piece of evidence might provide more insight into the mixed findings in the literature. We also discern that trade credit demand is more prevalent among capital-intensive firms. Kazakhstani firms pass a sizeable portion of their delinquent receivable to their trade credit suppliers. The transmission of trade credit delinquency, additionally, is amplified during the year 2014-5 economic crisis but the year 2009 global financial crisis.
    Keywords: Trade Credit; Delinquency; Financial Crisis; Large Enterprises; SMEs
    JEL: D22 G01 G20 G32
    Date: 2020–03
    URL: http://d.repec.org/n?u=RePEc:ajx:wpaper:15&r=all
  11. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia); Hasmik Kartashyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper develops VAR model for Armenia with housing price and estimates the impact of housing price on GDP growth and inflation. Passthrough results show, that 1% increase in real housing price creates from 0.03 to 0.09% inflation and increases GDP by around 0.25% in the long run. Paper then discusses simple housing decision model and incorporates it into DSGE framework. Households are allowed to divide their disposable housing stock into private consumption and lend out to firms for commercial purposes. Having borrowing constraint in the model enables to generate both borrowing and housing cycles. Balance sheet channel allows to explain the empirically observed estimates of the effects of housing prices on the Armenian economy. According to the theoretical model’s results, the long-run response of inflation to the real housing price increase as a result of housing market’s specific shocks is estimated to lie in the interval of 0.045-0.118%, which is very close to empirical estimates. Moreover, model estimated commercial housing preference cycle is consistent with historical events of the Armenian economy.
    Keywords: Commercial and personal housing, Real estate, Housing price, DSGE model, Borrowing constraint, Bayesian Estimation
    JEL: E31 E44 E52 R21
    Date: 2021–01
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:016&r=all
  12. By: Stella Mnoyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: In this paper, we develop a semi-structural macroeconomic model to estimate the Exchange Rate Pass-through in Armenia using Bayesian estimation. The pass-through both to import prices and core inflation is somewhat lower than the average results for comparable emerging economies reported in the literature. As we calculate time-varying pass-through rates we also explore critical factors causing shifts over time. The macroeconomic view of exchange rate pass-through incompleteness, especially the monetary policy credibility factor, plays a significant role.
    Keywords: Purchasing Power, Taylor Rule, Risk Premia, Exchange Rates, Exchange Rate Pass-through, Output Inflation, Bayesian Analysis, Econometric Modeling, Simulation
    JEL: F31 E31 E37 C11
    Date: 2019–10
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:013&r=all
  13. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia); Hovhannes Manukyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper discusses the evaluation of structural parameters and estimated potential economic growth of Armenia using different specifications of DSGE models. We extend the simple models so that they are consistent with a balanced steady state growth path driven by deterministic labor-augmenting technological progress. Using a Bayesian likelihood approach, paper estimates DSGE models for the Armenian economy using three macro-economic time series. As a result, the dynamics of estimated potential economic growth of the model with demand and mark-up shocks is consistent with economic stylized facts contrary to other models that have no demand and markup shocks or only have one of these shocks. Additionally, estimated potential economic growth of the model with demand and markup shocks shows high correlation with other estimates of Central Bank of Armenia. Paper then structures and estimates two specifications of simple RBC model and the estimated potential economic growth of the model with persistent permanent productivity is identical with DSGE’s one. We show that our models are able to beat Vector Autoregression (VAR) models in out-of-sample forecasting of economic growth.
    Keywords: Bayesian Estimation, VAR, Real Business Cycles, DSGE
    JEL: C11 C32 E12 E32
    Date: 2020–01
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:014&r=all
  14. By: Merike Kukk; Natalia Levenko
    Abstract: The paper investigates how much alternative options for corporate financing have affected the quality of domestic corporate bank loans in Estonia. We use quarterly data from 2004Q1–2019Q3 and three different methods to detect the relationship between the non-performing corporate loans of domestic banks and alternative sources of financing for firms. We find that a rise in intra-group borrowing from parent companies is associated with an increase in overdue corporate loans. There is also some evidence that foreign bank loans and trade credit might be positively related to non-performing corporate loans. The results suggest that a broader set of sources of corporate financing beyond domestic bank loans should be considered when assessing the dynamics of the overdue corporate loans of the domestic banking sector.
    Keywords: corporate debt, non-performing loans, alternative financing, Bayesian model averaging, local projection method
    JEL: G32 G34 C11 C14
    Date: 2021–04–08
    URL: http://d.repec.org/n?u=RePEc:eea:boewps:wp2020-6&r=all
  15. By: Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: Whether inflation and output respond symmetrically or asymmetrically to contractionary and expansionary monetary policy shock of the same size has important policy implications. This paper shows the presence of asymmetric responses in Armenian inflation and output to positive and negative monetary policy shocks of the same size by employing econometric models. Contractionary policy decreases inflation less than expansionary policy increases it. Output reacts in the opposite way. An estimated small open economy DSGE model with sticky wages and investment adjustment costs explains about half of the asymmetry observed in the monetary policy transmission mechanism. This paper finds that the main part of inflation reaction asymmetry is a result of a highly convex Phillips curve for the importers. The nonlinearities of the internal economy explain the predominant part of the asymmetry in output reaction.
    Keywords: nonlinear VAR, New Keynesian Model, monetary policy, asymmetries, business cycle, expansion, recession, asymmetric effects of monetary policy
    JEL: C32 E12 E32 E52
    Date: 2021–03
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:018&r=all
  16. By: Hayk Karapetyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: Potential output and output gap are important concepts in many areas of economic policy. However they are unobservable and can only be measured with some uncertainty. The paper documents some estimation methods used at the Central Bank of Armenia, discusses some relevant criteria for evaluation of the methods and shows the relative performance of the models across a wide range of criteria.
    Keywords: Potential Output, Output Gap, Multivariate Filter, Production Function Aproach
    JEL: E32 C32
    Date: 2019–10
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:012&r=all
  17. By: Mekvabishvili, Rati
    Abstract: Recent experimental economic research highlights the importance of Altruism and prosociality in many economic relations. Our experiment replicates the cross-cultural public goods game experiment conducted in 16 different countries by (Herrmann, Thöni, and Gächter 2008). We find that the mean contributions in standard public goods experiment with voluntary contribution in Tbilisi participant pool appears the highest compared to 16 experiment participant pool of different countries. Moreover, our experimental results show surprisingly flat pattern of mean contributions, indicating on strong evidence of altruism and prosociality. Individual level experimental data tentatively suggests, the repeated game incentives and considerable portion of altruism seems to reinforce each other and motivate subjects' genuine generosity reputation building, as it is a distinct and esteemed character of Georgian culture. In our view, our results of strong evidence of altruism contributes to the cross-cultural economic research of human cooperation.
    Keywords: Prosociality, Altruism, Culture, Human cooperation, Public Goods Experiment
    JEL: C92 H41
    Date: 2021–03–23
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:107048&r=all
  18. By: Kolev, Galina V.; Kube, Roland; Schaefer, Thilo; Stolle, Leon
    Abstract: Das neue Emissionsreduktionziel der EU von 55 Prozent gegenüber 1990 erfordert den Hochlauf von umfassenden, kostspieligen Technologieinvestitionen zur Dekarbonisierung der Industrie. Gleichzeitig unterliegen erst knapp 20 Prozent der weltweiten Emissionen einer direkten CO2-Bepreisung (World Bank, 2020) und die regionalen CO2-Preise liegen meist unter dem europäi-schen Zertifikatspreis. Damit die Transformation der europäischen Industrie weiterhin mit ei-nem international konkurrenzfähigen Produktionsstandort Europa vereinbar ist, sind zuneh-mende Wettbewerbsnachteile für europäische Hersteller und das steigende Risiko einer Verla-gerung der Produktion und der Emissionen an außereuropäische Standorte (Carbon Leakage) einzudämmen. Im Rahmen ihres Green Deals plant die EU-Kommissionen dazu einen Grenzaus-gleich (Carbon Border Adjustment Mechanism, CBAM) auf Emissionen von importieren Indust-rieprodukten, wenn diese aus Regionen mit geringerem CO2-Preisniveau stammen (EC, 2019). Die Einführung eines Grenzausgleichsmechanismus wird handelspolitische Implikationen mit sich bringen. Sollten die Handelspartner die Grenzabgaben als protektionistisch motivierte Maß-nahme bewerten, könnten sie eine Klage vor der Welthandelsorganisation WTO erheben und Vergeltungsmaßnahmen einleiten. Die Welthandelsregeln enthalten zwar Ausnahmen für Um-weltgüter, doch die endgültige WTO-Konformität lässt sich erst durch drohende Gerichtsverfah-ren endgültig klären. Gerade für exportorientierte Hersteller in Europa liegt hierin ein besonde-res Risiko, denn der Grenzausgleich würde vor allem Zuliefererländer wie Russland, die Türkei und China betreffen, die gleichzeitig wichtige Exportzielländer sind. [...]
    JEL: F18 Q54 Q48
    Date: 2021
    URL: http://d.repec.org/n?u=RePEc:zbw:iwkpps:62021&r=all
  19. By: Ani Asoyan (Monetary Policy Department, Central Bank of Armenia); Vahagn Davtyan (Monetary Policy Department, Central Bank of Armenia); Haykaz Igityan (Monetary Policy Department, Central Bank of Armenia); Hasmik Kartashyan (Monetary Policy Department, Central Bank of Armenia); Hovhannes Manukyan (Monetary Policy Department, Central Bank of Armenia)
    Abstract: This paper extends the closed economy DSGE model in order to evaluate the impact of the coronavirus on the economy. Our model makes it clear that people's decisions to reduce consumption and working hours due to the health crisis lead to an economic recession. As a result, the spread of the virus declines. Expansionary monetary policy decreases the size of GDP decline, but it is costly in terms of public health. This result shows that there is a trade-off between the output loss caused by the pandemic and the health consequences of the pandemic.
    Keywords: DSGE, health, epidemic, COVID-19
    JEL: E12 E52 I10
    Date: 2020–12
    URL: http://d.repec.org/n?u=RePEc:ara:wpaper:015&r=all

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