Epidemics in the New Keynesian Model

Martin Eichenbaum, Sergio Rebelo and Mathias Trabandt

No 27430, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper documents the behavior of key macro aggregates in the wake of the Covid epidemic. We show that a unique feature of the Covid recession is that the peak-to-trough decline is roughly the same for consumption, investment, and output. In contrast to the 2008 recession, there was only a short-lived rise in financial stress that quickly subsided. Finally, there was mild deflation between the peak and the trough of the Covid recession. We argue that a New Keynesian model that explicitly incorporates epidemic dynamics captures these qualitative features of the Covid recession. A key feature of the model is that Covid acts like a negative shock to the demand for consumption and the supply of labor.

JEL-codes: E1 H0 I1 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-dem, nep-dge, nep-hea, nep-hpe and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published as Martin S. Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2022. "Epidemics in the New Keynesian Model," Journal of Economic Dynamics and Control, .

Downloads: (external link)
http://www.nber.org/papers/w27430.pdf (application/pdf)

Related works:
Journal Article: Epidemics in the New Keynesian model (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:27430

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w27430

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().