ECOS3007 International Macroeconomics
Creation date:2024-05-28 16:51:28
International Macroeconomics
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: THEend8_
Application 2: Analysing the macroeconomic impact of
COVID-19 pandemic
ECOS3007 International Macroeconomics
Semester 1 2023
Lecture Slides, Topic 8
Week 10
Relevant Readings
See slides.
2 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) Source: IMF (April 2021)
4 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) Source: IMF (October 2022)
5 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) I Source: IMF (April 2021)
6 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2022) II Source: IMF (April 2021)
7 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) I Source: IMF (October 2022)
C H A P T E R 1 G LO B A L P R O S P E C TS A N D P O L I C I E S
9International Monetary Fund | October 2022
Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2022 WEO Update1
Difference from April
2022 WEO1
2021 2022 2023 2022 2023 2022 2023
World Output 6.0 3.2 2.7 0.0 –0.2 –0.4 –0.9
Advanced Economies 5.2 2.4 1.1 –0.1 –0.3 –0.9 –1.3
United States 5.7 1.6 1.0 –0.7 0.0 –2.1 –1.3
Euro Area 5.2 3.1 0.5 0.5 –0.7 0.3 –1.8
Germany 2.6 1.5 –0.3 0.3 –1.1 –0.6 –3.0
France 6.8 2.5 0.7 0.2 –0.3 –0.4 –0.7
Italy 6.6 3.2 –0.2 0.2 –0.9 0.9 –1.9
Spain 5.1 4.3 1.2 0.3 –0.8 –0.5 –2.1
Japan 1.7 1.7 1.6 0.0 –0.1 –0.7 –0.7
United Kingdom2 7.4 3.6 0.3 0.4 –0.2 –0.1 –0.9
Canada 4.5 3.3 1.5 –0.1 –0.3 –0.6 –1.3
Other Advanced Economies3 5.3 2.8 2.3 –0.1 –0.4 –0.3 –0.7
Emerging Market and Developing Economies 6.6 3.7 3.7 0.1 –0.2 –0.1 –0.7
Emerging and Developing Asia 7.2 4.4 4.9 –0.2 –0.1 –1.0 –0.7
China 8.1 3.2 4.4 –0.1 –0.2 –1.2 –0.7
India4 8.7 6.8 6.1 –0.6 0.0 –1.4 –0.8
ASEAN-55 3.4 5.3 4.9 0.0 –0.2 0.0 –1.0
Emerging and Developing Europe 6.8 0.0 0.6 1.4 –0.3 2.9 –0.7
Russia 4.7 –3.4 –2.3 2.6 1.2 5.1 0.0
Latin America and the Caribbean 6.9 3.5 1.7 0.5 –0.3 1.0 –0.8
Brazil 4.6 2.8 1.0 1.1 –0.1 2.0 –0.4
Mexico 4.8 2.1 1.2 –0.3 0.0 0.1 –1.3
Middle East and Central Asia 4.5 5.0 3.6 0.2 0.1 0.4 –0.1
Saudi Arabia 3.2 7.6 3.7 0.0 0.0 0.0 0.1
Sub-Saharan Africa 4.7 3.6 3.7 –0.2 –0.3 –0.2 –0.3
Nigeria 3.6 3.2 3.0 –0.2 –0.2 –0.2 –0.1
South Africa 4.9 2.1 1.1 –0.2 –0.3 0.2 –0.3
Memorandum
World Growth Based on Market Exchange Rates 5.8 2.9 2.1 0.0 –0.3 –0.6 –1.0
European Union 5.4 3.2 0.7 0.4 –0.9 0.3 –1.8
Middle East and North Africa 4.1 5.0 3.6 0.1 0.2 0.0 0.0
Emerging Market and Middle-Income Economies 6.8 3.6 3.6 0.1 –0.2 –0.2 –0.7
Low-Income Developing Countries 4.1 4.8 4.9 –0.2 –0.3 0.2 –0.5
World Trade Volume (goods and services) 10.1 4.3 2.5 0.2 –0.7 –0.7 –1.9
Imports
Advanced Economies 9.5 6.0 2.0 –0.2 –0.8 –0.1 –2.5
Emerging Market and Developing Economies 11.8 2.4 3.0 1.3 –0.3 –1.5 –1.8
Exports
Advanced Economies 8.7 4.2 2.5 –0.3 –1.0 –0.8 –2.2
Emerging Market and Developing Economies 11.8 3.3 2.9 0.1 –0.4 –0.8 –0.7
Commodity Prices (US dollars)
Oil6 65.9 41.4 –12.9 –9.0 –0.6 –13.3 0.4
Nonfuel (average based on world commodity import
weights) 26.3 7.3 –6.2 –2.8 –2.7 –4.1 –3.7
World Consumer Prices7 4.7 8.8 6.5 0.5 0.8 1.4 1.7
Advanced Economies8 3.1 7.2 4.4 0.6 1.1 1.5 1.9
Emerging Market and Developing Economies7 5.9 9.9 8.1 0.4 0.8 1.2 1.6
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 22, 2022–August 19, 2022. Economies are listed on
the basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1Difference based on rounded figures for the current, July 2022 WEO Update, and April 2022 WEO forecasts.
2See the country-specific note for the United Kingdom in the “Country Notes” section of the Statistical Appendix.
3Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
4For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as
a base year.
8 / 40
COVID-19 global economic impact
GDP growth cost and projections (2021-2023) II Source: IMF (October 2022)
C H A P T E R 1 G LO B A L P R O S P E C TS A N D P O L I C I E S
9International Monetary Fund | October 2022
Table 1.1. Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2022 WEO Update1
Difference from April
2022 WEO1
2021 2022 2023 2022 2023 2022 2023
World Output 6.0 3.2 2.7 0.0 –0.2 –0.4 –0.9
Advanced Economies 5.2 2.4 1.1 –0.1 –0.3 –0.9 –1.3
United States 5.7 1.6 1.0 –0.7 0.0 –2.1 –1.3
Euro Area 5.2 3.1 0.5 0.5 –0.7 0.3 –1.8
Germany 2.6 1.5 –0.3 0.3 –1.1 –0.6 –3.0
France 6.8 2.5 0.7 0.2 –0.3 –0.4 –0.7
Italy 6.6 3.2 –0.2 0.2 –0.9 0.9 –1.9
Spain 5.1 4.3 1.2 0.3 –0.8 –0.5 –2.1
Japan 1.7 1.7 1.6 0.0 –0.1 –0.7 –0.7
United Kingdom2 7.4 3.6 0.3 0.4 –0.2 –0.1 –0.9
Canada 4.5 3.3 1.5 –0.1 –0.3 –0.6 –1.3
Other Advanced Economies3 5.3 2.8 2.3 –0.1 –0.4 –0.3 –0.7
Emerging Market and Developing Economies 6.6 3.7 3.7 0.1 –0.2 –0.1 –0.7
Emerging and Developing Asia 7.2 4.4 4.9 –0.2 –0.1 –1.0 –0.7
China 8.1 3.2 4.4 –0.1 –0.2 –1.2 –0.7
India4 8.7 6.8 6.1 –0.6 0.0 –1.4 –0.8
ASEAN-55 3.4 5.3 4.9 0.0 –0.2 0.0 –1.0
Emerging and Developing Europe 6.8 0.0 0.6 1.4 –0.3 2.9 –0.7
Russia 4.7 –3.4 –2.3 2.6 1.2 5.1 0.0
Latin America and the Caribbean 6.9 3.5 1.7 0.5 –0.3 1.0 –0.8
Brazil 4.6 2.8 1.0 1.1 –0.1 2.0 –0.4
Mexico 4.8 2.1 1.2 –0.3 0.0 0.1 –1.3
Middle East and Central Asia 4.5 5.0 3.6 0.2 0.1 0.4 –0.1
Saudi Arabia 3.2 7.6 3.7 0.0 0.0 0.0 0.1
Sub-Saharan Africa 4.7 3.6 3.7 –0.2 –0.3 –0.2 –0.3
Nigeria 3.6 3.2 3.0 –0.2 –0.2 –0.2 –0.1
South Africa 4.9 2.1 1.1 –0.2 –0.3 0.2 –0.3
Memorandum
World Growth Based on Market Exchange Rates 5.8 2.9 2.1 0.0 –0.3 –0.6 –1.0
European Union 5.4 3.2 0.7 0.4 –0.9 0.3 –1.8
Middle East and North Africa 4.1 5.0 3.6 0.1 0.2 0.0 0.0
Emerging Market and Middle-Income Economies 6.8 3.6 3.6 0.1 –0.2 –0.2 –0.7
Low-Income Developing Countries 4.1 4.8 4.9 –0.2 –0.3 0.2 –0.5
World Trade Volume (goods and services) 10.1 4.3 2.5 0.2 –0.7 –0.7 –1.9
Imports
Advanced Economies 9.5 6.0 2.0 –0.2 –0.8 –0.1 –2.5
Emerging Market and Developing Economies 11.8 2.4 3.0 1.3 –0.3 –1.5 –1.8
Exports
Advanced Economies 8.7 4.2 2.5 –0.3 –1.0 –0.8 –2.2
Emerging Market and Developing Economies 11.8 3.3 2.9 0.1 –0.4 –0.8 –0.7
Commodity Prices (US dollars)
Oil6 65.9 41.4 –12.9 –9.0 –0.6 –13.3 0.4
Nonfuel (average based on world commodity import
weights) 26.3 7.3 –6.2 –2.8 –2.7 –4.1 –3.7
World Consumer Prices7 4.7 8.8 6.5 0.5 0.8 1.4 1.7
Advanced Economies8 3.1 7.2 4.4 0.6 1.1 1.5 1.9
Emerging Market and Developing Economies7 5.9 9.9 8.1 0.4 0.8 1.2 1.6
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 22, 2022–August 19, 2022. Economies are listed on
the basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1Difference based on rounded figures for the current, July 2022 WEO Update, and April 2022 WEO forecasts.
2See the country-specific note for the United Kingdom in the “Country Notes” section of the Statistical Appendix.
3Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
4For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as
a base year.
9 / 40
COVID-19 global economic impact
GDP growth cost and projections (2020-2024) Divergent losses and recovery paths
IMFs projection from April 2021 Outlook on average annual loss in per
capita GDP over 2020-2024 (relative to pre-pandemic forecasts):
advanced economies: 2.3%
emerging markets: 4.7%
low-income countries: 5.7%
Main reasons for the divergent losses and recovery paths:
1 Lower-income countries have less access to COVID-19 vacines.
2 Higher-income countries have more
scal capacity to launch above-the-line
scal measures.
Chinas economy returned to its pre-pandemic level in 2020.Q4;
US economy suprassed its pre-pandemic output forecast (in the absence of the
pandemic) in 2021.Q3, while other, lower-income countries are not expected to
so until 2023 or later.
10 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Source: IMF
11 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Source: IMF
12 / 40
COVID-19 global economic impact
Projected medium-term GDP losses (in 2024) Impact of policy responses?
Without above-the-line monetary and
scal policy responses, the global
GDP loss could have been three times worse (based on IMF projection):
monetary policy responses: unprecedented decrease in policy interest rates
globally (e¤ectively 0% rates for some countries, including Australia),
quantitative easings;
scal policy responses: US$ 16 trillion in various
scal support (up to Q2
2021).
13 / 40
Outline
1 Macroeconomic impact of COVID-19 pandemic
Global (GDP) impact
Impact on the Australian economy
2 How can we model COVID-19 pandemic (within a macroeconomic model)?
3 The AA-DD model with "pandemic shocks"
COVID-19s impact on the Australian economy