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Faculty of Economics

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Chudik, A., Mohaddes, K. and Raissi, M.

Covid-19 Fiscal Support and its Effectiveness

CWPE2116

Abstract: This paper uses a threshold-augmented Global VAR model to quantify the macroeconomic effects of countries' discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility.

Keywords: TGVAR, Covid-19, threshold effects, fiscal policy

JEL Codes: C32 E44 E62 F44

Author links: Kamiar Mohaddes  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2116.pdf

Open Access Link: https://doi.org/10.17863/CAM.65419