Investigating COVID-19 spillovers in the US economy with a dynamic CGE model

Abstract

Purpose

The recent COVID-19 is forcing governments to implement policies on a large scale to counter its spread. A central issue in the economic debate is the effective quantification of the impact that the policies may implicitly have on the economy. This study quantifies the effects of lockdown in the United States.

Design/methodology/approach

The study uses a dynamic computable general equilibrium (DCGE) model calibrated on a social accounting matrix (SAM). The lockdown policy is applied on the supply side, by using a reduction in the production according to the closing time of each industry. The reduction in the demand is also applied, throughout the contraction of the household consumption that is diversified by the commodities. In order to analyse the pure effect of the lockdown policy, the interventions by the policy makers are not considered in this study.

Findings

The results show an important contraction of productivity in the food industry, the real estate activities, the constructions and the general services.

Originality/value

The contraction produces a fall of the GDP for the whole period analysed, traced by the investments, which includes repercussions on the whole productive system, employment and income of the institutional sectors.

Citation

Ahmed, I., Socci, C., Deriu, S., D'Andrea, S. and Mathkur, N.M. (2023), "Investigating COVID-19 spillovers in the US economy with a dynamic CGE model", Kybernetes, Vol. 52 No. 7, pp. 2431-2456. https://doi.org/10.1108/K-09-2022-1293