Riikka Nuutilainen (BOFIT) - The Growth Impact of COVID-19: The Role of Economic Structures and Government Policies

Co-authors: Balázs Égert (OECD) and Iikka Korhonen (BOFIT)

This paper investigates the macroeconomic impact of Covid-19 on a large cross section of advanced, emerging market and developing economies. The economic impact, defined as the difference between output in 2021 and its forecast value from (before Covid-19) 2019, is found to be largely driven by economic structures observed before the outbreak of the pandemic. Lockdown and other government policies are found to explain much less in cross-country differences in economic outcomes, whereas fiscal and monetary policy responses are difficult to identify. The paper also shows that large emerging market economies perform in line with model predictions, with two exceptions: Turkey has been doing better than what model covariates would have predicted whereas India’s economic performance cannot be fully explained by the structural and policy variables used in the empirical analysis.

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