Author: Morsy, Hanan; Balma, Lacina; Mukasa, Adamon N.
Title: ‘Not a good time’: Assessing the economic impact of COVIDâ€19 in Africa using a macroâ€micro simulation approach Cord-id: mu8bh0jt Document date: 2021_5_18
ID: mu8bh0jt
Snippet: The paper studies the effects of the coronavirus disease 2019 (COVIDâ€19) pandemic on African economies and household welfare using a topâ€down sequential macroâ€micro simulation approach. The pandemic is modeled as a supply shock that disrupts economic activities of African countries and then affects households’ consumption behavior, the level of their welfare, and businesses’ investment decisions. The macroeconomic dynamic general equilibrium model is calibrated to account for informali
Document: The paper studies the effects of the coronavirus disease 2019 (COVIDâ€19) pandemic on African economies and household welfare using a topâ€down sequential macroâ€micro simulation approach. The pandemic is modeled as a supply shock that disrupts economic activities of African countries and then affects households’ consumption behavior, the level of their welfare, and businesses’ investment decisions. The macroeconomic dynamic general equilibrium model is calibrated to account for informality, a key feature of African economies. We find that COVIDâ€19 could diminish employment in the formal and informal sectors and contract consumption of nonâ€savers and, especially, savers. These contractions would lead to an economic recession in Africa and widen both fiscal and current account deficits. Extreme poverty is expected to increase further in Africa, in particular if the welfare of the poorest households grows at lower rates. We also use the macroeconomic model to analyze the effects of different fiscal policy responses to the COVIDâ€19 pandemic.
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