COVID-19 Fiscal Support and Its Effectiveness

Chudik, Alexander; Mohaddes, Kamiar; Raissi, Mehdi

doi:10.24149/gwp408

Working Paper

COVID-19 Fiscal Support and Its Effectiveness

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 Classification: C32; E44; E62; F44;

https://doi.org/10.24149/gwp408