Covid-19 fiscal support and its effectiveness

Vol: 
28/2021
Author name: 
Chudik A
Mohaddes K
Raissi M
Year: 
2021
Month: 
March
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.

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