The Effect of Government Fiscal Responses on the Dynamics of Macroeconomic variables under Pandemic Disease Conditions

Rafei, Meysam; Keshavarzi, Ali; Esmaeili, Parisa

doi:10.22059/ier.2024.343888.1007471

The Effect of Government Fiscal Responses on the Dynamics of Macroeconomic variables under Pandemic Disease Conditions

Document Type : Research Paper

Authors

Meysam Rafei ¹

Ali Keshavarzi ²

Parisa Esmaeili ¹

¹ Faculty of Economics, Kharazmi University, Tehran, Iran

² Faculty of Management and Economics, Shahid Bahonar University of Kerman, Kerman, Iran.

10.22059/ier.2024.343888.1007471

Abstract

The pandemic nature of the Coronavirus requires effective measures. Public health measures to control the spread of the disease and support vulnerable businesses are among the most important measures in this regard. On the other hand, restrictions on movement and economic activity have created challenges in the response of governments against this pandemic, which in turn has affected the role and performance of the government. In the present study, a dynamic stochastic general equilibrium model has been used to analyze the role of government under these conditions. The results of the survey of hands-on policy scenarios compared to the state of hands-off policy indicate that the shocks of government health expenditures have caused the faster convergence of macroeconomic variables to steady-state conditions. Therefore, as a proposed policy, it is recommended that the government play a stabilizing role under pandemic disease conditions.

Keywords

Bayesian Estimation

Dynamic Stochastic General Equilibrium

Health Status

Pandemic Outbreak

Subjects