General equilibrium theory

Monetary policy

Internal medicine

Macroeconomics

Pathology

Economics

Political science

Market liquidity

Recession

Unemployment

Disease

Shock (circulatory)

Coronavirus disease 2019 (COVID-19)

Dynamic stochastic general equilibrium

Infectious disease (medical specialty)

Fiscal policy

Monetary economics

Austerity

Medicine

Pandemic

Politics

Journal of Economic Dynamics and Control

I study the effects of the 2020 coronavirus outbreak in the United States and subsequent fiscal policy response in a nonlinear DSGE model. The pandemic is a shock to the utility of contact-intensive services that propagates to other sectors via general equilibrium, triggering a deep recession. I use a calibrated version of the model that matches the path of the US unemployment rate in 2020 to analyze different types of fiscal policies. I find that the pandemic shock changes the ranking of policy multipliers. Unemployment benefits are the most effective tool to stabilize income for borrowers, who are the hardest hit during a pandemic, while liquidity assistance programs are the most effective if the policy objective is to stabilize employment in the affected sector. I also study the effects of the $2.2 trillion CARES Act of 2020.

Fiscal policy during a pandemic