New Paper: "The Macroeconomics of Epidemics" by Prof. Eichenbaum, Prof. Rebelo and Prof. Trabandt
Prof. Eichenbaum (Northwestern University), Prof. Rebelo (Northwestern University) and Prof. Trabandt (Freie Universität Berlin) have recently written a research paper about the macroeconomic effects of epidemics.
News from Mar 23, 2020
The authors extend the canonical epidemiology model to study the interaction between economic decisions and epidemics. The authors' model implies that people's decision to cut back on consumption and work reduces the severity of the epidemic, as measured by total deaths. These decisions, however, exacerbate the size of the recession caused by the epidemic. The competitive equilibrium is not socially optimal because infected people do not fully internalize the effect of their economic decisions on the spread of the virus. In the authors’ benchmark model, the optimal containment policy increases the severity of the recession but saves roughly half a million lives in the U.S.
For the paper please click here.
The paper has been featured by the New York Times (title page), Washington Post, Frankfurter Allgemeine Zeitung, Science, Forbes, Bloomberg, International Business Times, BBC Brazil among others.