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24 April 2024 |
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Article overview
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V-, U-, L-, or W-shaped recovery after COVID? Insights from an Agent Based Model | | Dhruv Sharma
; Jean-Philippe Bouchaud
; Stanislao Gualdi
; Marco Tarzia
; Francesco Zamponi
; | | Date: |
15 Jun 2020 | | Abstract: | We discuss the impact of a Covid-like shock on a simple toy economy,
described by the Mark-0 Agent-Based Model that we developed and discussed in a
series of previous papers. We consider a mixed supply and demand shock, and
show that depending on the shock parameters (amplitude and duration), our toy
economy can display V-shaped, U-shaped or W-shaped recoveries, and even an
L-shaped output curve with permanent output loss. This is due to the existence
of a self-sustained "bad" state of the economy. We then discuss two policies
that attempt to moderate the impact of the shock: giving easy credit to firms,
and the so-called helicopter money, i.e. injecting new money into the
households savings. We find that both policies are effective if strong enough,
and we highlight the potential danger of terminating these policies too early.
While we only discuss a limited number of scenarios, our model is flexible and
versatile enough to allow for a much wider exploration, thus serving as a
useful tool for the qualitative understanding of post-Covid recovery. | | Source: | arXiv, 2006.8469 | | Services: | Forum | Review | PDF | Favorites | |
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