Macroeconomics in the Time of the Corona

19 Pages Posted: 23 Jul 2020 Last revised: 4 Aug 2020

See all articles by Halvor Mehlum

Halvor Mehlum

University of Oslo - Department of Economics

Ragnar Torvik

Norwegian University of Science and Technology (NTNU) - Department of Economics

Date Written: June 29, 2020

Abstract

For developed market economies, the corona crisis is a new type of crisis, but this crisis has parallels to economies at other times, and to crises at other places. We discuss some mechanisms from the traditional macro literature, and from the literature on macroeconomics for developing countries, which contains economic mechanisms that overnight have also become more relevant to developed market economies. Phenomena such as bottlenecks, rationing, forced savings, production constrained by access to inputs, liquidity constraints, sector heterogeneity, and costs running despite production being shut down, are all permanent phenomena in developing countries. During the corona crisis, however, they have also emerged as key mechanisms in developed market economies. We discuss some of these well developed, but partially forgotten mechanisms, by extending simple textbook descriptions, and we provide some examples of how the effects of fiscal and monetary policy are modified in a time of crisis.

Keywords: Corona, demand, supply, structuralist, macroeconomics, fiscal policy

JEL Classification: E11, E12, E16, E62, O11

Suggested Citation

Mehlum, Halvor and Torvik, Ragnar, Macroeconomics in the Time of the Corona (June 29, 2020). Available at SSRN: https://ssrn.com/abstract=3637930 or http://dx.doi.org/10.2139/ssrn.3637930

Halvor Mehlum (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

Ragnar Torvik

Norwegian University of Science and Technology (NTNU) - Department of Economics ( email )

N-7491 Trondheim
Norway
+47 735 91420 (Phone)
+47 735 96954 (Fax)

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