IMF Working Papers

COVID-19 and Emerging Markets: An Epidemiological Model with International Production Networks and Capital Flows

ByCem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, Muhammed A. Yildirim

July 17, 2020

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Cem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, and Muhammed A. Yildirim "COVID-19 and Emerging Markets: An Epidemiological Model with International Production Networks and Capital Flows", IMF Working Papers 2020, 133 (2020), accessed 12/6/2025, https://doi.org/10.5089/9781513550183.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We quantify the macroeconomic effects of COVID-19 for a small open economy by calibrating a SIR-multi-sector-macro model. We measure sectoral supply shocks utilizing teleworking and physical job proximity, and demand shocks with credit card purchases. Both shocks are also affected from changing infection rates under different lockdown scenarios. Being an open economy amplifies the economic costs through two main channels. First, the demand shock has domestic and external components. Second, the initial shock is magnified due to domestic and international input-output linkages.

Subject: COVID-19, Demand elasticity, Economic theory, External debt, Health, Labor, Monetary policy, Population and demographics, Unconventional monetary policies

Keywords: closed economy, COVID-19, Debt Monetisation, debt monetization, Demand elasticity, economic cost, Emerging Markets, External Finance, foreign currency, Global, inflation rate, Input-Output Tables, monetary policy, open economy, SIR, stimulus package, supply and demand, swap line, total output, Unconventional monetary policies, utility function, WP

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