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

_IMF Working Papers, July 17, 2020_

## Source details

**Canonical URL:** [COVID-19 and Emerging Markets: An Epidemiological Model with International Production Networks and Capital Flows](https://www.imf.org/en/publications/wp/issues/2020/07/17/covid-19-and-emerging-markets-an-epidemiological-model-with-international-production-49566)

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- [Markdown version](/en/publications/wp/issues/2020/07/17/covid-19-and-emerging-markets-an-epidemiological-model-with-international-production-49566/index.md)
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## Bibliographic details
- Authors: Cem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, Muhammed A. Yildirim
- Published: July 17, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513550183.001

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### Overview
- Title: COVID-19 and Emerging Markets: An Epidemiological Model with International Production Networks and Capital Flows
- Authors: Cem Cakmakli, Selva Demiralp, Sebnem Kalemli-Ozcan, Sevcan Yesiltas, Muhammed A. Yildirim
- Date: July 17, 2020
- Abstract summary:
  - Calibrates a SIR-multi-sector-macro model for a small open economy to quantify macroeconomic effects of COVID-19.
  - Measures sectoral supply shocks using teleworking and physical job proximity.
  - Measures demand shocks using credit card purchases.
  - Both supply and demand shocks are affected by changing infection rates under different lockdown scenarios.
  - Openness amplifies economic costs through two channels: demand shock having domestic and external components, and magnification via domestic and international input-output linkages.

### Methodology
- Model framework:
  - SIR-multi-sector-macro model for a small open economy.
- Measurement of shocks:
  - Supply shocks: teleworking and physical job proximity metrics.
  - Demand shocks: credit card purchases.
- Scenario variation:
  - Infection rates change under different lockdown scenarios, affecting both supply and demand shocks.
- Channels highlighted for amplification in an open economy:
  - Demand shock decomposed into domestic and external components.
  - Initial shock magnified through domestic and international input-output linkages.

### Key Findings and Results
- Main quantitative and qualitative findings:
  - The model quantifies macroeconomic effects of COVID-19 for a small open economy (no numerical macro estimates provided on the landing page beyond publication metadata).
  - Being an open economy amplifies economic costs via:
    - Demand shock having domestic and external components.
    - Magnification of the initial shock through domestic and international input-output linkages.

### Policy Implications and Topics Covered
- Policy-relevant themes and areas analyzed:
  - COVID-19, Demand elasticity, Economic theory, External debt, Health, Labor, Monetary policy, Population and demographics, Unconventional monetary policies.
- Keywords signaling policy relevance:
  - 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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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2020/07/17/covid-19-and-emerging-markets-an-epidemiological-model-with-international-production-49566_