Sectoral Shocks and Spillovers: An Application to COVID-19
IMF Working Papers, July 30, 2021
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- Sectoral Shocks and Spillovers: An Application to COVID-19
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Bibliographic details
- Authors: Sonali Das, Giacomo Magistretti, Evgenia Pugacheva, Philippe Wingender
- Published: July 30, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513587394.001
Overview
- Authors: Sonali Das, Giacomo Magistretti, Evgenia Pugacheva, Philippe Wingender
- Publication date: July 30, 2021
- Core question: How do sectoral spillovers propagate sectoral shocks through the broader economy, historically and during the COVID-19 pandemic?
Methodology and Data
- Sample period: 1995 to 2014
- Approach:
- Estimate effects of shocks that occur within a sector and spillovers from shocks to other sectors on sectoral activity.
- Measure supply shocks as changes in productivity at the sector level.
- Measure demand shocks as changes in government purchases at the sector level.
- Combine historical estimates with the network structure of global production to quantify spillovers from the COVID-19 economic shock.
Key Findings
- Both supply and demand shocks have large spillover effects on:
- Sector-level gross value added.
- A sector’s share of the economy.
- Spillover effects from the pandemic:
- Are sizeable.
- Make up a significant fraction of the overall decline in activity in 2020.
- Implication from results: Spillovers materially amplify sectoral shocks and therefore matter for understanding aggregate outcomes during crises such as COVID-19.
Policy Implications and Recommendations
- Policies with a sectoral dimension should account for:
- Direct within-sector shocks (productivity and government purchase changes).
- Indirect spillovers transmitted through sectoral linkages and the global production network.
- Design of support and recovery strategies should incorporate estimated spillovers to better target interventions and mitigate amplified declines in activity.
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- Working Paper