## Sectoral Shocks and Spillovers: An Application to COVID-19

_IMF Working Papers, July 30, 2021_

## Source details

**Canonical URL:** [Sectoral Shocks and Spillovers: An Application to COVID-19](https://www.imf.org/en/publications/wp/issues/2021/07/30/sectoral-shocks-and-spillovers-an-application-to-covid-19-462895)

## Other formats

- [Markdown version](/en/publications/wp/issues/2021/07/30/sectoral-shocks-and-spillovers-an-application-to-covid-19-462895/index.md)
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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

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### 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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## Content in this bundle

- **Working Paper**
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  - [Working Paper (PDF)](/-/media/files/publications/wp/2021/english/wpiea2021204-print-pdf.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2021/07/30/sectoral-shocks-and-spillovers-an-application-to-covid-19-462895_