COVID-19

Aggregate Fluctuations, Network Effects and Covid-19

Vol: 
59/2022
Author name: 
Bahal G
Lenzo D
Year: 
2022
Month: 
September
Abstract: 

We decompose the macroeconomic impact of Covid-19 in the US using three production network measures. First, we estimate the aggregate indirect effect of sectoral employment shocks, finding these “network spillovers” to account for ≈72% of the decline in real GDP over the second quarter of 2020. Second, we show that downstream propagation explains most of the aggregate effect of the sector-specific disruptions. Specifically, 77% of the GDP decline constitutes the effect of shocks to supplier sectors on downstream customers. Finally, higher-order feedback is mostly inconsequential in explaining the depth of the contraction: only 5% of the aggregate impact is attributed to second-, third- and higher-round effects of the initial shocks.

Publication file: 

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