Covid-19 Fiscal Support and its Effectiveness

Chudik, A., Mohaddes, K. and Raissi, M.

This paper uses a threshold-augmented Global VAR model to quantify the macroeconomic effects of countries' discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility.