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The macroeconomics of epidemics

link to paper

I’ve used this paper as a teaching aid. It has a very simple competitive equilibrium model, and adds an extra piece to it to try to answer a relevant question.

Students are tired of hearing about that now. I feel like I need to find a new paper with the simple equilibrium plus something else angle.

BibTeX

@article{eichenbaum2021macroeconomics,
  title={The macroeconomics of epidemics},
  author={Eichenbaum, Martin S and Rebelo, Sergio and Trabandt, Mathias},
  journal={The Review of Financial Studies},
  volume={34},
  number={11},
  pages={5149--5187},
  year={2021},
  publisher={Oxford University Press}
}

Abstract

We extend the canonical epidemiology model to study the interaction between economic decisions and epidemics. Our model implies that people cut back on consumption and work to reduce the chances of being infected. These decisions reduce the severity of the epidemic but exacerbate the size of the associated recession. The competitive equilibrium is not socially optimal because infected people do not fully internalize the effect of their economic decisions on the spread of the virus. In our benchmark model, the best simple containment policy increases the severity of the recession but saves roughly half a million lives in the United States.