key: cord-0948845-gzq4hr47 authors: Jawad, Muhammad; Maroof, Zaib; Naz, Munazza title: Impact of pandemic COVID‐19 on global economies (a seven‐scenario analysis) date: 2021-04-04 journal: MDE Manage Decis Econ DOI: 10.1002/mde.3337 sha: 09c01f314f5598603aff5d79aa8104af17d361e0 doc_id: 948845 cord_uid: gzq4hr47 Coronavirus (COVID‐19) has affected life expectancy and disturbed economic growth. In pursuance of a better understanding of the probable economic consequences, the present research evaluates seven diverse scenarios/situations to anticipate the possible progression of COVID‐19 using a global hybrid dynamic stochastic general equilibrium (DSGE)–computable general equilibrium (CGE) general equilibrium model and also investigates the macroeconomic outcomes. showed that COVID-19 rapidly spread to economies all across the globe. The World Health Organization (WHO) has identified a communal health crisis prompting a need to coordinate the worldwide response to the disease (WHO in its 2020 report). Researchers all across the globe have also affirmed that in addition to the decline of Chinese economic activities, worldwide supply chain networks have also been disturbed. Businesses across the biosphere which were reliant on resource inputs from the Chinese economy have also encountered shrinkages in manufacturing and production. Furthermore, international transportation services have suffered and further decelerated worldwide economic operations. Most prominently, anxiety among customers and businesses has also influenced usual consumption arrangements and created marketplace irregularities. Adding to this, all international financial marketplaces have also been receptive to the fluctuations. In wake of the global instability, in a primary valuation, the International Monetary Fund predicts China to decrease its initial development target by 0.60% and age a negative impact on global development by 1.72%. The present investigation examines the possible universal costs of COVID-19 by considering probable outcomes. The objective is to offer direction to policymakers to achieve maximum financial benefits of synchronized strategy responses to handle the infection. The investigation draws on the knowledge gained from assessing the economic impacts of the earlier SARS virus (Lee & McKibbin, 2003) and epidemic Influenza virus (McKibbin & Sidorenko, 2006) . Studies have shown that human health, measured by life expectancy, newborn death rate, and maternal death frequency, is associated with financial well-being and development (Bhargava et al., 2001; Haacker, 2004; Robalino, Jenkins, & El, 2002) . Studies have shown several networks through which an infectious disease epidemic affects economic activities. Previous research utilized conventional methods of data analysis pertinent to mortality and sickness to approximate costs. Furthermore, some studies also used data Studies have also mentioned the devastating social and economic impact of HIV/AIDS on the well-being of individuals (Haacker, 2004) . Previous literature demonstrated that the influenza infection was far more transmittable than HIV and likewise in the case of COVID-19, the researchers are predicting a more swift and unanticipated spread of this new virus. The distressful characteristic of COVID-19 has also generated serious consequences for human beings all the globe. It has instigated numerous social and psychological implications which have serious apprehension for social and economic well-being. Studies have evidenced a significant economic and social implication of the SARS virus in developed and developing countries. Some researchers also reported a huge decline in consumption patterns, an increase in business functioning expenditures, and amplified risk in numerous economies. (Lee & McKibbin, 2003) . The review of the literature has evidenced only a few studies emphasizing the economic implications and expenditures of the pandemic. Schoenbaum (1987) performed a preliminary investigation for examining the economic implication of the influenza virus in emerging economies. Likewise, Meltzer et al. (1999) also investigated the financial impact of the influenza epidemic in the United States and reported economic losses of $73.1 to $166.6 billion. Bloom et al. (2005) After deliberation of all this, the present research adapts and extends the work of Lee and McKibbin (2003) and Sidorenko (2006) by considering a large cluster of countries using recent modernized data related to the COVID-19 pandemic. Furthermore, the basic assumption to define the inter-linkage between the global economies, the study executes and analyzes the effect of the COVID-19 on developing and developed economies. For the current investigation, we relate a universal intertemporal wide-ranging equilibrium prototype with diverse mediators known as the G-cubed multistate model. This exemplary prototype is a mixture of the dynamic stochastic general equilibrium (DSGE) prototype and computable general equilibrium (CGE) prototype. where a explains the differential output (divided by technology process), ϖ represents gross inflation rate, and Q explains nominal interest rate. The "check" denotes proportion deviations from a constant state and in the scenario of output, from a trend path (Woodford, 2003) . The DSGE model can be solved through the algorithm projected by Sims (2002) . Describe the vector of variablesB t =ǎ t ,π t ,Q t ,m t ,b t , P tǎt + 1 , P tπt + 1 À Á and the vector of shocks as ϵ t = (ϵ Q,t , ϵ m,t , ϵ b,t ). The G-cubed (G20) prototype has been adopted from the work of McKibbin and Triggs (2018) who extended the inventive prototype acknowledged in Wilcoxen (1999, 2013) . The prototype was developed on six segments and 24 states and counties. Table 1 describes various constituencies and segments in the prototype adapted from the Global Trade Analysis Project (GTAP) database (Aguiar et al., 2019) . Initially, the model completely explains shares along with flows of physical and monetary assets; followed by this, it emphasized the use of money distributed by states central bank to businesses and houses for performing all economic activities (based on Henderson-McKibbin-Taylor monetary rules). Adding to it, the model emphasized that minimal salaries are sticky, and it regulates with time based on country-specific employment contracting conventions. Moreover, it also emphasized that inflexibilities stop the economy from moving rapidly from one symmetry to another, for example, nominal stickiness triggered by wage inflexibilities, absence of anticipation in the establishment of prospects, cost of alteration in speculation by firms, and financial and economic experts following specific financial and economic guidelines. Lastly, the model also includes diverse households and businesses. In the current study, we undertook that all 12 sectors are characterized by price-taking attributes that select variable contributions and magnitude of investment to enhance stock value. All firm's manufacturing technology is characterized by a structured constant elasticity of substitution function. According to this, productivity is a parameter of capital, labor, energy, and materials: where Q i is out of the firm in a specific industry, X ij is firm with time and observation, A o i denominates the parameter of technology, σ o i denominates the elasticity of alternatives, and δ o ij denominates different parameters used for input. The common approach used all parameters, that is, capital, labor, energy, and materials through the above equation to estimate the Gcubed model. The current investigation followed the method in Lee and McKibbin (2003) and McKibbin and Sidorenko (2006) McKibbin and Sidorenko (2006) and the most contemporary data on the COVID-19 infection. Table 3 In Scenario 7, a minor widespread is expected to be repetitive every year for the unspecified future. Initially, in the current study, implement the baseline scenario model Barro (1991 Barro ( , 2015 . Over elongated periods, Barro approximates that the regular catch-up proportion of individual nations to the global production frontier is 2.0% per year. We practice the Groningen Growth and Development catalog (2018) Table 9 comprises the influence on inhabitants in dissimilar constituencies. These essential shockwaves are combined with the numerous indicators explained above to produce the seven situations. Table 9 illustrates that for the lowermost of the epidemic situations (S:4), there are projected to be nearly 16 million demises. According to estimates, in the United States, the approximation is 332,000 demises, and these deaths due to COVID-19 can be associated with a consistent influenza virus period in the United States, where universally 56,000 individuals expire every year. Tables 10 and 11 provide an instantaneous overview of the general GDP destruction for each state/section under seven situations. The outcomes in Table 10 are the transformation in GDP in the year 2020 articulated as a fraction modification from the model. The outcomes in Table 11 are the outcomes from Table 10 whereas the illness eruption lingers. In the context of actual and monetary pressure, there is a serious part for administrations. Despite the fact of reduction in the interest proportion, the probable response from the fundamental banks, the shockwave is not a simple or insignificant directional problem but a multidimensional disaster that will necessitate financial, economic, and well-being strategy outcomes. Isolating the affected individuals, businesses, and economies to evaluate the effectiveness in shared resources and their operative response. Extensive distribution of good sanitation practices as delineated in Levine and McKibbin (2020) can be a small cost and extremely operative reaction that can condense the magnitude of infection and consequently diminish the communal and financial cost. Findings also asserted that the longer period outcomes are even more significant. Notwithstanding the possible damage of life expectancy and the potential extensive disturbance to a huge number of individuals, many administrations have been hesitant to capitalize adequately in their well-being care schemes. Professionals have cautioned and endured to notify that infectious illnesses will experience to stance a hazard to the existence of millions of individuals with hypothetically main disturbance to cohesive world economies. The impression that any nation can be a key in a unified international economy is verified erroneously by the modern epidemic of COVID-19. Universal collaboration, specifically in the domain of community health and financial enlargement, is necessary. All foremost nations necessitate contributing dynamically. It is excessively late to respond once the infection has been embraced in several other nations and endeavor to close boundaries once an epidemic is in progress. Poverty eliminates the deprived class of the economy; however, the epidemic of COVID-19 illustrates that if diseases are produced in underprivileged states due to overpopulation, deprived communal health, and interface with uninhabited animals, then these sicknesses can assassinate individuals of any socioeconomic cluster in any civilization. There is a need for more spending in the health sector predominantly in underprivileged economies. The findings of the present study emphasized the probable expense reduction via worldwide venture in civic health in all states. Although well known about serious strategy intermediation for years, nonetheless, legislators endure overlooking the methodical proof on the significance of communal health in enlightening the excellence of lifespan and as a regulator of financial development. The corresponding author appreciated the efforts of its research team to this task which will help out the policymaker for better implementation of policies. The GTAP Data Base: Version 10 Economic growth in a cross-section of countries Convergence and modernisation Potential economic impact of an avian flu pandemic on Financial development and growth in the short and long run. The World Bank Global Health Security Index 2019. Nuclear threat initiative Johns Hopkins Center for Health Security, Maryland; and The Economist Intelligence Unit The macroeconomics of HIV/AIDS. IMF The impact of SARS Simple steps to reduce the odds of a global catastrophe Global Macroeconomic Consequences of Pandemic Influenza. Lowy Institute Analysis Modelling the G20. Centre for Applied Macroeconomic Analysis The theoretical and empirical structure of the G-cubed model Chapter 17: A global approach to energy and the environment: The G-cubed model The economic impact of pandemic influenza in the United States: Priorities for intervention The International Country Risk Guide Methodology (ICRG). PRS Group The risks and macroeconomic impact of HIV/AIDS in the Middle East and North Africa: Why waiting to intervene can be costly Economic impact of influenza. The individual's perspective Solving linear rational expectations models Impact of pandemic COVID-19 on global economies (a seven-scenario analysis). Manage Decis Econ The authors declare that they have no conflict of interest. This article does not contain any studies with human participants or animals performed by any of the authors. The data will be available on request. The data was collected World Bank open database for researcher, which is the most reliable data source for economic variables.