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?:abstract
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I develop a novel macroeconomic epidemiological agent-based model to study the impact of the COVID-19 pandemic under varying policy scenarios. Agents differ with regard to their profession, family status and age and interact with other agents at home, work or during leisure activities. The model allows to implement and test actually used or counterfactual policies such as closing schools or the leisure industry explicitly in the model in order to explore their impact on the spread of the virus, and their economic consequences. The model is calibrated with German statistical data on time use, demography, households, firm demography, employment, company profits and wages. I set up a baseline scenario based on the German containment policies and fit the epidemiological parameters of the simulation to the observed German death curve and an estimated infection curve of the first COVID-19 wave. My model suggests that by acting one week later, the death toll of the first wave in Germany would have been 180% higher, whereas it would have been 60% lower, if the policies had been enacted a week earlier. I finally discuss two stylized fiscal policy scenarios: procyclical (zero-deficit) and anticyclical fiscal policy. In the zero-deficit scenario a vicious circle emerges, in which the economic recession spreads from the high-interaction leisure industry to the rest of the economy. Even after eliminating the virus and lifting the restrictions, the economic recovery is incomplete. Anticyclical fiscal policy on the other hand limits the economic losses and allows for a V-shaped recovery, but does not increase the number of deaths. These results suggest that an optimal response to the pandemic aiming at containment or holding out for a vaccine combines early introduction of containment measures to keep the number of infected low with expansionary fiscal policy to keep output in lower risk sectors high.
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