Economic Covid-19 effects analysed by macro econometric models—the case of Norway

Abstract

<abstract><p>Counterfactual analysis of the impact of Covid-19 can be based on a solution of a macroeconomic model for a scenario without the coronavirus interfering with the macroeconomic system. Two measures of impact are introduced with the aid of a simple theoretical model, and then used in the empirical analysis: (Ⅰ) The difference between the counterfactual without Covid-19 and a baseline model solution. (Ⅱ) The difference between the counterfactual and the actual development of the economy. In order to analyze the impact on GDP we use two model categories. First, empirical final form model equations, which were purpose-built with the aid of a machine learning algorithm. Second, an operational multiple-equation model of the Norwegian macroeconomic system. Empirically, we find a significant impact of Covid-19 on the GDP Mainland Norway in 2020. For some of the estimator/model combinations, the impacts are also significant in the two first quarters of 2021. Using the multiple-equation model, the assessment is extended to the impact of Covid-19 on value added in four Mainland Norway industries, on imports and exports, and on final consumption expenditure and gross capital formation.</p></abstract>