Sectoral Shocks and Spillovers: An Application to COVID-19

By Sonali Das, Giacomo Magistretti, Evgenia Pugacheva, Philippe Wingender

July 30, 2021

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Sonali Das, Giacomo Magistretti, Evgenia Pugacheva, and Philippe Wingender. Sectoral Shocks and Spillovers: An Application to COVID-19, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines the role of sectoral spillovers in propagating sectoral shocks in the broader economy, both in the past and during the COVID-19 pandemic. In particular, we study how shocks that occur within a sector itself and spillovers from shocks to other sectors affect sectoral activity, for a large sample of countries from 1995 to 2014. We find that both supply and demand shocks—measured as changes in, respectively, productivity and government purchases at the sector level—have large spillover effects on sector-level gross value added and on a sector’s share of the economy. We then use these historical estimates, together with the network structure of global production, to quantify the spillovers from the economic shock associated with the pandemic. We find spillover effects to be sizeable, making up a significant fraction of the overall decline in activity in 2020.Our results have implications for the design of policies with a sectoral dimension.

Subject: COVID-19, Economic theory, Expenditure, Financial sector policy and analysis, Health, Production, Spillovers, Supply shocks, Total factor productivity

Keywords: Appendix C. Construction, COVID-19, Global, Sector recovery, Spillover effect, Spillovers, Spillovers from shock, Supply and demand demand shock, Supply shocks, Total factor productivity

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/204
Stock No:

WPIEA2021204
ISBN:

9781513587394
ISSN:

1018-5941

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