Time-Varying Impact of Pandemics on Global Output Growth

This paper analyses the dynamic impact of uncertainty due to global pandemics (SARS, H5N1, H1N1, MERS, Ebola, and COVID-19) on global output growth for the quarterly period of 1996:Q1 to 2020:Q1, using a time-varying parameter structural vector autoregressive (TVP-SVAR) model. Besides the index based on the discussion about pandemics which appear in Economist Intelligence Unit (EIU) country reports, our model contains the growth rate of the United States (US), advanced economies excluding the US, and emerging market countries. We find that the negative effect of the coronavirus on the growth rate of output is unprecedented, with the emerging markets being the worst hit. We also find that since 2016, the comovement among the growth rates has increased significantly. Our results imply that policymakers would need to undertake massive expansionary policies, but it is also important to pursue well-coordinated policy decisions across the economic blocs.