Prague Economic Papers 2021, 30(6):724-747 | DOI: 10.18267/j.pep.786

Study on Impacts of COVID-19 Pandemic Recession Based on Monte Carlo Simulation

Di Shang ORCID...a, Chang Yub, Gang Diao ORCID...c
a School of Economics and Management, Harbin Institute of Technology (Shenzhen), Shenzhen, Guangdong, China
b School of Economics and Management, Beijing Forestry University, Beijing, China
c Business School, Lishui University, Lishui, Zhejiang, China

We analyse the economic impact of the economic recession caused by the unprecedented COVID-19 pandemic by estimating the amplitude, duration and scope of influence of the recession. We employ the turning point method to extract the characteristics of the historical recessions since 1980 in 153 countries and use the information to obtain the distribution characteristics of the GDP growth rate in these countries during the current pandemic-induced recession with Monte Carlo simulation. We then make judgment on the scope of influence of this pandemic-induced recession by investigating the co-movement relationship between the historical recessions in the 153 countries. The results show that this pandemic-induced recession is likely to be a severe global recession. The mean of the average simulated ΔGDP of the 153 countries will plunge into a trough at -1.16% in 2020 with a recession amplitude of approximately 4.50% and recover to the pre-crisis level of 3.29% in 2023.

Keywords: COVID-19 pandemic, economic recession, GDP growth rate forecasting, turning points, Monte Carlo simulation
JEL classification: E30, F60

Received: September 24, 2020; Revised: June 26, 2021; Accepted: July 1, 2021; Prepublished online: November 25, 2021; Published: December 15, 2021  Show citation

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Shang, D., Yu, C., & Diao, G. (2021). Study on Impacts of COVID-19 Pandemic Recession Based on Monte Carlo Simulation. Prague Economic Papers, 30(6), 724-747. doi: 10.18267/j.pep.786
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