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Title: Vietnam’s DSGE Model Analysis of the COVID-19 Pandemic’s Effects on Economic Growth and Monetary Policy
Abstract: In light of the current complex COVID-19 pandemic situation, governments of nations must also develop solutions to deal with the pandemic’s detrimental effects on the economy in addition to medical efforts on disease prevention and treatment. The objective of this study is to provide precise, thorough, and scientific estimates of how the COVID-19 pandemic will affect the Vietnamese economy. Research findings using the Bayesian method to estimate DSGE models reveal that a shock increase of one standard deviation to the Covid status variable (roughly 1.49% increase in the probability of a COVID-19 outbreak) immediately reduces the output gap by 0.94%. This reduction in the output gap only lasts for a quarter before it widens once more. The magnitude of the reduction is relatively small, but refinancing interest rates, inflation, and changes in exchange rates all experience an immediate decline in response to this shock. In order to deal with the COVID-19 pandemic’s current complex situation, governments of nations must find solutions to deal with the pandemic’s detrimental effects on the economy in addition to medical efforts on disease prevention and treatment. The objective of this study is to provide precise, thorough, and scientific estimates of how the COVID-19 pandemic will affect the Vietnamese economy. Research findings using the Bayesian method to estimate DSGE models reveal that a shock increase of one standard deviation to the Covid status variable (roughly 1.49% increase in the probability of a COVID-19 outbreak) immediately reduces the output gap by 0.94%. This reduction in the output gap only lasts for a quarter before it widens once more. Meanwhile, Exchange rate changes, inflation, and refinancing interest rates all have an immediate decline in response to this shock, but the reduction’s size is only modest.
Keywords: monetary policy; the COVID-19 pandemic; policy responses; DSGE models
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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