The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach
Abstract This study examines, diagnoses, and assesses appropriate macroeconomic policy responses of the Montenegrin Government to the outbreak of COVID-19. The model econometrically measures the macroeconomic costs using a Bayesian VARX Litterman/Minessota prior to the pandemic disease in terms of d...
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doaj-96b2f64ae6664710acbf848287ea14802020-11-25T04:07:18ZengSpringerOpenFinancial Innovation2199-47302020-11-016111610.1186/s40854-020-00207-zThe macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approachGordana Djurovic0Vasilije Djurovic1Martin M. Bojaj2Faculty of Economics, University of MontenegroFaculty of Economics, University of MontenegroFaculty of Economics, University of MontenegroAbstract This study examines, diagnoses, and assesses appropriate macroeconomic policy responses of the Montenegrin Government to the outbreak of COVID-19. The model econometrically measures the macroeconomic costs using a Bayesian VARX Litterman/Minessota prior to the pandemic disease in terms of demand and supply loss due to illness and closed activities and their effects on GDP growth in various pandemic scenarios. We explore five economic scenarios—shocks—using the available data from January 2006 to December 2019, following real out-of-sample forecasts generated from January 2020 to December 2020. Sensitivity scenarios spanning January 2020 to June 2020 from ± 10 to ± 60% were analyzed. We observed what happens to the supply and demand sides, namely, GDP, tourism, capital stock, human capital, health expenditures, economic freedom, and unemployment. The results show a toll on the GDP, tourism, unemployment, capital stock, and especially human capital for 2020. The recommended policy measures are public finance spending initiatives focused on securing employment and keeping highly qualified staff in Montenegrin companies. Considering all uncertainties, the rebound of the Montenegrin economy could take a few years to reach pre-COVID 19 output levels.http://link.springer.com/article/10.1186/s40854-020-00207-zPandemicsRiskMacroeconometricsForecast |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Gordana Djurovic Vasilije Djurovic Martin M. Bojaj |
spellingShingle |
Gordana Djurovic Vasilije Djurovic Martin M. Bojaj The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach Financial Innovation Pandemics Risk Macroeconometrics Forecast |
author_facet |
Gordana Djurovic Vasilije Djurovic Martin M. Bojaj |
author_sort |
Gordana Djurovic |
title |
The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach |
title_short |
The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach |
title_full |
The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach |
title_fullStr |
The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach |
title_full_unstemmed |
The macroeconomic effects of COVID-19 in Montenegro: a Bayesian VARX approach |
title_sort |
macroeconomic effects of covid-19 in montenegro: a bayesian varx approach |
publisher |
SpringerOpen |
series |
Financial Innovation |
issn |
2199-4730 |
publishDate |
2020-11-01 |
description |
Abstract This study examines, diagnoses, and assesses appropriate macroeconomic policy responses of the Montenegrin Government to the outbreak of COVID-19. The model econometrically measures the macroeconomic costs using a Bayesian VARX Litterman/Minessota prior to the pandemic disease in terms of demand and supply loss due to illness and closed activities and their effects on GDP growth in various pandemic scenarios. We explore five economic scenarios—shocks—using the available data from January 2006 to December 2019, following real out-of-sample forecasts generated from January 2020 to December 2020. Sensitivity scenarios spanning January 2020 to June 2020 from ± 10 to ± 60% were analyzed. We observed what happens to the supply and demand sides, namely, GDP, tourism, capital stock, human capital, health expenditures, economic freedom, and unemployment. The results show a toll on the GDP, tourism, unemployment, capital stock, and especially human capital for 2020. The recommended policy measures are public finance spending initiatives focused on securing employment and keeping highly qualified staff in Montenegrin companies. Considering all uncertainties, the rebound of the Montenegrin economy could take a few years to reach pre-COVID 19 output levels. |
topic |
Pandemics Risk Macroeconometrics Forecast |
url |
http://link.springer.com/article/10.1186/s40854-020-00207-z |
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