A counterfactual economic analysis of Covid-19 using a threshold augmented multi-country model.

This paper develops a threshold-augmented dynamic multi-country model (TGVAR) to quantify the macroeconomic effects of the Covid-19 pandemic. We show that there exist threshold effects in the relationship between output growth and excess global volatility at individual country levels in a significant majority of advanced economies and several emerging markets. We then estimate a more general multi-country model augmented with these threshold effects as well as long term interest rates, oil prices, exchange rates and equity returns to perform counterfactual analyses.