Macrofinancial information on the post-COVID-19 economic recovery: Will it be V, U or L-shaped?

Financ Res Lett

European Central Bank, Directorate General Monetary Policy, Sonnemannstrasse 22, 60314 Frankfurt am Main, Germany.

Published: November 2021

We use standard macrofinancial no-arbitrage term structure models to forecast key macroeconomic variables such as GDP. Simple adaptations to the models are proposed in order to generate plausible forecasts in the context of the COVID-19 crisis. The financial market variables included in the models are shown to improve GDP forecasts. Forecasts of real GDP conditioned on macrofinancial information up to August 2020 suggest that the shape of the recovery will most likely be between a U and an L in most euro area countries considered, with substantial persistent losses.

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http://www.ncbi.nlm.nih.gov/pmc/articles/PMC9760224PMC
http://dx.doi.org/10.1016/j.frl.2021.101978DOI Listing

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