This paper aims to explore the effectiveness of macroeconomic recovery policies implemented by fiscal and monetary authorities against Covid-19 pandemic in Turkey. A dynamic stochastic general equilibrium (DSGE) model, in… Click to show full abstract
This paper aims to explore the effectiveness of macroeconomic recovery policies implemented by fiscal and monetary authorities against Covid-19 pandemic in Turkey. A dynamic stochastic general equilibrium (DSGE) model, in which Turkey is defined as an open and small developing country, is built. The model contains eight groups of agents, which are two heterogeneous households, the firms producing intermediate, final and capital goods, the commercial bank, the central bank and the government. Stochastic simulations of the model reveal the propagation of Covid-19 shock, the impacts of fiscal and monetary tools on the selected economic variables. The simulations demonstrate that direct fiscal measures are more effective in mitigating negative economic impacts of Covid-19. This paper broadens existing literature on the macroeconomic impacts of Covid-19 by exerting the functioning of different fiscal and monetary measures in a comprehensive framework within a developing country context.
               
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