Transmission of Economic Policy to Output during Crises

The COVID-19 pandemic and measures to mitigate the consequences of the pandemic on the health of citizens have led to a significant decline in economic activity in individual countries, leading to a global recession and economic crisis. Most of the affected countries adopted economic policy measures immediately after the escalation of the pandemic in order to save their national economies from complete collapse. However, since the "COVID crisis" is an unprecedented event in recent history, there is significant uncertainty about the effects of these measures and the speed of recovery in the medium and long term, as well as whether an additional set of measures will be needed in the near future. This uncertainty stems from a generally insufficient level of knowledge and empirical evidence on the effectiveness of economic policy transmission mechanisms, especially in conditions of economic crises when global economic activity is severely affected by large macroeconomic shocks.

The project's overall goal is to conduct a systematic and comprehensive empirical evaluation of the effects of fiscal and monetary policy on economic activity as an analytical and data-based basis for further improving the effectiveness of economic policy in times of economic crises and shocks. The realization of the following specific goals will achieve the general goal of the project:

• Strengthening scientific capacities for analyzing the interaction of economic fluctuations and transmission mechanisms of economic policy through the construction of a single set of data on forecasting errors as approximations of macroeconomic shocks and development of a methodology that incorporates the impact of economic crises in assessing the transmission effects of fiscal and monetary policy;
• Strengthening the capacity of economic policymakers to make fiscal and monetary decisions that neutralize the effects of economic crises and mitigate fluctuations in economic activity through the development of macroeconomic simulations and the implementation of adequate recommendations and guidelines for the anti-crisis economic policy with special emphasis on the current crisis caused by COVID-19 pandemic.

The project was funded by the Institute of Economic Sciences as a winning solution presented in an internal competition for funding IES researcher projects.

Project team members

• Aleksandar Zdravković, project manager
• Darko Marjanović, senior researcher on the project
• Duško Bodroža, senior researcher on the project
• Milena Lazić, a junior researcher on the project
• Nevena Jolović, a junior researcher on the project
• Elena Jovičić, project associate