The global economy has shifted from a mostly growing economy into a severe, almost life-threatening recession or even depression within of weeks and months. The aim of this term paper is to show the real impacts of the Corona crisis on the economy. Especially the impacts on demand and fiscal policy reactions are described in this term paper.
The wealth of a country depends, among other things, on the overall economic situation, which is usually defined as the business cycle. Good indicators of an economic situation are generally indicators such as the employment rate, the unemployment rate, prices and development of interest rates, sales and capacity of utilization. The pandemic has completely changed all areas of life overnight including the world economy. In addition, to protect of people and address issues of mobile working, new products had to be developed very quickly, for politicians to make current assessments and decisions. The exceptional circumstances have posed challenges to all and raised very similar questions for humanity: what will be the consequences of the pandemic for the economy, for international cooperation in education, academic research, and culture?
Table of Contents
1 Introduction
1.1 Issue and objectives of the thesis
1.2 Structure
2 Background information
2.1 Definition of COVID-19 pandemic
2.2 Business cycle and IS-LM Model
2.3 Economics before the COVID-19 pandemic
3 Effects of the Corona crisis
3.1 Corona crisis versus global financial crisis
3.2 From global health crisis to recession – impacts on economy
3.3 World trade impacts
3.4 Government support in response to the COVID-19 pandemic
4 Final assessment
4.1 Summary
4.2 Conclusion and outlook
Objectives and Core Topics
The primary objective of this seminar thesis is to analyze the profound economic impacts of the COVID-19 pandemic, with a specific focus on the resulting global demand shock and the subsequent fiscal policy responses implemented by governments to mitigate economic decline.
- Theoretical analysis of business cycles and the IS-LM macroeconomic model in the context of a pandemic.
- Comparative examination of the economic effects of the 2008 financial crisis versus the COVID-19 crisis.
- Assessment of disruptions to global trade, supply chains, and industrial sectors.
- Evaluation of government fiscal interventions, including stimulus packages and support for businesses and households.
Excerpt from the Book
3.1 Corona crisis versus global financial crisis
First of all, it is necessary to understand the crisis and classify the depth. According to data and scenarios, the Corona crisis surpasses the global financial crisis, which occurred in 2008. However, comparisons with the global economic depression of the 1930s, which are occasionally drawn, seem overdrawn in this case. The following figure shows differences between the real economic growth during the financial crisis and global depression in the 30s. Furthermore, this figure is a model, which shows the course of the Corona crisis. In each case, the average of inflation-adjusted growth of GDP in Germany, France, United Kingdom and the US is considered in this figure.
Obviously, the GDP fell rapidly and more sharply in spring 2020 than during the financial crisis. This fact is represented by the V-shaped course of the Corona crisis, reaching the trough phase, and then followed by a rapid recovery phase in 2021. After the worldwide depression in the 30s, the Corona crisis caused the lowest GDP rate.13 The financial crisis was mostly a mixture of monetary and budgetary policy. Drastic government deficits were created to prevent a collapse of the banking systems and the associated negative consequences for the economy. Meaning, a large part of the debt was transferred to the government, which had long-term effects on GDP growth. Therefore, GDP growth is slower in comparison to the Corona crisis.
Summary of Chapters
1 Introduction: Introduces the research scope, outlining the shift in the global economy and the objectives of analyzing demand shocks and policy reactions.
2 Background information: Defines the pandemic and explains the theoretical framework of business cycles and the IS-LM model relative to economic stability.
3 Effects of the Corona crisis: Provides an in-depth analysis of the recession, comparing the Corona crisis to the financial crisis while evaluating disruptions in world trade and government interventions.
4 Final assessment: Consolidates the findings regarding the pandemic's impact and provides an outlook on future economic developments and the role of digitalization.
Keywords
COVID-19, Corona crisis, global economy, demand shock, fiscal policy, recession, business cycle, IS-LM model, world trade, supply chains, government support, economic growth, inflation, digital transformation, financial crisis.
Frequently Asked Questions
What is the core focus of this thesis?
The work examines the economic repercussions of the COVID-19 pandemic, focusing specifically on how it acted as a global demand shock and how governments utilized fiscal policy to counter the resulting recession.
What are the central topics addressed?
The main themes include the definition of the Corona crisis, international trade disruption, comparing the current pandemic to the 2008 financial crisis, and analyzing government aid measures in various countries.
What is the primary research goal?
The goal is to demonstrate the concrete economic impacts of the Corona crisis and how different fiscal strategies were employed to stabilize national economies during the downturn.
Which economic models are used to analyze the situation?
The thesis utilizes the business cycle theory and the IS-LM model to visualize the relationship between interest rates, economic output, and liquidity during economic phases.
What is the scope of the main chapters?
The main section covers the background of the pandemic, a comparative analysis of the current crisis versus previous financial crises, the impact on global trade and supply chains, and an evaluation of government fiscal support.
Which keywords best describe this study?
Key terms include COVID-19, global demand shock, fiscal policy, recession, supply chains, and government economic intervention.
How deep was the economic impact of the pandemic compared to 2008?
The thesis argues that the Corona crisis caused a more rapid and sharp decline in GDP compared to the 2008 financial crisis, characterized by an exogenous supply and demand shock.
What is the significance of the "digital transformation" regarding the economy?
Digital transformation, accelerated by social distancing, is identified as a critical factor that allowed many businesses to continue operations and mitigate some of the negative economic impacts.
- Citation du texte
- Seda Kaygusuz (Auteur), 2021, The Corona crisis. Global demand shock and fiscal policy reaction, Munich, GRIN Verlag, https://www.grin.com/document/1420335
