Catégorie d'article: Conceptual Paper
Publié en ligne: 31 mars 2023
Pages: 3 - 12
Reçu: 08 juin 2022
Accepté: 14 déc. 2022
DOI: https://doi.org/10.2478/ijme-2023-0001
Mots clés
© 2023 Michael Frenkel et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.
We study the impact of several Covid-19 related supply shocks. We use a standard wage setting-price setting model of the labor market and analyze the transmission of the shocks to the natural rate of unemployment and production. In a first step, the shocks are analyzed in a general way, graphically and algebraically. In a second step, numerical examples illustrate the effects on the real wage and the labor market equilibrium as well as output. Our theoretical results indicate that the negative supply shocks related to the Covid-19 pandemic are associated with a decline in the natural level of output and employment. Our results are supported by empirical evidence across various countries. However, limitations of the theoretical model can be considerable.