An epidemiological model of economic crisis spread across sectors in the United States

Eva Janssens, Robin L. Lumsdaine*, Sebastiaan H. L. C. G. Vermeulen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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Abstract

This papere develops a discrete-time epidemiological model to characterize the spread of economic deterioration across sectors in the United States for the period 1952-2015. It is the first model to apply an epidemiological approach to consider such spread using macroeconomic Flow of Funds data. By extending the usual one-period Markov model to a two-period setting, we incorporate the possibility that an initial slow growth period may either continue further or improve such that further economic deterioration is averted. The estimated model can be used to classify more versus less contagious sectors and identify their channels of transmission.
Original languageEnglish
JournalJournal of Money, Credit and Banking
Early online date6 Oct 2021
DOIs
Publication statusEarly online - 6 Oct 2021

Keywords

  • Flow of Funds
  • financial contagion
  • economic downturns
  • susceptible–infected–removed (SIR)

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