MACROECONOMICS OF COVID-19 PANDEMIC: A THEORETICAL PERSPECTIVE WITH REFERENCE TO INDIA

Published: 10 May 2022| Version 1 | DOI: 10.17632/27thrhhvxc.1
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The pandemic caused by COVID-19 virus and the imposition of great lockdown has thrown the global economy off its feet by putting the trade and commercial in utter impasses. At this juncture, standard wisdom of macroeconomics envisages a massive disruption in supply as well as in demand. This paper seeks to examine the economic fallout of the pandemic in the light of demand-supply constrained macroeconomic equilibrium. It has been illustrated how imposition lockdown led to severe plummeting of aggregate demand with the emergence of poignant aversion to spending at spree in anticipation of future economic predicament. Beside this, investors also become pessimistic leading to investment turning relatively interest inelastic. Under the circumstances, though fiscal expansion to combat the crisis emerged as the linchpin the macro-economic policies, it becomes essential to investigate the efficacy of fiscal stimulus (backed by monetization of deficit) of the government on the real variables of the economy which is addressed in this paper. Besides, this study also reveals the potential risk of overshooting the inflation rate associated with this kind of fiscal stimulus.

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Institutions

Jadavpur University, Loreto College Kolkata, Institute of Management Study

Categories

Fiscal Management, Inflation, Pandemic

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