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COVID-19 and the GDP fall in Germany: A Business Cycle Accounting Approach

Scholl, Christoph (2022): COVID-19 and the GDP fall in Germany: A Business Cycle Accounting Approach.

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Abstract

The Business Cycle Accounting method by Chari, Kehoe, and McGrattan (2007) helps identify theories that have quantitative promise in explaining economic fluctuations. In this paper, it will be applied to Germany to study the impact of the COVID-19 pandemic. The efficiency wedge primarily drove Germany’s recession. The extensive lockdowns that prevented existing production factors such as labor and capital from producing at their full potential can explain the productivity loss. This suggests that the lockdowns are well identified as significant drivers of the reduction in economic activity and that their end would predict a sharp recovery in Germany.

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