Back to search

SAMØKONOMI-Makroøkonomiske utfordringer

The Corona-crisis, structural change, and macroeconomic policy

Alternative title: Coronakrisen, strukturelle endringer og makroøkonomisk politikk

Awarded: NOK 12.0 mill.

Project Number:

315008

Application Type:

Project Period:

2021 - 2025

Location:

This project analyzes economic crisis and structural change through unique data sources, alternative methodological approaches and new economic theories. The working hypothesis is that crisis events may have very different effects on the business cycles, and subsequently the distribution of household income and firms earnings, when the economy is undergoing structural changes. This knowledge is important for policymakers. The project addresses three key challenges. First, it uses unique and new data sources to set up an early warning system for predicting global crisis, and then analyze key drivers of economic cycles. As the Corona-crisis is an unprecedented event, generating some of the largest business cycle swings ever recorded, managing to predict and prepare for such an event in the future would be welfare improving. This part of the project therefore focuses on how the pandemic and subsequent policy actions have affected three small open economies; Australia, Norway and Sweden. The second part of the project studies how crisis events affect (ongoing) structural changes in the economy, and discuss the role of economic policy in such transformations. We focus in particular on analyzing the structural changes following the corona crisis and persistent petroleum market changes. Macroeconomic policy analysis will have an important role in these theories, as it can potentially facilitate (a preferable) structural change in the economy. Finally, the project will analyze how structural change and large macroeconomic shocks affect individual firms and households, and discuss the macroeconomic implications of such microeconomic behaviour. To do so we will develop and use new empirical models tailored for the analysis of large cross-sectional time series to facilitate empirical analysis of the short- and long-run heterogeneous effects households and firms might experience following major macroeconomic shocks and policy changes.

This project combines unique data sources, alternative methodological approaches and new economic theories to analyse economic crisis and structural change. Our working hypothesis is that crisis events may have very different effects on the distribution of household income and firms earnings when the economy is undergoing structural changes, and this knowledge is important for policymakers. Against this background, this research project is organised in three work packages: First, we will explore the possibilities offered by various Big Data sources and alternative methodological approaches invented within the fields of, e.g., National Language Processing (NLP) and Machine Learning (ML), to address whether better predictions of rapid business cycle changes can be made, so as to provide a reliable early warning system. Understanding the sources behind economic fluctuations has been a core field in macroeconomics. In that respect, the Corona-virus pandemic is an unprecedented event, generating some of the largest business cycle swings ever recorded. Managing to predict and prepare for such events in the future would be welfare improving. Second, we will develop and evaluate macroeconomic theory which studies how the steady state of the economy changes as a result of large shocks and permanent changes, e.g., the corona crisis and persistent petroleum market changes, and how the transition to this new steady state comes by. Macroeconomic policy analysis will have an important role in these theories, as it can potentially facilitate (a preferable) structural change in the economy as well influence the optimal path towards this new steady state. Finally, we will develop and use new empirical models tailored for the analysis of large cross-sectional time series to facilitate empirical analysis of the short- and long-run heterogeneous effects households and firms might experience following major macroeconomic shocks and policy changes.

Funding scheme:

SAMØKONOMI-Makroøkonomiske utfordringer