We present a theory of Keynesian supply shocks: supply shocks that trigger changes in aggregate demand larger than the shocks themselves. We argue that the economic shocks associated to the COVID-19 epidemic—shutdowns, layoffs, and firm exits—may have this feature. In one-sector economies supply...
Keywords:
2019-nCoVCOVID-19, Disease Outbreak, Supply Shocks, Demand Shortages, Macroeconomic Implications
