*Co esponding au ho . E-mail: a.balce [email protected]
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Copy igh © 2021 The Au ho (s). Published by Vilnius Gediminas Technical Uni e si y
Technological and Economic De elopmen o Economy
ISSN: 2029-4913 / eISSN: 2029-4921
2021 Volume 27 Issue 3: 742–762
h ps://doi.o g/10.3846/ ede.2021.14585
THE COVID-19 DISEASE AND POLICY RESPONSE
TO MITIGATE THE ECONOMIC IMPACT IN THE EU
Ma ek ZINECKER 1, Ka el DOUBRAVSKÝ 1, Adam P. BALCERZAK 1, 2*,
Michał Be na d PIETRZAK 3, Mi ko DOHNAL 1
1Facul y o Business and Managemen , B no Uni e si y o Technology, B no, Czech Republic
2Facul y o Economic Sciences, Uni e si y o Wa mia and Mazu y in Olsz yn, Olsz yn, Poland
3Facul y o Economic Sicences and Managemen , Nicolaus Cope nicus Uni e si y in To uń,
To uń, Poland
Recei ed 13 Oc obe 2020; accep ed 07 Feb ua y 2021
Abs ac . This s udy aims o unde s and how Co id-19 con agious disease and he EU’s policy
esponse may a ec mac oeconomic pe o mance. P e ious s udies on his opic ha e used his-
o ical da a se s on “ a e mac oeconomic disas e s” such as G ea In luenza o assess he impac
o he cu en pandemic on he global economy. The au ho s examine he main channels o ans-
mission and a ge ed policy esponse o mi iga e c isis quali a i ely. The au ho s use heu is ics and
apply quali a i e end-based analysis because he cu en pandemic is a unique e en o which
accu a e quan i a i e da a a e no cu en ly a ailable. Resea che s i s iden i y a se o eigh a i-
ables based on p e ious academic heo ies. They hen exp ess each a iable as a end: ascending,
descending, and cons an . The nume ical calcula ions consis o 17 scena ios, supplemen ed by 24
ansi ions and a ansi ion g aph. Besides, he a icle p oposes a g aphical solu ion o examine
he change in GDP ha is oo small. The esul s o he s udy should be unde s ood as a e e ence
poin o allow bo h p i a e and public s akeholde s o unde s and be e he ela ionship be ween
he obse ed a iables and hei dynamics. The esea ch p o ides a comp ehensi e lis o u u e
e en s o examine u he he implica ions o he economy as a whole and each indi idual.
Keywo ds: Co id-19, economic impac , GDP, quali a i e end-based analysis, model, scena ios.
JEL Classi ica ion: E17, E52, E58, E31, E62.
In oduc ion
Recen ly, he e is an inc easing numbe o s udies add essing he issue how he Co id-19
sp ead ac oss coun ies migh a ec he global economy (Ku el, 2020; Dias e al., 2020). No
su p isingly, many au ho s ag ee ha as a esul o he pandemic, we migh ace he mos se-
ious economic and social c isis since he ou b eak o he G ea Dep ession in 1929 (Boissay
& Rungcha oenki kul, 2020; Co eia e al., 2020; Eu opean Commission, 2020; McKibbin &
Technological and Economic De elopmen o Economy, 2021, 27(3): 742–762 743
Fe nando, 2020; OECD, 2020; UNCTAD, 2020). The Eu opean Commission (2020) indica es
ou channels h ough which he Co id-19 pandemic has been a ec ing he economy. Fi s ly,
China’s subs an ial decline in economic ac i i y in he i s qua e o 2020 had wo ying
e ec s on he consume sen imen and esul ed in he dis up ion o global supply chains.
Secondly, he in oduc ion o social dis ancing policies and he global lockdown caused ab-
sences om he wo kplace and deepened he p oblem o dis up ed supply chains. The hi d
channel h ough which he disease ou b eak a ec s he global economy is a weak demand
sen imen caused by ising unemploymen , mobili y and a el es ic ions, e c. Fou h, he
pandemics may also dep ess inancial ma ke s, as he demand o isk asse s ell, causing a
sha p d op in he p ices o equi y-based ins umen s. Se ious liquidi y cons ain s o banks,
en e p ises and households become mo e likely wi h he leng hening o he pe iod when
eme gency measu es and a d op in p oduc i i y will pe sis . In his con ex , wo o he as-
pec s make he wo ld economy s ongly ulne able o he cu en epidemics: a high le el o
globaliza ion wi h accen ua ed “c oss-coun y spillo e s” and high le e age used o co e
consume and in es men expendi u es in many segmen s o p i a e economy (Boissay &
Rungcha oenki kul, 2020).
How do he na ional go e nmen s and he Eu opean Commission espond o alle ia e
he nega i e e ec s o he disease on he economy? An ex ensi e numbe o measu es ha e
been in oduced wi hin he ecen weeks and mon hs. The na ional budge s, as well as he
EU budge , ha e been mobilised in o de o suppo small and medium-sized en e p ises
wi h wo king capi al loans, unds allowing he implemen a ion o pa - ime wo k schemes
mi iga ing he isk o unemploymen , and wi h de e ed paymen s o co po a e and alue
added axes o social secu i y con ibu ions. Fu he mo e, con ainmen measu es o p o ec
public heal h a e complemen ed by a ge ed in es men s in o he heal h ca e sys em. Due o
he key ole o he inancial sec o (Pa dal e al., 2020), banks a e p o ided wi h gua an ees
o a oid a sudden and sha p educ ion in he a ailabili y o c edi s o he economy (Ko zeb
& Niedziółka, 2020). Mo eo e , he Eu opean Cen al Bank (ECB) has aken complemen a y
ac ions o acili a e he low o c edi . The i s ins umen – he new a ge ed lending acil-
i y– is ocused on p o iding liquidi y o banks a a nega i e in e es a e (–0.75%). Second,
he pandemic eme gency pu chase p og amme was ini ia ed consis ing in buying public
and p i a e sec o bonds. Fo mo e de ails, see he Eu opean Commission (2020), Boissay &
Rungcha oenki kul (2020), Gopina h (2020) and Laga de (2020).
Mos o he ecen pape s used quan i a i e da a se s on p e ious pandemics and es ima-
ions a e made in e ms o he impac o he cu en si ua ion on he economic ac i i y. In
his pape , we will go beyond hese app oaches; we assume ha beha iou al pa e ns can be
explained by heu is ics and he quali a i e end analysis is used he e o de elop and explo e
how Co id-19 con agious disease and he EU’s policy esponse may a ec mac oeconomic
ou pu . This means ha we ely on academic heo ies and expe es ima ions how each a ia-
ble in ol ed in he model migh de elop. The a iables unde s udy a e desc ibed by iple s,
i.e., he i s and second quali a i e ime de i a i es a e used o app oxima e he end. The
solu ions consis o a se o scena ios and a ansi ional g aph co e ing all possible u u e
beha iou s o he obse ed a iables. Fu he mo e, a g aphic solu ion was de i ed o s udy
he beha iou o economic g ow h on he imeline.
744 M. Zinecke e al. The Co id-19 disease and policy esponse o mi iga e he economic impac in he EU
The es o he cu en a icle is o ganized as ollow. In he nex sec ion, we discuss he
backg ound o he p oposed analysis, which concen a es on he mos ecen esea ch de o -
ed o he p oblem o he cu en and p ojec ed economic in luence o Co id-19 pandemic. In
he nex me hodology sec ion, we discuss quali a i e end analysis as a me hod, which has
a g ea po en ial o analysing a e e en s, which canno be p ecisely desc ibed by up- o– o-
da e and accu a e da a, such as Co id-19 pandemic. Then, we p o ide a p ecise p esen a ion
o ou esea ch con ibu ion. Finally, we end up wi h discussion and conclusions, which s ess
he speci ic alue added o ou app oach.
1. Theo e ical backg ound
A conside able amoun o p io esea ch has ex ensi ely assessed he impac o epidem-
ics on he economy. Boissay & Rungcha oenki kul (2020) p o ide a summa y o he main
ou pu s o he mos p ominen s udies and me hodologies. A en ion is hen payed o he
issue o which ex en Co id-19 will impac he global GDP g ow h. The clea es his o i-
calanalogy o cu en e en s is he 1918 G ea In luenza (Spanish lu). Thisepidemic killed
abou 39million people, o 2 pe cen o he wo ld’s popula ion a he ime (Ba o e al.,
2020). A compa able mo ali y a e oday would esul in a subs an ial loss o human li e and
long-las ing economic down u n. The au ho s do no belie e ha he e a e some speci ics
in e ms o in e ac ions be ween supply and demand ansmission channels, al hough hey
equi e u he esea ch in he ield. The economic cos s o he Co id-19 shock ha e o be
assessed om bo h sho - e m and long- e m pe spec i e. Based on ecen o ecas s, Boissay
& Rungcha oenki kul (2020) p edic a e y deep ecession in 2020. Es ima ed annual ou pu
losses ange be ween 4 and 4.5% o he wo ld economy and 5 and 9% o he US economy.
Compa ed o SARS (2003), H5N1 (2003-19) and Ebola (2014–2016), he cos s o Co id-19
a e “an o de o magni ude highe ” and exceed e en hose o he G ea Recession be ween
2008 and 2009. The po en ial long- e m e ec s o he disease a e also sca ing and di icul o
calcula e. A wa e o bank up cies could dis up supply chains and cause se ious damage o
he labou ma ke and p oduc i i y.
The OECD (2020) used wo app oaches o assessing he po en ial impac o global shu -
downs on he economy. The i s app oach is sec o -based, ocused on es ima ing how con-
ainmen measu es migh a ec indi idual indus ies and hei ou pu s. Assump ions a e
made abou he magni ude o which he sec o s a e likely o be a ec ed. The bigges impac
on ou pu will occu wi hin se ice sec o s including ou ism, a el and e ail because o he
es ic ions on mo emen and social dis ancing. A a he mode a e di ec impac o lock-
downs is assumed in capi al in ensi e indus ies, al hough some o hem a e also ad e sely
a ec ed by supply chain dis up ions, pa icula ly he manu ac u ing o anspo ehicles. I
an economy-wide shu down is assumed, he calcula ions sugges ha con ainmen measu es
could educe he le el o ou pu by 15% o e en mo e in bo h well-de eloped and majo
eme ging ma ke economies i he es ic ions should las o he whole yea . The second
app oach o assessing he possible impac o economy-wide shu downs is based on consume
expendi u es. Th ee ca ego ies o spending we e iden i ied in o de o p edic he magni ude
o expendi u e es ain . Fi s o all, spending equi ing di ec con ac , such as clo hing,
Technological and Economic De elopmen o Economy, 2021, 27(3): 742–762 745
oo wea and package holidays, is assumed o be s ongly educed o pos poned en i ely. Ex-
pendi u es on local a el, public ca e ing and accommoda ion se ices ep esen he second
ca ego y. The hi d ca ego y o spending conce ns essen ial i ems, he consump ion o which
is assumed o be una ec ed. The main conclusion ha can be d awn om he calcula ions
is ha he pe o mance o a ypical G7 economy will educe by a ound 20% in he le el o
GDP on he annual basis.
McKibbin and Fe nando (2020) de eloped and explo ed se en scena ios o assess he
impac o Co id-19 on he global economy by applying he global in e empo al gene al
equilib ium model wi h he e ogeneous agen s (G-Cubed Model). This model cap u es da a
o six sec o s and wen y- ou coun ies and egions. The calcula ion esul s show ha in
he wo s case scena io, he GDP loss would each 8.4% in he U.S.A., 6.2% in China, and
8.4% wi hin he EU. In absolu e amoun s, he GDP educ ion would be o e US$ 9 illion
in 2020. Fu he mo e, he au ho s p o ide es ima es o he impac o he global pandemic
on consump ion, p i a e in es men and equi y ma ke s. In e ms o capi al mo emen s, he
p edic ion is ha unds will be shi ed om equi y in o bond ma ke s, and ha inancial
capi al will ou low om mo e a ec ed economies such as China and o he de eloping and
eme ging economies in o “sa e ha bou s” such as he USA, Aus alia and Eu ope, wi h he
impac on exchange a es and cu en accoun adjus men s. In he conclusions, McKibbin
and Fe nando (2020) equi e he implemen a ion o mone a y, iscal, and heal h policy e-
sponses. In he sho - e m, cu ing in e es a es, iscal spending inc ease, educing social
in e ac ions, and dissemina ion o good hygiene p ac ices seem o be highly e ec i e ools.
In he long- e m, go e nmen s a e encou aged o conduc la ge-scale in es men s in o public
heal h sys ems and medical esea ch in in e na ional co-ope a ion.
Ba o e al. (2020) aimed a es ima ing he mac oeconomic impac o he G ea In luenza
Epidemic o 1918-1920. They used he de ini ion o “ a e mac oeconomic disas e s” as la ge,
ins an aneous, and pe manen d ops in eal ou pu o e one o mo e adjacen yea s by 10
pe cen o mo e (see also Ba o & U súa, 2008). Examples o such a e e en s include wa s,
dep essions, financial c ises, and epidemics (Nakamu a e al., 2010). Based on his de ini ion,
Ba o e al. (2020) ank as he mos ad e se mac oeconomic shocks o he wo ld since 1870
Wo ld Wa II, he G ea Dep ession, Wo ld Wa I, and he G ea In luenza Epidemic. The
au ho s used he c oss-coun y panel eg ession analysis o assess he impac o he G ea
In luenza Epidemic and Wo ld Wa I on he economic g ow h exp essed as g ow h a es o
he eal GDP pe capi a and eal consump ion pe capi a. The da a se lis s alues o he
pe iod be ween 1901 and 1929 and co e s 42 coun ies. The calcula ions indica e ha he
G ea In luenza Epidemic educed eal economic ou pu pe capi a by 6.0 pe cen on a e age.
To compa e his esul wi h he impac o o he a e mac oeconomic disas e s, he au ho s
also conduc ed calcula ions o Wo ld Wa I. In his espec , he indings sugges ha he
G ande Gue e has lowe ed he eal pe capi a GDP by 8.4 pe cen in a ypical coun y. Fu -
he indings o he s udy sugges conside able sho - e m slumps in eal e u ns on s ocks
and sho - e m go e nmen bills. In conclusion, Ba o e al. (2020) o e impo an esea ch
implica ions, while add essing he issue how he cu en co ona i us pandemic migh a ec
he global economy. The ou lined wo s -case scena ios a e igh ening: he G ea In luenza
lu mo ali y a e o 2.0 pe cen would cause oday abou 150 million dea hs wo ldwide,
which co esponds o he GDP and consump ion decline a he le el o 6 pe cen , and 8 pe
746 M. Zinecke e al. The Co id-19 disease and policy esponse o mi iga e he economic impac in he EU
cen espec i ely. The indings also suppo he assump ion ha highe lu dea h a es will
signi ican ly lowe eal e u ns on s ocks and sho - e m go e nmen bills.
Co eia e al. (2020) deal wi h wo se s o ques ions. Fi s ly, he au ho s add ess he
issue how a pandemic will impac he eal economic ac i i y and whe he he e ec s o he
economic down u n a e likely o be o a sho - e m o long- e m na u e. Second, how do
“non-pha maceu ical in e en ions” (NPIs) a ec he economic se e i y o he disease? The
economic cos s and bene i s o NPIs policies a e s udied and compa ed, while using U.S.
da a se s on he 1918 G ea In luenza mo ali y, economic ac i i y, bank balance shee s, and
con ainmen measu es implemen ed ac oss s a es and ci ies. The s udy deli e s e idence ha
he pandemic caused “a sha p and pe sis en ” economic decline in e ms o indus ial p o-
duc ion ( educ ion by 18% pe yea ), he s ock o du able goods, and bank asse s. Hence, he
economic dis up ion was unambiguously d i en by bo h supply and demand-side channels.
The indings also suppo he no ion ha imely and o ensi e NPIs could educe des uc i e
economic e ec s o he G ea In luenza. Ci ies and s a es ha applied con ainmen meas-
u es as e could no only la en he shape o hei mo ali y cu es bu also o economic
pe o mance cu es. The e idence on indus ial p oduc ion and bank balance shee s sug-
ges s ha an ea ly implemen a ion o NPIs enabled a smoo he economic eco e y a e he
pandemic. Co eia e al. (2020) conclude ha he lessons om 1918 a e impo an o s udy
he economic impac o Co id-19; howe e , hey s ess ha a compa ison is possible only
o a limi ed ex en . The dea h a e o he 1918 G ea In luenza was signi ican ly g ea e and
he disease a ec ed younge people in pa icula . The le el o globaliza ion and he ole o
mode n communica ion echnologies oday also di e signi ican ly, making compa isons
mo e complica ed.
Eichenbaum e al. (2020) enhanced he SIR model (suscep ible, in ec ed, and eco e ed o
emo ed) de eloped by Ke mack and McKend ick (1927) o explo e he in e ac ion be ween
economic decisions and in ec ional disease. They sugges ha an epidemic will impac he
agg ega e demand, as well as he agg ega e supply. The agg ega e supply will be cu down
because o cons ain s on he labou ma ke whe e a ema kable sha e o he global wo k-
ing o ce emains ou side he wo kplace. Addi ionally, unp eceden ed policy measu es o ce
people o emain unde lockdown (Kuc-Cza necka, 2020). Many households espond o he
new si ua ion by dec easing consump ion, which shi s he agg ega e demand cu e o he
le . The consecu i e ou come o he AS and AD shi s esul s in a deep global economic
down u n. Eichenbaum e al. (2020) modi y he canonical SIR model by assuming ha i he
beha iou o people emained unchanged, he isk o sp eading in ec ious diseases among
humans would inc ease. The esul ing concep is e e ed as he SIR-mac o model, he sim-
ples a ian o which abs ac s om he exis ence o accina ions, medical ea men s, and
limi ed heal hca e capaci y. Based on his simple SIR-mac o model assuming ha be ween
60 and 70 pe cen o he US popula ion will be in ec ed, he au ho s p edic ha he ag-
g ega e consump ion will decline by 4.7% in he i s yea o he epidemic. Mo eo e , he
simple SIR-mac o model is ex ended by implemen ing he assump ion ha he mo ali y a e
is an inc easing unc ion o he numbe o in ec ed popula ion. In his case, an e en mo e
signi ican decline o he AS and AD can be expec ed as people educe hei consump ion
and wo king hou s mo e agg essi ely. In subsequen calcula ions, Eichenbaum e al. (2020)
discuss he issue how so a a hypo he ical possibili y o an e ec i e ea men would change

Technological and Economic De elopmen o Economy, 2021, 27(3): 742–762 747
he esea ch indings. The cen al message o he esea ch is as ollows: inding a comp omise
be ween economic in e es s o mi iga e he sho - e m ecession and con ainmen measu es
o mi iga e ad e se heal h consequences plays a c i ical ole. The bes simple con ainmen
policy clea ly wo sens he economic si ua ion bu signi ican ly educes mo ali y.
Table 1 summa izes he me hodologies and calcula ion esul s o he s udies men ioned
abo e.
Table 1. Resea ch on impac o Co id-19 on economic ac i i y (sou ce: elabo a ed by he au ho s)
S udies Me hodology Es ima ing he Global Economic Cos s
Boissay and
Rungcha-
oenki kul
(2020)
A e iew o empi ical s udies on he
economic impac o pas epidemics
P i a e sec o o ecas s on he GDP
g ow h a es
Using he di e ence be ween cu en
o ecas s and p e-Co id-19 ou look
Sho - e m e ec s: annual GDP losses be ween
4 and 4.5% o he wo ld economy and 5 and
9% o he US economy
Long- e m e ec s: bank up cies, dis up ed
supply chains, and he c isis in he labou
ma ke wi h a nega i e impac on p oduc i i y
OECD
(2020) Sec o based o ecas s ocused
on es ima ing how con ainmen
measu es migh a ec indi idual
indus ies and hei ou pu s
Consump ion based o ecas s
ocused on assessing how economy-
wide shu downs migh a ec
consume expendi u es
Annual GDP losses on he le el o 15% o
e en mo e in bo h well-de eloped and majo
eme ging ma ke economies
The pe o mance o a ypical G7 economy will
educe by a ound 20% in he le el o GDP on
he annual basis
McKibbin
and
Fe nando
(2020)
De eloping scena ios on
mac oeconomic ou comes
and inancial ma ke s while
using a global in e empo al
gene al equilib ium model wi h
he e ogeneous agen s (G-Cubed
Model)
Calcula ions o se en scena ios
The wo s case scena io: GDP decline in he
USA a he le el o 8.4% (globally o e US $ 9
illion in 2020).
The mos lenien scena io: GDP decline in he
U.S.A. a he le el o 0.1% (globally by a ound
US $ 2.4 illion)
Ba o e al.
(2020) C oss-coun y panel eg ession
analysis o assess impac o he G ea
In luenza Epidemic and Wo ld Wa
I on economic g ow h exp essed as
he g ow h a es o eal GDP pe
capi a and eal consump ion pe
capi a
The da a se lis s alues o he
pe iod be ween 1901 and 1929 and
co e s 42 coun ies
Implica ions o esea ch how Co id-19 migh
a ec he global economy
Annual GDP and consump ion decline a he
le el o 6 pe cen and 8 pe cen espec i ely
Signi ican ly lowe eal e u ns on s ocks and
sho - e m go e nmen bills
Co eia
e al.
(2020)
Empi ical app oach building on he
US da a on he 1918 G ea In luenza
Es ima ing he impac o non-
pha maceu ical in e en ions on
mo ali y, economic ac i i y, and
bank balance shee s ac oss s a es and
ci ies
The lessons om 1918 a e impo an o s udy
in e ms o he economic impac o Co id-19
Howe e , he compa ison is icky because o
di e ences in mo ali y a es, public heal h
se ice e iciency, he le el o globaliza ion, he
s uc u e o economies, and he ole o mode n
communica ion echnologies.
Eichen-
baum e al.
(2020)
Ex ending he SIR model o s udy
he equilib ium in e ac ion be ween
poli ical decisions on con ainmen
measu es and epidemic dynamics
The simple SIR-mac o model: a decline in
consump ion by 4.7% in he i s yea o
epidemic in he USA
Re-calcula ing o he model esul s i an
e ec i e ea men we e ound
748 M. Zinecke e al. The Co id-19 disease and policy esponse o mi iga e he economic impac in he EU
2. Me hodology
B inging oge he he me hodological app oaches used in ecen academic esea ch, we can
conclude ha hese a e based on quan i a i e da a se s o p e ious pandemics. Many assump-
ions a e made in e ms o he cu en pandemic in o de o es ima e he impac on he global
economic g ow h. He e, we use a quali a i e app oach o unde s and he impac o Co id-19
epidemic and a ge ed policy measu es on GDP.
Quali a i e end analysis (QTA) ep esen s a echnique how o deal wi h a e e en s
which canno be desc ibed by nume ical da a se s because hese a e no a ailable o a e
incomple e (Villez, 2015). Many shallow knowledge i ems a e a ailable jus as e bal desc ip-
ions based on ends: dec easing, cons an , o inc easing (Yan e al., 2013). Fo ins ance, i an
e ec i e ea men o Co id-19 we e ound, hen a sha p inc ease in GDP can be expec ed.
Villez (2015) epo s ha a QTA consis s o a wo-s ep p ocedu e. In he i s s ep, an ab-
s ac ion o he quan i a i e da a se ies is ou lined. The second on- he-in ui ion-based s ep
simula es quali a i e ea u es. A ime se ies is di ided in o ime windows ( hese a e called
episodes) on he basis o he signs o i s de i a i es. Pai wise end ela ions a e a g aphical
ep esen a ion o he quali a i e desc ip ions. Objec i e and subjec i e knowledge mus be
syn hesized o gain he ob ious bene i s o objec i e accu acy and semi-subjec i e abili y o
common sense. Typical examples o pai wise end ela ions a e shown in Figu e 1.
In ou quali a i e model, ou a iables ep esen ing he ansmission channels h ough
which Co id-19 epidemic is likely o a ec GDP g ow h (G) a e used: supply shock (S),
China spillo e (C), demand shock (D), and liquidi y cons ain s (LC). Fu he mo e, ou
a iables ocused on assessing he impac o policy measu es wi hin he EU a e conside ed:
liquidi y measu es (LM), schemes o alle ia e he impac on he labou ma ke (E), ins u-
men s o suppo in es men s (I), and schemes how o main ain supply chains (T).
Figu e 1. Examples o pai wise end ela ions
(sou ce: Doub a ský & Dohnal, 2018)
Y
X
22 Y
X
21 Y
X
23
Y
X
25 Y
X
26 Y
X
24
Technological and Economic De elopmen o Economy, 2021, 27(3): 742–762 749
We build on a s ill expanding numbe o s udies su ounding he Co id-19 pandemic o
shed ligh on a supply shock, induced by he lockdowns, con ainmen measu es, and dis-
up ed supply-side chains, and i s e ec s on agg ega e demand (see e.g. Gue ie i e al., 2020;
Boissay & Rungcha oenki kul, 2020; E iksson on Allmen e al., 2020). E iksson on Allmen
e al. (2020) sugges ha companies in he e ail, leisu e, ou ism, and a el indus ies ha e
been a ec ed by he c isis i s ollowed by o he sec o s such as au omo i e and elec onics,
which ha e aced o dis up ed supply-side chains. Consequen ly, he inc easing unce ain y,
loss o income, ising p opensi y o sa e, and a decline in expo s ha e educed p i a e in-
es men ac i i y and consump ion and dep ess he agg ega e demand. The pandemic can
also ha e long-las ing e ec s on he po en ial p oduc because o highe mo ali y, pe sis en
s uc u al unemploymen and lowe p oduc i i y esul ing om a wa e o bank up cies.
Addi ionally, Ramsden (2020) emphasizes he “sca ing” e ec accompanying he pos -c isis
pe iod, which le i m in es men and labou p oduc i i y below he p e-c isis le els, due o
he ini ial nega i e shock. This esul s in lowe household incomes han hey migh o he wise
ha e been (Ramsden, 2020) and in pa icula less a luen households a e excluded om he
use o se ices p o ided by, e.g., he inancial indus y (Hu e ski e al., 2020).
We dis inguish be ween lo e y and decision a iables. Ex e nal supply shocks and China
spillo e s a e lo e y a iables, i.e., bo h he na ional go e nmen s and he EU ins i u ions
can ake ei he ze o o e y limi ed ac ions o in luence hem (we call hese a iables o be
o -con ol). On he o he hand, he demand shock and liquidi y cons ain s can be essen ial-
ly in luenced by implemen ing any kind o measu es lis ed in Figu e 2. In his case, we a e
alking abou decision a iables, al hough we ecognize ha hese can be unde con ol only
o a ce ain ex en . Fo ins ance, sho - ime wo k schemes empo a ily suppo employmen
and companies as hey can be e ma ch he numbe o hou s wo ked o ou pu equi emen s.
Wi hou doub , pe manen employmen , which can be main ained e en du ing ecessions,
migh be bene icial in he phase o economic eco e y and suppo economic g ow h. On
he o he hand, such go e nmen -sponso ed p og ammes can also cause ma ke ine iciency
(e.g., he ealloca ion o labou o mo e p oduc i e jobs migh be educed, o eelance s do
no bene i om he schemes as hey a e a he excluded om he labou ma ke , see e.g.
Cahuc, 2019). This means ha sho - ime wo k schemes in e ms o p omo ing economic
g ow h canno ep esen a decision a iable sensu s ic o.
Fo u he de ails, how ansmission channels migh in luence he GDP g ow h a es,
see Figu e 2.
2.1. Quali a i e end based analysis
The quali a i e end analysis o he end model M (see unc ion 1), is based on ou quan i-
ie s, see Table 2.
( )
12
M , ,, .
n
XX X… (1)
Table 2. The quan i ie s (sou ce: Vicha & Dohnal, 2008)
Values: Posi i e Ze o Nega i e Any hing
T end: Inc easing Cons an Dec easing Any di ec ion
Symbol: + 0 – *
750 M. Zinecke e al. The Co id-19 disease and policy esponse o mi iga e he economic impac in he EU
The end model M ( unc ion 1) is speci ied when all a iables unde s udy X1, X2,..., Xn
a e desc ibed by iple s as ollows:
(Xi, DXi, DDXi), i= 1, 2,…, n, (2)
whe e DX is he i s quali a i e ime de i a i e o X and DDX is he second quali a i e ime
de i a i e o he a iable X. Fo example, he iple is (+,+,+), sho ly (+++). This iple
can be in e p e ed so ha he a iable X is posi i e (X= (+)), g owing in ime (DX= (+))
and g ow h accele a es (DDX= (+)).
The quali a i e end analysis s ands on he elemen a y concep ion o de i a i es (Dou-
b a ský e al., 2020). The end model M can be ep esen ed by a se o di e en ial equa ions;
o de ails, see (Vicha & Dohnal, 2008). When he model ( o mula 1) is sol ed, he se o
n-dimensional scena ios is ob ained S(n, m). The e a e m scena ios:
( ) ( ) ( ) ( )
{ }
11 1 2 2 2 n
S , ,D ,DD , ,D ,DD , , ,D ,DD ,
nn j
nm X X X X X X X X X

= …

(3)
whe e j= 1,2,…,m.
Figu e 2. A Schema ic O e iew o Co id-19 T ansmission Channels o he GDP G ow h
and Con ainmen Policy Measu es in he EU
(sou ce: own wo k based on Eu opean Commission, 2020; Boissay & Rungcha oenki kul 2020;
Gopina h, 2020; Laga de, 2020)
Supply Shock on he Labou
Ma ke and Dis up ion o
Supply Chains (Mo ali y,
Illness, and Absences om
he Wo kplace)
Social dis ancing measu es
(con aining he pandemic)
Spending on public heal h
sys ems (con aining and ea ing
he pandemic)
Loss o P oduc i e
Wo k o ce
Ins umen s suppo ing he low
o goods, secu ing essen ial
a el, and anspo sa e y
Demand Shock
(Unemploymen and Loss o
Income, Unce ain y and i s
Nega i e Impac on
In es men Plans)
P o iding liquidi y o en e p ises
(co e ing wo king capi al, sho
ime wo king schemes, loan
gua an ees, c edi holidays, e c.)
Weak Consume and
In es men Sen imen
Measu es suppo ing he labou
ma ke (sho - ime wo k
schemes, changes o
unemploymen bene i
a angemen s, p omo ion o
elewo king)
Shocks T ansmission Channels Con ainmen Policy Measu es
Fiscal Policy: Go e nmen loan
gua an ees p o ided o banks
C edi Chanel Shock (C edi
C unch)
Liquidi y Cons ain s
Mone a y Policy: a ge ed
lending acili ies, a ge ed
colla e al easing ools, buying
public and p i a e sec o bonds
(ECB)
Technological and Economic De elopmen o Economy, 2021, 27(3): 742–762 757
Fu he mo e, we used he ollowing end ee (Figu e 6) o analyse all a ailable pa hs,
R(S7, E), whe e E= {S1, S15}. Only h ee pa hs could be iden i ied, o hei desc ip ion, see
Table 7.
Table 7. A comp ehensi e lis o pa hs
(sou ce: elabo a ed by he au ho s)
No. Pa h
17 →9 →1
27 →9 →17 →16 →15
37 →10 →17 →16 →15
Figu e 5. T ansi ional g aph G (sou ce: elabo a ed by he au ho s)
Figu e 6. T end ee (sou ce: elabo a ed by he au ho s)
9
1 17
66
16
15
1
1
7
10
6
17
16
15
1
1
6
6

758 M. Zinecke e al. The Co id-19 disease and policy esponse o mi iga e he economic impac in he EU
The ansi ion be ween wo nodes (scena ios) is associa ed wi h a change o obse ed a -
iables. In his pape , we ocus on he decision a iables VD. Fo example, he ansi ion om
scena io 7 o scena io 9 equi es he change o all 6 decision a iables (see Table 6 and Figu e 5).
The numbe o changed a iables is needed o apply he sub-heu is ics H1. Numbe s o
changed decision a iables o all ansi ions Tij shown in Figu e 5 a e lis ed in Table 8.
Table 8. Changes o a iables (sou ce: elabo a ed by he au ho s)
T ansi ion Numbe o changed a iables
F om node iTo node j
7 9 6
7 10 6
9 1 6
9 17 6
10 17 6
17 16 1
16 15 1
Table 9. T ansi ion p obabili ies (sou ce: elabo a ed by he au ho s)
T ansi ion P obabili y
F om node iTo node j
7 9 0.588
7 10 0.412
9 1 0.429
9 17 0.571
10 17 1
17 16 1
16 15 1
Figu e 7. Quali a i e desc ip ion o unc ion G( ) (sou ce: elabo a ed by he au ho s)
G
7 9 17 16 15
Technological and Economic De elopmen o Economy, 2021, 27(3): 742–762 759
On he basis o numbe o changed a iables, see Table 7, he p obabili ies o he ansi-
ions (10) we e ob ained (see Table 9).
In Table 9, we can see ha he mos p obable pa h is No. 2, see Table 7. Fo his pa h, we
can de i e he o ecas o indi idual a iables o e ime. Fo example, he de elopmen o
he quali a i e unc ion G( ) is shown in Figu e 7. This g aph does no ep esen a con en-
ional g aph. I is a end g aph, which con ains i e columns, whe e each column s ands o
one scena io.
Discussion and conclusions
In his pape , we aimed a s udying how he Co id-19 in ec ious disease and how he EU
policy esponse migh impac mac oeconomic ou comes using he quali a i e end analysis.
P io esea ch on he opic has la gely wo ked wi h his o ical quan i a i e da a conce ning
a e e en s such as he G ea In luenza o assess he impac s o he cu en pandemic on
he global economic g ow h. Unlike hese s udies, we seek o examine he c ucial ansmis-
sion channels and a ge ed policy esponse o mi iga e he c isis on a quali a i e basis. The
quali a i e on- he- end-based esea ch concep has been applied he e o s udy e en s and
sys ems, which a e unique, ague and mul idimensional and hus canno be desc ibed by
cu en adequa e da a se s.
The se S comp ising 17 scena ios and he ansi ional g aph G ep esen he main e-
sea ch ou comes. Mo eo e , we p opose a g aphical solu ion o examine he change o he
a iables unde s udy o e ime. The se o scena ios, he ansi ional g aph and he isu-
aliza ion o he de elopmen o he GDP g ow h o e ime se e as a ool allowing bo h
p i a e and public s akeholde s o be e unde s and he ela ionship be ween he obse ed
a iables and hei dynamics. The esul s o quali a i e modelling deli e a comple e lis o
all upcoming e en s, whose consequences o he economy as a whole and/o each indi idual
can be u he s udied.
In compa ison o o he me hodological app oaches used o s udy he phenomena, he
esea ch app oach implemen ed in his case does no equi e nume ical da a se s and sophis-
ica ed ma hema ical ools. This means ha he beha iou o he economic sys em can be
s udied in many a ia ions; no ele an o ecas can be neglec ed and o he addi ional a ia-
bles can be in eg a ed in o he model. This ea u e also allows he esea che s o ca y ou any
union o in e sec ion o a ious models. Mo eo e , all possible ime ansi ions among he
ga he ed scena ios can be de e mined. Finally, ano he ad an age o he quali a i e app oach
consis s in i s common sense na u e, which makes i e y a ac i e om he pe spec i e o
p ac i ione s. Policy make s, co po a e manage s, in es o s, analys s, and o he s akeholde s
a e p o ided he e wi h a lexible ool o suppo e ec i e decision-making.
Ce ainly, we see a signi ican po en ial o mo e la ge-scale and mo e igo ous ollow-up
esea ch. Fo example, he e is a g owing consensus ha he possible consequences o he
cu en c isis a e o a new and unp eceden ed scale. Uncon en ional measu es o o e come
he c isis ha e been in oduced bo h on he na ional and in e na ional le el. Albei challeng-
ing, an u gen need migh occu o implemen a wide ange o mone a y and iscal ins u-
men s wi hin he ollowing weeks and mon hs; hus, mo e a iables and ele an pai -wise
ela ions migh be equi ed o be implemen ed wi hin ou model in o de o inc ease he
accu acy o he esea ch esul s.
760 M. Zinecke e al. The Co id-19 disease and policy esponse o mi iga e he economic impac in he EU
Funding
This wo k was suppo ed by he Ins i u e o Economic Resea ch To uń, Poland, and B no
Uni e si y o Technology, Facul y o Business and Managemen , Czech Republic (g an num-
be 2019/1). The i le o he p ojec is “Public and P i a e Equi y in CEE coun ies”.
Au ho con ibu ions
Ma ek Zinecke concei ed he s udy and was esponsible o he design o he s udy and he
in e p e a ion o he esea ch esul s. Ka el Doub a ský was esponsible o he design and
de elopmen o he da a analysis. Adam Balce zak and Michal Pie zak we e esponsible o
he da a analysis and in e p e a ion.
Disclosu e s a emen
All he au ho s decla e ha hey do no ha e any compe ing inancial, p o essional, o pe -
sonal in e es s om o he pa ies.
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