2026-04-17T23:30:43Zhttps://recercat.cat/oai/request

oai:recercat.cat:10230/471362025-12-23T02:15:34Zcom_2072_6col_2072_452953

00925njm 22002777a 4500 dc Fornaro, Luca author Wolf, Martin author 2021-04-16T08:47:05Z 2021-04-16T08:47:05Z 2021-04 We study the effects of supply disruptions - for instance caused by the emergence of a pandemic - in an economy with Keynesian unemployment and endogenous productivity growth. By negatively affecting investment, even purely transitory negative supply shocks generate permanent output losses. The associated negative wealth effect depresses consumers’ demand, which may even fall below the exogenous fall in supply. In this case, the optimal monetary policy response flips relative to conventional wisdom, as monetary expansions are needed to fight negative output gaps. If monetary policy is not expansionary enough a supply-demand doom loop emerges, causing a recession characterized by unemployment and weak productivity growth. Innovation policies, by fostering firms’ investment, can restore full employment and healthy growth. Supply shocks Covid-19 Hysteresis Investment Endogenous growth Monetary policy Fiscal policy Zero lower bound Keynesian growth Stagnation traps The scars of supply shocks