The trade-offs between economy and health: an assessment of Covid-19 policies in Japan

The goal of this project is to assess the macroeconomic consequence of Japanese economic and health policies in the ongoing Covid-19 pandemic. Based on Eichenbaum-Rebelo Trabandt (2020)'s pandemic macro model, we (i) distinguish tested/non-tested patients, (ii) consider people's perception bias about the actual and observed number of Covid-19 infection, and (iii) incorporate new channels of infection between workers and consumers. The model parameters are carefully calibrated by patient-level infection data in Novel Coronavirus 2019 Dataset, Japanese social contacts survey in epidemiological research, and Japanese time-use data. On top of that, we forecast the economic and health outcomes and evaluate economic welfares of the current policies such as voluntary quarantine of 80% activities, expansion of Covid-19 testing availability, and compensation for business closures. We also solve the welfare-maximizing policy problem among a broader set of alternative policy instruments. Our finding suggests the importance of providing more accurate information of the Covid-19 spreads by an expansion of testing.