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Author(s)

Sergio Rebelo

Martin Eichenbaum

Mathias Trabandt

We develop a SIR-based macroeconomic model to study the impact of testing/ quarantining and social distancing/mask use on health and economic outcomes. These policies can dramatically reduce the costs of an epidemic. Absent testing/quarantining, the main effect of social distancing and mask use on health outcomes is to delay, rather than reduce, epidemic-related deaths. Social distancing and mask use reduce the severity of the epidemic-related recession but prolong its duration. There is an important synergy between social distancing and mask use and testing/quarantining. Social distancing and mask use buy time for testing and quarantining to come to the rescue. The benefits of testing/quarantining are even larger when people can get reinfected, either because the virus mutates or immunity is temporary.
Date Published: 2022
Citations: Rebelo, Sergio, Martin Eichenbaum, Mathias Trabandt. 2022. The Macroeconomics of Testing and Quarantining. Journal of Economic Dynamics and Control.