Modeling the impact of COVID-19 on the tourism sector in Mauritius: A dynamic stochastic general equilibrium analysis

Abstract

This paper develops a Dynamic Stochastic General Equilibrium model to gauge on the detrimental effects of COVID-19 on the tourism sector and consequently on the macroeconomy of Mauritius. Findings demonstrate COVID-19-induced tourism export shock triggering subdued exports, imports, investments and tax revenues while government debt, inflation rate, transfer income experienced bullish momentum. Overall, results from the model bode well with the real macroeconomic conditions which prevailed post the pandemic. Policywise, findings advocate the development of a new sector to diversify the exporting arm of the Mauritian economy. Our model can be used not only by local authorities but also by foreign economies which exhibit similar features to those of the Mauritian economy in view of shaping out optimal policies.