Investigating the Effect of Covid-19 Crisis on Publicsector economies: Some Evidences from Developed and Developing Countries

The Covid-19 crisis was first recognized as a serious threat to public health around the world, but as it grew into a pandemic all over the globe, it inflicted enormous losses on the economies of many countries grappling with tackling its grip. The negative effect of this crisis has been different between countries and the role of governments turned to be a decisive one in dealing with it; The aim of this research has been to investigate the effect of the covid-19 shock on the public sectors of 19 developed and 24 developing countries for the period ranging from 2020 to 2022 using a panel vector autoregressive (PVAR) model run on seasonal data. The results show that the covid-19 crisis has led to an all the way down to an increase in healthcare expenditures, budget deficits, government size and a slump in tax revenues. What makes the patterns witnessed in these two groups of countries different is the degree of the effect the crisis had on aforementioned variables. The results show that overall, the developing countries have been affected the most by the crisis.